<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WESTERN BANCORP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 6712 95-386296
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of Classification code number) Identification
incorporation or organization) No.)
</TABLE>
--------------------------
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
(714) 863-2300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
--------------------------
HUGH S. SMITH, JR.
WESTERN BANCORP
1251 WESTWOOD BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 477-2401
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
STANLEY F. FARRAR, ESQ. ROBERT M. SMITH, ESQ.
SULLIVAN & CROMWELL DEWEY BALLANTINE
444 SOUTH FLOWER STREET 333 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071 LOS ANGELES, CALIFORNIA 90071
(213) 955-8000 (213) 626-3399
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, no par value..................... 3,663,441 shares $29.92 $109,597,672 $9,156
</TABLE>
(1) Represents the estimated maximum number of shares of Common Stock, no par
value, which are issuable upon consummation of the merger of SC Bancorp
("SCB") with and into Western Bancorp ("Western").
(2) Pursuant to Rules 457(f) and 457(c), the registration fee is based on the
average of the high and low sale prices of SCB Common Stock on the American
Stock Exchange Composite Transactions tape on September 5, 1997 ($13.63),
and computed based on the estimated maximum number of shares thereof
(8,040,915) that may be converted into the securities being registered.
(3) A fee of $24,056 was previously paid upon filing of a Joint Proxy
Statement-Prospectus on Schedule 14A which constitutes a part of this
Registration Statement. The Schedule 14A fee was calculated by multiplying
(i) 4,147,525 shares (the then-estimated number of shares to which the
transaction applies), by (ii) the per share price of $29.00 computed
pursuant to Securities Exchange Act Rule 0-11, and by (iii) one-50th of one
percent. The amount of the registration fee hereunder, $33,212, has been
reduced by the amount of such Schedule 14A fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
September 9, 1997
To Our Shareholders:
You are cordially invited to attend a Special Meeting (the "SCB Special
Meeting") of Shareholders of SC Bancorp, a California corporation ("SCB"), to be
held on Friday, October 10, 1997 at 10:00 a.m. at which you will be asked to
consider and vote on a proposal to approve the principal terms of a proposed
merger (the "Merger") of SCB with and into Western Bancorp, a California
corporation, formerly known as Monarch Bancorp ("Western"), pursuant to an
Agreement and Plan of Reorganization, dated as of April 29, 1997, by and between
Western and SCB. Upon the Merger becoming effective, each share of common stock,
no par value, of SCB (the "SCB Common Stock") issued and outstanding at such
time (other than (a) shares which have not been voted in favor of the approval
of the principal terms of the Merger and with respect to which dissenters'
rights have been perfected in accordance with the California General Corporation
Law and (b) shares held directly or indirectly in a fiduciary capacity or in
satisfaction of a debt previously contracted) will be converted into the right
to receive 0.4556 shares (the "Conversion Number") of common stock, no par
value, of Western.
THE BOARD OF DIRECTORS OF SCB HAS CONCLUDED THAT THE MERGER IS IN THE BEST
INTERESTS OF SCB AND HOLDERS OF SCB COMMON STOCK (THE "SCB SHAREHOLDERS"), AND
UNANIMOUSLY RECOMMENDS THAT THE SCB SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
PRINCIPAL TERMS OF THE MERGER. Credit Suisse First Boston Corporation, SCB's
financial advisor, has delivered to the Board of Directors of SCB its opinion,
dated the date hereof, that the Conversion Number is fair, from a financial
point of view, to the SCB Shareholders.
It is important that your shares be represented and voted at the SCB Special
Meeting regardless of the number of shares you own and whether or not you plan
to attend the SCB Special Meeting. The affirmative vote of the holders of a
majority of the SCB Common Stock entitled to vote at the SCB Special Meeting is
required for approval of the principal terms of the Merger. Your failure to vote
for approval of the principal terms of the Merger has the same effect as a vote
against the Merger. Therefore, we urge you to sign, date and mail the enclosed
proxy. If you decide to attend the SCB Special Meeting and wish to vote in
person, you may withdraw your proxy at that time.
YOU SHOULD NOT SEND IN CERTIFICATES FOR SCB COMMON STOCK AT THIS TIME.
Sincerely,
[SIGNATURE]
H. A. Beisswenger
Chairman of the Board
[SIGNATURE]
Larry D. Hartwig
President and Chief
Executive Officer
[LETTERHEAD]
<PAGE>
SC BANCORP
3800 EAST LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92807
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 10, 1997
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting the ("SCB Special Meeting") of
Shareholders of SC Bancorp, a California corporation ("SCB"), has been called by
the Board of Directors of SCB and will be held at the Embassy Suites, 3100 East
Frontera St., Anaheim, CA 92806 at 10:00 a.m., local time, on Friday, October
10, 1997 for the following purposes:
(1) To consider and vote on a proposal (the "SCB Proposal") to approve
the principal terms of a proposed merger (the "Merger") of SCB with and into
Western Bancorp, a California corporation ("Western"), pursuant to an
Agreement and Plan of Reorganization, dated as of April 29, 1997 (as the
same may be amended, the "Merger Agreement"), by and between Western and
SCB. The Merger Agreement provides, among other things, that each issued and
outstanding share of common stock, no par value, of SCB ("SCB Common Stock")
(other than (a) shares which have not been voted in favor of the approval of
the principal terms of the Merger and with respect to which dissenters'
rights have been perfected in accordance with the California General
Corporation Law and (b) shares held directly or indirectly by Western, other
than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted), will be converted into the right to receive 0.4556
shares of common stock, no par value, of Western ("Western Common Stock")
on, and subject to, the terms and conditions contained in the Merger
Agreement; and
(2) To consider and act upon such other business as may properly come
before the SCB Special Meeting or any adjournment or postponement thereof.
The terms of the SCB Proposal and the Western Common Stock to be issued in
connection therewith are described in detail in the accompanying Joint Proxy
Statement-Prospectus. To ensure that your vote will be counted, please complete,
date and sign the enclosed proxy card and return it promptly in the enclosed
postage-paid envelope, whether or not you plan to attend the SCB Special
Meeting. You may revoke your proxy in the manner described in the accompanying
Joint Proxy Statement-Prospectus at any time before it is voted at the SCB
Special Meeting.
Only holders of SCB Common Stock of record at the close of business on
August 22, 1997 (the "SCB Record Date"), will be entitled to notice of, and to
vote at, the SCB Special Meeting or at any postponements or adjournments
thereof. The affirmative vote of a majority of the shares of SCB Common Stock
outstanding as of the SCB Record Date is required to approve the SCB Proposal.
Shareholders of SCB may be entitled to exercise dissenters' rights and to
receive cash in an amount equal to the fair market value of their shares of SCB
Common Stock as of April 28, 1997 in lieu of receiving the Western Common Stock
in the Merger by complying with certain procedures specified by California law.
See "The Merger--Dissenters' Rights" in the accompanying Joint Proxy Statement-
Prospectus.
By Order of the Board of Directors,
[SIGNATURE]
William C. Greenbeck
SECRETARY
Anaheim, California
September 9, 1997
------------------------
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE SCB SPECIAL MEETING. YOUR PROXY
WILL BE REVOCABLE, EITHER IN WRITING OR BY VOTING IN PERSON AT THE SCB SPECIAL
MEETING, AT ANY TIME PRIOR TO ITS EXERCISE, BY FOLLOWING THE PROCEDURES
DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT--PROSPECTUS. YOU SHOULD NOT
FORWARD SHARE CERTIFICATES AT THIS TIME.
------------------------
<PAGE>
[LETTERHEAD]
September 9, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Western Special
Meeting") of Shareholders of Western Bancorp, a California corporation
("Western"), to be held on Friday, October 10, 1997, at 4100 Newport Place,
Third Floor, Newport Beach, California 92660 at 10:30 a.m., at which you will be
asked to consider and vote on a proposal to approve the principal terms of a
proposed merger (the "Merger") of SC Bancorp, a California corporation ("SCB"),
with and into Western, pursuant to an Agreement and Plan of Reorganization,
dated as of April 29, 1997 (as the same may be amended, the "Merger Agreement"),
by and between Western and SCB. Upon the Merger becoming effective, each share
of common stock, no par value, of SCB ("SCB Common Stock") issued and
outstanding at such time (other than (a) shares which have not been voted in
favor of the approval of the principal terms of the Merger and with respect to
which dissenters' rights have been perfected in accordance with the California
General Corporation Law and (b) shares held directly or indirectly by Western,
other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) will be converted automatically into the right to receive
0.4556 shares (the "Conversion Number") of common stock, no par value, of
Western ("Western Common Stock").
You will also be asked at the Western Special Meeting to consider and vote
upon an amendment to Western's Bylaws to change the authorized number of
directors of Western from a minimum of seven and a maximum of 13 to a minimum of
nine and a maximum of 16. The Merger Agreement provides for, among other things,
the appointment of four current directors of SCB to the Board of Directors of
Western immediately prior to the consummation of the Merger.
The Board of Directors of Western has unanimously approved the Merger
Agreement and has determined that the Merger is fair to, and in the best
interests of, holders of Western Common Stock (the "Western Shareholders"). In
addition, Piper Jaffray Inc., as financial advisor to Western, has delivered its
opinion, dated the date hereof, to the Board of Directors of Western that the
Merger Consideration is fair, from a financial point of view, to the Western
Shareholders. Therefore, the Board of Directors of Western unanimously
recommends that Western Shareholders vote "FOR" the approval of the principal
terms of the Merger.
I urge you to consider carefully these important matters which are described
in the accompanying Joint Proxy Statement-Prospectus. In order to ensure that
your vote is represented at the Western Special Meeting, please indicate your
choice on the enclosed proxy form, date, sign and return it in the enclosed
envelope. A prompt response will be appreciated. If you attend the Western
Special Meeting you may revoke your proxy and vote in person if you wish.
Sincerely,
[SIGNATURE]
Hugh S. Smith, Jr.
Chairman of the Board and
Chief Executive Officer
[LETTERHEAD]
<PAGE>
WESTERN BANCORP
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 10, 1997
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Western Special
Meeting") of Shareholders of Western Bancorp, a California corporation
("Western"), has been called by the Board of Directors of Western (the "Western
Board") and will be held at 4100 Newport Place, Third Floor, Newport Beach,
California 92660 at 10:30 a.m. local time on Friday, October 10, 1997 for the
following purposes:
(1) To consider and vote upon a proposal to approve the principal terms
of a proposed merger (the "Merger") of SC Bancorp, a California corporation
("SCB"), with and into Western pursuant to an Agreement and Plan of
Reorganization, dated as of April 29, 1997 (as the same may be amended, the
"Merger Agreement"), by and between Western and SCB. The Merger Agreement
provides, among other things, that each issued and outstanding share of
common stock, no par value, of SCB ("SCB Common Stock") (other than (i)
shares which have not been voted in favor of the approval of the principal
terms of the Merger and with respect to which dissenters' rights have been
perfected in accordance with the California General Corporation Law and (ii)
shares held directly or indirectly by Western, other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted), will
be converted into the right to receive 0.4556 shares of common stock, no par
value, of Western ("Western Common Stock"), on, and subject to, the terms
and conditions contained in the Merger Agreement;
(2) To consider and vote upon an amendment to Western's Bylaws to change
the authorized number of directors from a minimum of seven and a maximum of
13 to a minimum of nine and a maximum of 16; and
(3) To consider and act upon such other business as may properly come
before the Western Special Meeting or any adjournment or postponement
thereof.
The Joint Proxy Statement-Prospectus and the Appendices thereto (including
the Merger Agreement attached as Appendix A thereto) form a part of this Notice.
Only holders of Western Common Stock of record at the close of business on
August 26, 1997, will be entitled to notice of, and to vote at, the Western
Special Meeting or any adjournments or postponements thereof. Approval of the
matters to be voted upon in connection with the Merger requires the affirmative
vote of a majority of the outstanding shares of Western Common Stock.
Shareholders of Western may be entitled to exercise dissenters' rights and
to receive cash in an amount equal to the fair market value of their shares of
Western Common Stock as of April 28, 1997, by complying with certain procedures
specified by California law. See "The Merger--Dissenters' Rights" in the
accompanying Joint Proxy Statement-Prospectus.
By Order of the Board of Directors,
[SIGNATURE]
Hugh S. Smith, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Newport Beach, California
September 9, 1997
------------------------
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU
PLAN TO ATTEND THE WESTERN SPECIAL MEETING. YOUR PROXY WILL BE REVOCABLE, EITHER
IN WRITING OR BY VOTING IN PERSON AT THE WESTERN SPECIAL MEETING, AT ANY TIME
PRIOR TO ITS EXERCISE, BY FOLLOWING THE PROCEDURES DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT-PROSPECTUS. THE BOARD OF DIRECTORS OF WESTERN UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE PRINCIPAL TERMS OF THE MERGER
AND THE OTHER MATTERS TO BE VOTED UPON AT THE WESTERN SPECIAL MEETING.
------------------------
<PAGE>
WESTERN BANCORP SC BANCORP
JOINT PROXY STATEMENT
---------------------
WESTERN BANCORP
PROSPECTUS
---------------------
This Joint Proxy Statement-Prospectus is being furnished to the shareholders
of Western Bancorp, a California corporation ("Western"), in connection with the
solicitation of proxies by the Board of Directors of Western (the "Western
Board") from holders of outstanding shares of common stock, no par value
("Western Common Stock"), of Western for use at a Special Meeting of
shareholders of Western ("Western Shareholders") to be held on October 10, 1997
and at any adjournments and postponements thereof (the "Western Special
Meeting"). This Joint Proxy Statement-Prospectus is also being furnished to the
shareholders of SC Bancorp, a California corporation ("SCB" and together with
Western, the "Companies"), in connection with the solicitation of proxies by the
Board of Directors of SCB (the "SCB Board" and together with the Western Board,
the "Boards") from holders of outstanding shares of common stock, no par value
("SCB Common Stock"), of SCB, for use at a Special Meeting of shareholders of
SCB ("SCB Shareholders" and together with the Western Shareholders, the
"Shareholders") to be held on October 10, 1997, and at any adjournments or
postponements thereof (the "SCB Special Meeting" and, together with the Western
Special Meeting, the "Special Meetings").
At the Special Meetings, the Shareholders will be asked to consider and vote
upon, among other things, a proposal to approve the principal terms of a merger
of SCB with and into Western (the "Merger"), with Western being the corporation
surviving the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"), pursuant to an Agreement and Plan of Reorganization, dated as of
April 29, 1997 (as the same may be amended, supplemented or otherwise modified
from time to time, the "Merger Agreement"), by and between Western and SCB,
which is attached as Appendix A to this Joint Proxy Statement-Prospectus and is
incorporated herein by reference. Upon the Merger becoming effective, each share
of SCB Common Stock issued and outstanding at the Effective Time (as defined
herein) (other than (a) shares which have not been voted in favor of the
approval of the principal terms of the Merger and with respect to which
Dissenters' Rights (as defined herein) shall have been perfected in accordance
with the California General Corporation Law (the "CGCL") and (b) shares held
directly or indirectly by Western, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) will be converted
automatically into the right to receive 0.4556 shares (the "Conversion Number")
of Western Common Stock and each option or right to purchase shares of SCB
Common Stock (an "SCB Option") outstanding immediately prior to the Effective
Time shall be converted into the right to receive, for each share otherwise
issuable upon exercise thereof, a number of shares of Western Common Stock equal
to the quotient obtained by dividing the Spread (as defined herein) by $31.28.
Pursuant to the Merger Agreement, the Conversion Number was determined by
dividing (i) $14.25 by (ii) $31.28. Based upon (a) the 7,498,365 shares of SCB
Common Stock outstanding on the SCB Record Date (as defined herein) and (b) the
542,550 shares of SCB Common Stock reserved for issuance upon exercise of
employee stock options to acquire SCB Common Stock outstanding on the SCB Record
Date, and assuming no Dissenters' Rights are perfected by SCB Shareholders and
no cash is paid in lieu of fractional shares, (i) if no shares of SCB Common
Stock reserved for issuance on the SCB Record Date were issued and outstanding
on the Effective Time, 3,416,255 shares of Western Common Stock would be issued
in respect of the outstanding shares of SCB Common Stock and approximately
138,760 shares would be issued in respect of the SCB Options, and (ii) if all
shares of SCB Common Stock reserved for issuance on the SCB Record Date were
issued and outstanding on the Effective Time, 3,663,441 shares of Western Common
Stock would be issued in the Merger. Based upon the 7,071,973 shares of Western
Common Stock outstanding on the Western Record Date (as defined herein) and the
447,044 shares of Western Common Stock reserved for issuance upon exercise of
employee stock options and warrants to acquire Western Common Stock outstanding
on the Western Record Date, and assuming no Dissenters' Rights are perfected by
any Shareholders and no cash is paid in lieu of fractional shares, shares held
by the Western and SCB Shareholders after consummation of the Merger would
represent (i) 66.5 percent and 33.5 percent, respectively, of the Surviving
Corporation, if none of the shares of SCB Common Stock or Western Common Stock
which were reserved for issuance on the SCB Record Date and the Western Record
Date, respectively, were outstanding on the Effective Date, and (ii) 67.2
percent and 32.8 percent, respectively, if all shares of SCB Common Stock and
Western Common Stock which were reserved for issuance on the SCB Record Date and
the Western Record Date, respectively, were issued by the Effective Date.
IN ORDER FOR ANY SHAREHOLDER TO EXERCISE DISSENTERS' RIGHTS, A NOTICE MUST
BE SENT BY SUCH SHAREHOLDER AND RECEIVED BY WESTERN OR SCB, AS THE CASE MAY BE,
ON OR BEFORE OCTOBER 10, 1997, THE DATE OF THE SPECIAL MEETINGS, AND ANY SUCH
SHAREHOLDER MUST VOTE AGAINST THE APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER.
SEE "THE MERGER--DISSENTERS' RIGHTS."
In addition, Western Shareholders will be asked at the Western Special
Meeting to approve an amendment to Western's Bylaws to increase the authorized
number of directors of Western from a minimum of seven and a maximum of 13 to a
minimum of nine and a maximum of up to 16.
The Western Common Stock is designated for quotation on the Nasdaq National
Market under the symbol "WEBC."
SEE "RISK FACTORS" ON PAGE 22 FOR A DISCUSSION OF CERTAIN CONSIDERATIONS
THAT SHAREHOLDERS SHOULD CONSIDER WITH RESPECT TO THE MERGER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS SEPTEMBER 9, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS JOINT PROXY
STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER, OR SOLICITATION OF
AN OFFER, OR PROXY SOLICITATION. NEITHER DELIVERY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES BEING OFFERED
PURSUANT TO THIS JOINT PROXY STATEMENT-PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR THEREIN SINCE THE DATE OF THIS JOINT PROXY
STATEMENT-PROSPECTUS.
AVAILABLE INFORMATION
Each of the Companies is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, each files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements and other information filed by the Companies with the
Commission may be inspected and copied at the public reference facilities of the
Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov. Shares of
Western Common Stock are traded as "National Market Securities" on the Nasdaq
National Market under the symbol "WEBC". Material filed by Western can be
inspected at the offices of the National Association of Securities Dealers,
Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
Western has filed with the Commission a registration statement on Form S-4
(including exhibits thereto, the "Registration Statement") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), covering the shares
of Western Common Stock issuable in the Merger. This Joint Proxy Statement-
Prospectus does not contain all the information set forth in the Registration
Statement. Such additional information may be obtained from the Commission's
principal office in Washington, D.C. Statements contained in this Joint Proxy
Statement-Prospectus as to the contents of any contract or other document
referred to herein are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
This Joint Proxy Statement-Prospectus constitutes both the proxy statement
of Western and SCB relating to the solicitation of proxies for their use at
their respective Special Meetings and the Prospectus filed as part of the
Registration Statement. This Joint Proxy Statement-Prospectus and the related
proxies and other materials are first being provided to the shareholders of
Western and SCB on or about September 11, 1997.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Joint Proxy Statement-Prospectus incorporates by reference documents
not included herein. Documents relating to Western and California Commercial
Bankshares ("CCB"), excluding exhibits unless specifically incorporated herein,
are available without charge upon request to Arnold C. Hahn, Executive Vice
President, Chief Financial Officer and Secretary, Western Bancorp, 4100 Newport
Place, Suite 900, Newport Beach, California 92660. Telephone requests may be
directed to Arnold C. Hahn, at (714) 863-2351. Documents relating to SCB,
excluding exhibits unless specifically incorporated herein, are available
without charge upon request to William C. Greenbeck, Secretary, 3800 La Palma
Avenue, Anaheim, California 92817. Telephone requests may be directed to Bruce
W. Roat, Executive Vice President and Chief Financial Officer, at (714)
228-8201. In order to ensure timely delivery of documents, any requests should
be made by September 26, 1997.
The following documents filed with the Commission by Western (file numbers
0-13551 and 2-78788) and SCB (file number 0-10699) are incorporated herein by
reference:
(a) Western's Annual Report, as amended, on Form 10-KSBA for the fiscal
year ended December 31, 1996;
(b) Western's Current Report on Form 8-K, dated July 15, 1997,
presenting Western's restated consolidated financial statements reflecting
the effect of the CCB Merger (as defined herein) on a pooling-of-interests
basis;
(c) CCB's Annual Report on Form 10-K, as amended on Form 10-K/A, for the
fiscal year ended December 31, 1996;
(d) Western's Current Reports on Form 8-K, dated April 14, 1997, May 2,
1997, June 18, 1997 and August 11, 1997;
(e) Western's Quarterly Reports on Form 10-QSB, dated May 15, 1997 and
August 14, 1997;
(f) Western's Current Report on Form 8-K, dated August 28, 1997,
presenting historical financial statements of Santa Monica Bank;
(g) SCB's Annual Report, as amended, on Form 10-K/A for the fiscal year
ended December 31, 1996 (which amends and restates SCB's 10-K for 1996);
(h) SCB's 1997 Proxy Statement;
(i) SCB's Current Report on Form 8-K, dated May 5, 1997; and
(j) SCB's Quarterly Reports on Form 10-Q, dated May 10, 1997 and August
8, 1997.
Such incorporation by reference shall not be deemed to incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents and reports filed by either of the Companies pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the Special Meetings shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of such filing and any
statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
3
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
AVAILABLE INFORMATION...................................................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... 3
TABLE OF CONTENTS.......................................................................................... 4
TABLE OF DEFINED TERMS..................................................................................... 6
SUMMARY.................................................................................................... 8
The Companies............................................................................................ 8
The Special Meetings..................................................................................... 8
The Merger............................................................................................... 10
The Merger Agreement..................................................................................... 13
Stock Option Agreement................................................................................... 14
Comparison of Shareholder Rights......................................................................... 14
Risk Factors............................................................................................. 14
Proposed Santa Monica Bank Acquisition................................................................... 14
Markets and Market Prices................................................................................ 15
Summary Historical Financial Data........................................................................ 16
Summary Unaudited Pro Forma Combined Financial Data...................................................... 18
Selected Historical and Pro Forma Per Share Data......................................................... 19
Summary Financial Data Regarding SMB..................................................................... 20
RISK FACTORS............................................................................................... 22
Competition.............................................................................................. 22
Ability to Integrate the Operations of Western and SCB................................................... 22
General Business Risk.................................................................................... 22
Concentration of Operations; Recessionary Environments; Decline in Real Estate Values.................... 23
Interest Rate Risk....................................................................................... 23
Shares Eligible for Future Sale; Dilution................................................................ 24
Regulation............................................................................................... 25
Limited Market for Western Common Stock.................................................................. 25
THE COMPANIES.............................................................................................. 26
Western.................................................................................................. 26
SCB...................................................................................................... 26
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA...................................................... 27
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA............................................. 35
PROPOSED SANTA MONICA BANK ACQUISITION..................................................................... 37
Terms of the SMB Merger.................................................................................. 37
Pro Forma Effect of the SMB Merger....................................................................... 38
THE SPECIAL MEETINGS....................................................................................... 45
Date, Time and Place..................................................................................... 45
Matters to be Considered at the Special Meetings......................................................... 45
Record Date; Stock Entitled to Vote...................................................................... 45
Votes Required; Quorum................................................................................... 46
Voting of Proxies........................................................................................ 46
Revocability of Proxies.................................................................................. 47
Solicitation of Proxies.................................................................................. 47
Security Ownership of Certain Beneficial Owners and Management........................................... 47
FIP LITIGATION............................................................................................. 53
THE MERGER................................................................................................. 55
Background of the Merger................................................................................. 55
Effect of Merger......................................................................................... 58
Reasons for the Merger; Recommendations of the Boards of Directors....................................... 59
Opinions of Financial Advisors........................................................................... 61
Certain Federal Income Tax Consequences.................................................................. 70
Regulatory Approvals..................................................................................... 72
Resale of Western Common Stock........................................................................... 72
</TABLE>
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<S> <C>
Interests of Certain Persons in the Merger............................................................... 73
Dissenters' Rights....................................................................................... 76
Accounting Treatment..................................................................................... 78
THE MERGER AGREEMENT....................................................................................... 79
The Merger............................................................................................... 79
Conversion of SCB Common Stock........................................................................... 79
Effective Time........................................................................................... 79
Exchange of Stock Certificates........................................................................... 80
Conduct of the Business of SCB and Western Prior to the Merger........................................... 80
Representations and Warranties........................................................................... 81
Certain Covenants........................................................................................ 81
Conditions............................................................................................... 86
Waiver and Amendment..................................................................................... 87
Termination.............................................................................................. 87
THE STOCK OPTION AGREEMENT................................................................................. 89
General.................................................................................................. 89
The Stock Option......................................................................................... 89
Termination.............................................................................................. 90
THE SHAREHOLDER AGREEMENTS................................................................................. 91
DESCRIPTION OF WESTERN CAPITAL STOCK AND COMPARISON OF SHAREHOLDER RIGHTS.................................. 92
Description of Western Capital Stock..................................................................... 92
Comparison of Corporate Structure........................................................................ 92
Voting Rights............................................................................................ 92
Dividends and Dividend Policy............................................................................ 92
Number of Directors...................................................................................... 93
Indemnification of Directors and Officers................................................................ 93
VALIDITY OF WESTERN COMMON STOCK........................................................................... 93
EXPERTS.................................................................................................... 93
</TABLE>
LIST OF APPENDICES
Appendix A-- Agreement and Plan of Reorganization, dated as of April 29, 1997,
by and between Western and SCB.
Appendix B-- Fairness Opinion of Credit Suisse First Boston Corporation.
Appendix C-- Fairness Opinion of Piper Jaffray Inc.
Appendix D-- Chapter 13 of the CGCL.
5
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TABLE OF DEFINED TERMS
<TABLE>
<S> <C>
Acquisition Proposal.................................................................. 83
Acquisition Transaction............................................................... 89
Additional Shares..................................................................... 24
Adjusted Plan......................................................................... 68
Affiliates............................................................................ 85
Amendment............................................................................. 9
AMEX.................................................................................. 15
Average Price......................................................................... 79
BHCA.................................................................................. 8
BKX Index Percentage.................................................................. 88
Boards................................................................................ 1
BPI................................................................................... 12
Cash Alternative...................................................................... 36
CCB................................................................................... 3
CCB Merger............................................................................ 8
Certificate........................................................................... 80
CGCL.................................................................................. 1
Code.................................................................................. 11
Commission............................................................................ 2
Companies............................................................................. 1
Conversion Number..................................................................... 1
Covered Termination................................................................... 74
CRA................................................................................... 72
CSFB.................................................................................. 11
Demand................................................................................ 77
Dissenters' Rights.................................................................... 76
Dissenters' Rights Condition.......................................................... 13
Dissenting Shareholder................................................................ 77
Dissenting Shares..................................................................... 77
D&T................................................................................... 87
Effective Time........................................................................ 13
EPS................................................................................... 68
Exchange Act.......................................................................... 2
Exchange Agent........................................................................ 80
Executive............................................................................. 12
FDIC.................................................................................. 27
Federal Reserve Board................................................................. 11
FIP................................................................................... 13
Fund.................................................................................. 48
GAAP.................................................................................. 63
Good Reason........................................................................... 74
Hovde................................................................................. 53
Indemnified Parties................................................................... 83
Initial Shares........................................................................ 53
KPMG.................................................................................. 87
Letter of Transmittal................................................................. 80
Management Plan....................................................................... 68
Maximum Amount........................................................................ 83
Merger................................................................................ 1
Merger Agreement...................................................................... 1
Merger Consideration.................................................................. 80
NBSC.................................................................................. 8
Option................................................................................ 14
Party Shareholders.................................................................... 91
</TABLE>
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<TABLE>
<S> <C>
Preliminary Purchase Event............................................................ 90
Piper Jaffray......................................................................... 11
Piper Opinion......................................................................... 11
Pooling Condition..................................................................... 12
Purchase Event........................................................................ 89
Registration Rights................................................................... 89
Registration Statement................................................................ 2
Reverse Stock Split................................................................... 15
Right of First Refusal Shares......................................................... 53
SC Bank............................................................................... 8
SCB................................................................................... 1
SCB Board............................................................................. 1
SCB Common Stock...................................................................... 1
SCB Option............................................................................ 1
SCB Special Meeting................................................................... 1
SCB Record Date....................................................................... 9
SCB Shareholders...................................................................... 1
SCB Subsidiary........................................................................ 89
Securities Act........................................................................ 2
Selected Companies.................................................................... 68
Selected Transactions................................................................. 69
Shareholder Agreements................................................................ 82
Shareholders.......................................................................... 1
SMB................................................................................... 14
SMB Common Stock...................................................................... 14
SMB Financial Statements.............................................................. 20
SMB Merger............................................................................ 14
SMB Merger Agreement.................................................................. 14
Special Meetings...................................................................... 1
Spread................................................................................ 79
State Commissioner.................................................................... 13
Stock Alternative..................................................................... 36
Stock Option Agreement................................................................ 14
Surviving Corporation................................................................. 1
Target Bonus.......................................................................... 74
Ten Day Average Price................................................................. 88
Ten Day Period........................................................................ 88
Western............................................................................... 1
Western Board......................................................................... 1
Western Certificate................................................................... 80
Western Common Stock.................................................................. 1
Western Common Stock Price Percentage................................................. 88
Western Management.................................................................... 24
Western Record Date................................................................... 9
Western Shareholders.................................................................. 1
Western Special Meeting............................................................... 1
Western Subsidiary.................................................................... 89
</TABLE>
7
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SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ALL
RESPECTS BY THE MORE DETAILED INFORMATION INCLUDED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS, THE APPENDICES HERETO AND THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE. THE SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS JOINT
PROXY STATEMENT-PROSPECTUS, INCLUDING THE APPENDICES HERETO AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, IN ITS ENTIRETY.
ALL INFORMATION CONCERNING WESTERN (FORMERLY MONARCH BANCORP), NATIONAL BANK
OF SOUTHERN CALIFORNIA ("NBSC") AND WESTERN BANK INCLUDED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS, THE APPENDICES HERETO AND THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE, HAS BEEN FURNISHED BY WESTERN, AND ALL INFORMATION
CONCERNING SCB AND SOUTHERN CALIFORNIA BANK ("SC BANK") INCLUDED IN THIS JOINT
PROXY STATEMENT-PROSPECTUS, THE APPENDICES HERETO AND THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE, HAS BEEN FURNISHED BY SCB. UNLESS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO "WESTERN" HEREIN SHALL BE TO WESTERN AND ITS
SUBSIDIARIES, INCLUDING NBSC AND WESTERN BANK, AND REFERENCES TO "SCB" HEREIN
SHALL BE TO SCB AND SC BANK.
THE COMPANIES
WESTERN
Western is a bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), and its principal business is to serve as
a holding company for its banking subsidiaries, NBSC and Western Bank. Western
was organized on May 20, 1983 as a California corporation and commenced
operation as a bank holding company on June 18, 1984. Western Bank was acquired
by Western on September 30, 1996. On June 3, 1997, Western changed its name from
"Monarch Bancorp" in order for the name to more accurately reflect the
geographic location of Western on an ongoing basis. On June 4, 1997, Western
consummated its merger (the "CCB Merger") with CCB pursuant to which CCB merged
with and into Western. Also on June 4, 1997, Monarch Bank, a wholly-owned
subsidiary of Western prior to the CCB Merger, merged with and into NBSC, a
wholly-owned subsidiary of CCB prior to the CCB Merger. The banking operations
of NBSC and Monarch Bank were combined during the period of June 6, 1997 through
June 8, 1997. NBSC provides banking and other financial services primarily in
southern Orange County. Western Bank provides banking and other financial
services primarily in the west side of Los Angeles County. At June 30, 1997,
Western had consolidated total assets, total deposits and shareholders' equity
of $859,771,000, $761,469,000, and $79,857,000, respectively. Western's
principal executive offices are located at 4100 Newport Place, Suite 900,
Newport Beach, California 92660, and its telephone number is (714) 863-2300. See
"The Companies--Western."
SCB
SCB is a bank holding company registered under the BHCA, and its principal
business is to serve as a bank holding company for SC Bank. SCB was organized as
a California corporation and commenced operation as a bank holding company on
February 9, 1981. SCB conducts operations through its sole, wholly-owned
subsidiary, SC Bank, a California state-chartered commercial bank. SC Bank
provides banking and other financial services primarily in southeastern Los
Angeles County and in Orange and San Diego counties. At June 30, 1997, SCB had
consolidated total assets, total deposits and shareholders' equity of
$507,894,000, $446,245,000 and $51,785,000, respectively. SCB's principal
executive offices are located at 3800 East La Palma Avenue, Anaheim, California
92807-1798, and its telephone number is (714) 238-3111. See "The
Companies--SCB."
THE SPECIAL MEETINGS
DATE, TIME AND PLACE
WESTERN. The Western Special Meeting is scheduled to be held at 4100
Newport Place, Third Floor, Newport Beach, California 92660 on Friday, October
10, 1997 at 10:30 a.m., local time.
8
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SCB. The SCB Special Meeting is scheduled to be held at the Embassy Suites,
3100 East Frontera St., Anaheim, CA 92806 on Friday, October 10, 1997 at 10:00
a.m., local time.
See "The Special Meetings--Date, Time and Place."
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
WESTERN. The purpose of the Western Special Meeting is to (a) consider and
vote upon the approval of the principal terms of the Merger; (b) consider and
vote upon approval of an amendment to Western's Bylaws to change the authorized
number of directors of Western from a minimum of seven and a maximum of 13 to a
minimum of nine and a maximum of 16 (the "Amendment"); and (c) consider and act
upon such other business as may properly come before the Western Special Meeting
or any adjournments or postponements thereof.
SCB. The purpose of the SCB Special Meeting is to (a) consider and vote
upon the approval of the principal terms of the Merger; and (b) consider and act
upon such other business as may properly come before the SCB Special Meeting or
any adjournments or postponements thereof.
See "The Special Meetings--Matters to be Considered at the Special
Meetings."
RECORD DATE; STOCK ENTITLED TO VOTE
WESTERN. Only holders of record of Western Common Stock at the close of
business on August 26, 1997 (the "Western Record Date") will be entitled to
receive notice of, and to vote at, the Western Special Meeting and any
postponements or adjournments thereof.
SCB. Only holders of record of SCB Common Stock at the close of business on
August 22, 1997 (the "SCB Record Date") will be entitled to receive notice of,
and to vote at, the SCB Special Meeting and any postponements or adjournments
thereof.
See "The Special Meetings--Record Date; Stock Entitled to Vote."
VOTES REQUIRED; QUORUM
WESTERN. The affirmative vote of the holders of at least a majority of the
total number of outstanding shares of Western Common Stock entitled to vote at
the Western Special Meeting is required to approve the principal terms of the
Merger and the Amendment. Each holder of shares of Western Common Stock
outstanding on the Western Record Date will be entitled to one vote for each
share held of record upon each matter properly submitted at the Western Special
Meeting and any postponement or adjournment thereof. A majority of all shares of
Western Common Stock entitled to vote, represented in person or by proxy,
constitutes a quorum. Abstentions and broker non-votes are each included in the
determination of the number of shares present; however, they are not counted as
votes in favor of the principal terms of the Merger.
SCB. The affirmative vote of the holders of at least a majority of the
total number of outstanding shares of SCB Common Stock entitled to vote at the
SCB Special Meeting is required to approve the principal terms of the Merger.
Each holder of shares of SCB Common Stock outstanding on the SCB Record Date
will be entitled to one vote for each share held of record upon each matter
properly submitted at the SCB Special Meeting and any postponement or
adjournment thereof. A majority of all shares of SCB Common Stock entitled to
vote, represented in person or by proxy, constitutes a quorum. Abstentions and
broker non-votes are each included in the determination of the number of shares
present; however, they are not counted as votes in favor of the principal terms
of the Merger.
See "The Special Meetings--Votes Required; Quorum."
9
<PAGE>
REVOCABILITY OF PROXIES
The presence of a Shareholder at the relevant Special Meeting (or at any
postponement or adjournment thereof) will not automatically revoke such
Shareholder's proxy. However, a Shareholder may revoke a proxy at any time prior
to its exercise by (a) delivery to the Secretary of the relevant Company of a
written notice of revocation prior to or at the relevant Special Meeting (or, if
such Special Meeting is adjourned or postponed, prior to or at the time the
adjourned or postponed meeting is actually held); (b) submission of a duly
executed proxy bearing a later date; or (c) attending the relevant Special
Meeting (or, if such Special Meeting is adjourned or postponed, by attending the
adjourned or postponed meeting) and voting in person thereat. In the case of
Western Shareholders, any written revocation of proxy or other related
communications should be addressed to Arnold C. Hahn, Secretary, Western
Bancorp, 4100 Newport Place, Suite 900, Newport Beach, California 92660. In the
case of SCB Shareholders, any written revocation of proxy or other related
communications should be addressed to William C. Greenbeck, Secretary, SC
Bancorp, 3800 East La Palma Avenue, Anaheim, California 92807-1798.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
WESTERN. As of the Western Record Date, the directors and executive
officers of Western beneficially held, in the aggregate, the ability to direct
the voting with respect to 2,487,139 shares of Western Common Stock, comprising
approximately 35.2 percent of the voting power of the Western Common Stock
outstanding. Such directors and executive officers of Western have informed
Western that they intend to vote their shares of Western Common Stock for the
approval of the principal terms of the Merger.
SCB. As of the SCB Record Date, the directors and executive officers of SCB
beneficially held, in the aggregate, the ability to direct the voting with
respect to 332,209 shares of SCB Common Stock, comprising approximately 4.4
percent of the voting power of the SCB Common Stock outstanding. Such directors
and executive officers of SCB have informed SCB that they intend to vote their
shares of SCB Common Stock for the approval of the principal terms of the
Merger.
See "The Special Meetings--Security Ownership of Certain Beneficial Owners
and Management."
THE MERGER
EFFECT OF MERGER
At the Effective Time, SCB will merge with and into Western, and Western
will be the surviving corporation and will continue its corporate existence
under California law under the name "Western Bancorp." The separate corporate
existence of SCB will cease at the Effective Time.
Upon the Merger becoming effective, each share of SCB Common Stock issued
and outstanding at the Effective Time (other than (a) shares which have not been
voted in favor of the approval of the principal terms of the Merger and with
respect to which Dissenters' Rights shall have been perfected in accordance with
the CGCL and (b) shares held directly or indirectly by Western, other than
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted) will be converted automatically into the right to receive 0.4556
shares of Western Common Stock.
As of the Effective Time, the Board of Directors of the Surviving
Corporation is expected to consist of 14 directors, including all of the current
directors of Western and four current directors of SCB appointed pursuant to the
Merger Agreement. It is anticipated that the management and operation of Western
and SCB will be integrated after the Merger.
See "The Merger--Effect of Merger," "The Merger Agreement--The Merger" and
"The Merger Agreement--Effective Time."
10
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REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS
The Boards have each unanimously approved the Merger Agreement and the
transactions contemplated thereby. THE MEMBERS OF EACH BOARD UNANIMOUSLY BELIEVE
THAT THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS AND UNANIMOUSLY
RECOMMEND A VOTE "FOR" APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER. THE
CONCLUSIONS OF THE BOARDS WITH RESPECT TO THE MERGER ARE BASED UPON A NUMBER OF
FACTORS MORE FULLY DESCRIBED HEREIN. IN ADDITION, THE WESTERN BOARD HAS ALSO, BY
UNANIMOUS VOTE, APPROVED AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT.
See "The Merger--Background of the Merger," "--Reasons for the Merger;
Recommendations of the Boards of Directors" and "--Opinions of Financial
Advisors."
OPINIONS OF FINANCIAL ADVISORS
WESTERN. Piper Jaffray Inc. ("Piper Jaffray"), Western's financial advisor,
has rendered its written opinion, dated as of July 14 , 1997, to the Western
Board to the effect that, as of each of such date, the Merger Consideration (as
defined herein) was fair to the Western Shareholders from a financial point of
view. The written opinion of Piper Jaffray, dated as of July 14, 1997 (the
"Piper Opinion"), is attached to this Joint Proxy Statement-Prospectus as
Appendix C and should be read in its entirety.
SCB. Credit Suisse First Boston Corporation ("CSFB"), SCB's financial
advisor, has rendered its written opinions, dated April 29, 1997 and September
9, 1997, to the SCB Board to the effect that, as of each of such dates, the
Conversion Number was fair to the SCB Shareholders from a financial point of
view. The written opinion of CSFB, dated September 9, 1997, is attached to this
Joint Proxy Statement-Prospectus as Appendix B and should be read in its
entirety.
See "The Merger--Opinions of Financial Advisors."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Sullivan & Cromwell, special counsel to Western, and Dewey Ballantine,
counsel to SCB, have each advised that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that Western and SCB will each be a party
to that reorganization within the meaning of Section 368(b) of the Code. See
"The Merger--Certain Federal Income Tax Consequences."
Because of the complexity of the tax laws and the individual nature of
certain tax consequences of the Merger to each SCB Shareholder, each SCB
Shareholder should consult their own tax advisor concerning certain other
federal and all state, local and foreign tax consequences of the Merger that may
be applicable.
REGULATORY APPROVALS
The Merger is subject to prior approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under Section 3 of the BHCA
and the State Commissioner pursuant to Section 700 ET SEQ. of the California
Financial Code. The Companies submitted an application seeking approval of the
Merger and related matters to the Federal Reserve Board and Western submitted an
application seeking approval of the Merger to the State Commissioner on June 18,
1997 and July 3, 1997, respectively, and such approvals were obtained on July
29, 1997. See "The Merger--Regulatory Approvals" and "The Merger
Agreement--Conditions."
DISSENTERS' RIGHTS
In connection with the Merger, the Shareholders may be entitled to
Dissenters' Rights under Chapter 13 of the CGCL, the text of which is attached
hereto as Appendix D. In order for any Shareholder to exercise Dissenters'
Rights, a notice must be sent by such Shareholder and received by Western or
SCB,
11
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as the case may be, on or before the date of the respective Special Meetings,
and any such Shareholder must vote against the approval of the principal terms
of the Merger. Failure to send such notice and vote against the Merger will
result in a waiver of such Shareholder's Dissenters' Rights. See "The Merger--
Dissenters' Rights."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management of each of the Companies and of the Boards
have certain interests in the transactions contemplated by the Merger Agreement
that are in addition to the interests of Shareholders generally and which may
create potential conflicts of interest.
These interests include, among others, provisions in the Merger Agreement
relating to the indemnification of SCB and SC Bank officers and directors,
directors' and officers' liability insurance, and benefit plans and agreements.
In addition, four members of the SCB Board will be appointed to the Western
Board immediately prior to the Effective Time. Each member of the SCB Board
appointed to the Western Board will receive an annual retainer of $5,000 and
meeting fees ranging from $300 to $750 for each meeting he attends.
Western will also honor the current employment agreements of Larry D.
Hartwig, David A. McCoy, Bruce W. Roat, Ann E. McPartlin and Michael V. Cummings
in accordance with their terms. Mr. Hartwig's agreement provides him with a
minimum base salary of $210,000 per year, with increases in base salary as
determined by the Board of Directors, and his current base salary is $228,000.
The employment agreements of Messrs. McCoy and Roat, Ms. McPartlin and Mr.
Cummings (the "Executives") provide the Executives with base salaries as
determined by the Board of Directors, and participation in certain benefits
available to employees and executive officers of SCB, including vacation, health
and life insurance, and incentive and deferred compensation benefits. Such
Executives' current base salaries are $158,600, $145,600, $114,400 and $145,600,
respectively.
In addition, as a result of the Merger, all unvested options under the SC
Bancorp 1989 Stock Option Plan will vest at the Effective Time. As of the SCB
Record Date, Messrs. Cummings, Hartwig, McCoy, Roat and Ms. McPartlin held
22,000, 44,000, 18,000, 23,000 and 15,000 unvested options, respectively, which
had values, as of such date, of $171,871, $334,000, $137,247, $182,125 and
$117,372, respectively. Furthermore, as the result of the Merger at the
Effective Time, the vesting of all unvested shares of SCB Common Stock held by
SCB's 401(k) Plan, including 359 such shares on Mr. Roat's behalf, will be
accelerated. As of the SCB Record Date, the value of such shares was $4,936.
Additionally, John M. Eggemeyer, a director of Western, beneficially owns 80
percent of Belle Plain Partners, Inc. ("BPI") which provided financial advisory
and consulting services to Western in connection with the Merger for which BPI
will be paid a fee of approximately $1.8 million.
See "The Merger--Interests of Certain Persons in the Merger" and "The Merger
Agreement-- Certain Covenants."
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, it is currently expected
that the Merger will be accounted for as a pooling-of-interests in accordance
with generally accepted accounting principles, and confirmation by the
independent accountants for the Companies of the ability to use such accounting
treatment is one of the conditions (the "Pooling Condition") to the consummation
of the Merger. In the event that the Pooling condition is not satisfied the
Companies will either terminate the Merger Agreement for failure of the Pooling
Condition or waive such condition and resolicit the vote of the Shareholders to
approve the principal terms of the Merger with the Merger being accounted for
using the purchase method of accounting. See "The Merger--Accounting Treatment"
and "The Merger Agreement-- Conditions."
12
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THE MERGER AGREEMENT
EFFECTIVE TIME
The Merger will become effective (the "Effective Time") on the date and at
the time that an agreement of merger and related documents are filed with the
California Secretary of State or such later date as may be specified in such
agreement of merger. Subject to conditions specified in the Merger Agreement,
the parties expect the Merger to become effective on or about October 10, 1997,
although there can be no assurance as to whether or when the Merger will occur.
See "The Merger Agreement-- Effective Time" and "--Conditions."
CONDITIONS TO THE MERGER
The obligations of the Companies to effect the Merger are subject to the
satisfaction or waiver prior to the Effective Time of various conditions,
including the following: obtaining requisite Shareholder approvals; obtaining
requisite approvals from the Federal Reserve Board and the California
Commissioner of Financial Institutions (the "State Commissioner"); the
effectiveness of the Registration Statement of which this Joint Proxy
Statement-Prospectus is a part; receipt of opinions of counsel in respect of
certain federal income tax consequences of the Merger; receipt of opinions
confirming the fairness of the terms of the Merger to the Shareholders from a
financial point of view; and receipt of accountants' letters to the effect that
the Merger qualifies for pooling-of-interests accounting treatment. The
obligation of SCB to effect the Merger is also subject to the satisfaction or
waiver prior to the Effective Time of certain additional conditions, including
receipt of an opinion of counsel in respect of the shares of Western Common
Stock issued upon consummation of the Merger. See "The Merger
Agreement--Conditions."
One such condition to the obligation of Western to effect the Merger is
that, unless waived prior to the Effective Time, the Shareholders voting against
the approval of the Merger Agreement or giving notice in writing at or before
the applicable Special Meeting that such Shareholders dissent from the Merger
Agreement in the aggregate hold not more than five percent of the SCB Common
Stock or the Western Common Stock, as the case may be (the "Dissenters' Rights
Condition").
As of the Western Record Date, Financial Institutions Partners, L.P. ("FIP")
beneficially owned 342,797 shares of Western Common Stock, constituting 4.85
percent of the outstanding Western Common Stock, and as of the SCB Record Date,
FIP beneficially owned 145,000 shares of SCB Common Stock, constituting 1.9
percent of the outstanding SCB Common Stock. See "FIP Litigation."
WAIVER AND AMENDMENT
Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party benefitted by the provision or by both parties, or amended
or modified at any time (including the structure of the transaction) by an
agreement in writing between the parties and approved by the Boards (or duly
authorized committee thereof). However, after the vote by the shareholders SCB
or Western, no principal term of the Merger may be amended or revised without
the approval of the shareholders of SCB or Western, as the case may be. See "The
Merger Agreement--Waiver and Amendment."
TERMINATION
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Time, either before or after its approval by the Shareholders,
upon the occurrence of various events and under certain circumstances, including
by the mutual consent of the Companies; by either party in the event of the
failure of the relevant Shareholders to approve the principal terms of the
Merger at the relevant Special Meeting; by either party upon the failure to
obtain any approval, consent or waiver of a governmental authority required to
permit consummation of the transactions contemplated by the Merger Agreement;
and by SCB in the event that shares of Western Common Stock trade below certain
price levels prior to the Effective Time. Under certain circumstances a
termination fee of $1.25 million plus all costs and expenses
13
<PAGE>
incurred by the other party in connection with the Merger Agreement, up to
$500,000, may be payable by Western or SCB to the other party upon termination
of the Merger Agreement. See "The Merger Agreement--Termination."
STOCK OPTION AGREEMENT
As an inducement and condition to Western's entering into the Merger
Agreement, Western and SCB entered into a Stock Option Agreement, dated as of
April 29, 1997, between SCB as issuer and Western as grantee (the "Stock Option
Agreement"), pursuant to which SCB has granted to Western an irrevocable option
(the "Option") to purchase up to 1,491,050 shares of SCB Common Stock (or such
lesser number of shares of SCB Common Stock as shall constitute 19.9 percent of
the then outstanding SCB Common Stock) at a price of $11.875 per share, subject
to adjustment in certain circumstances. The Option is exercisable only under
certain limited and specifically defined circumstances, which generally relate
to an acquisition of control of, or a significant equity interest in or
significant assets of, SCB by a third party, or certain proposals or offers with
respect thereto. To the best of the Companies' knowledge, none of such events
has occurred as of the date hereof. The purchase of SCB Common Stock pursuant to
the Stock Option Agreement is subject to compliance with applicable law,
including receipt of any necessary approvals under the BHCA. See "The Stock
Option Agreement."
COMPARISON OF SHAREHOLDER RIGHTS
The rights of SCB Shareholders currently are determined by reference to the
CGCL, SCB's Articles of Incorporation and SCB's Bylaws. At the Effective Time,
SCB Shareholders will become shareholders of the Surviving Corporation. Their
rights as shareholders will then be determined by reference to the CGCL,
Western's Restated Articles of Incorporation and Western's Bylaws. See
"Description of Western Capital Stock and Comparison of Shareholder Rights."
RISK FACTORS
In deciding whether to vote for the approval of the principal terms of the
Merger, Shareholders should carefully evaluate the matters set forth under "Risk
Factors" herein in addition to the other matters described herein.
PROPOSED SANTA MONICA BANK ACQUISITION
On July 30, 1997, Western executed an Agreement and Plan of Merger (the "SMB
Merger Agreement") with Santa Monica Bank ("SMB") pursuant to which a subsidiary
of Western will merge with SMB (the "SMB Merger"). The SMB Merger Agreement
provides that each shareholder of SMB will have the right to elect to receive
either $28.00 per share in cash or 0.875 shares of Western Common Stock for each
share of common stock, par value $3.00 per share, of SMB ("SMB Common Stock").
In the event that shareholders owning more than 50 percent of SMB Common Stock
elect to receive Western Common Stock in the SMB Merger, each shareholder of SMB
Common Stock electing to receive Western Common Stock will receive cash and a
pro rata share of the stock available for distribution. In the event that the
number of shareholders of SMB Common Stock electing to receive cash is so great
as to prevent a tax-free reorganization, then all holders of SMB Common Stock,
regardless of their election, will receive $28.00 per share in cash upon
consummation of the SMB Merger. Assuming that the maximum number of shares of
Western Common Stock Western can be required to issue pursuant to the SMB Merger
Agreement are issued, 3,096,332 shares of Western Common Stock would be issued
in connection with the SMB Merger; PROVIDED, THAT, under certain circumstances
Western may, at its sole option, increase the percentage of stock to be issued
as consideration in the SMB Merger. If no Western Common Stock is issued as
consideration in the SMB Merger, the cash consideration will equal approximately
$198 million.
Approval of the principal terms of the Merger solicited hereby is
independent of and does not constitute approval of the SMB Merger. Another
shareholder meeting will be held to consider and vote upon the SMB Merger and
more detailed information will be provided to Western Shareholders (including
SCB Shareholders who become Western Shareholders as a result of the Merger,
assuming the Merger is consummated) prior to such meeting.
14
<PAGE>
MARKETS AND MARKET PRICES
There were, as of the Western Record Date, approximately 1,150 holders of
record of Western Common Stock. No shares of Western's serial preferred stock
have been issued or are outstanding. Western Common Stock is designated for
quotation on the Nasdaq National Market under the symbol "WEBC."
As of the SCB Record Date, there were approximately 509 holders of record of
SCB Common Stock. No shares of SCB's preferred stock have been issued or are
outstanding. SCB Common Stock is listed on the American Stock Exchange (the
"AMEX") under the symbol "SCK."
The following table summarizes the approximate high and low sales prices on
a per share basis for the Western Common Stock and the SCB Common Stock for the
periods indicated.
<TABLE>
<CAPTION>
WESTERN SCB
COMMON STOCK (1) COMMON STOCK (2)
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1995
First Quarter............................................. $ 12.75 $ 10.20 $ 5.25 $ 4.31
Second Quarter............................................ (3) (3) 5.25 4.63
Third Quarter............................................. 11.48 10.20 6.63 4.75
Fourth Quarter............................................ 11.48 10.20 6.13 5.44
1996
First Quarter............................................. 11.05 8.93 6.75 6.06
Second Quarter............................................ 17.00 8.50 7.13 6.38
Third Quarter............................................. 14.88 8.50 7.00 6.19
Fourth Quarter............................................ 29.75 13.86 9.88 7.00
1997
First Quarter............................................. 34.00 19.13 12.25 9.25
Second Quarter............................................ 37.19 28.63 14.25 10.25
Third Quarter (through September 5, 1997)................. 33.25 28.63 13.94 13.13
</TABLE>
- ------------------------------
(1) Prior to June 3, 1997, Western Common Stock was traded solely "over the
counter." Consequently, the prices listed before that date represent
quotations by dealers making a market in Western Common Stock and reflect
inter-dealer prices, without adjustments for mark-ups, mark-downs or
commissions, and may not necessarily represent actual transactions. Prior to
June 3, 1997, trading in Western Common Stock was limited in volume and may
not be a reliable indicator of its market value. On June 3, 1997, Western
Common Stock was designated for quotation on the Nasdaq National Market and
on that date Western effected a 1.0 for 8.5 reverse stock split (the
"Reverse Stock Split"). The sales prices prior to June 3, 1997 in the
preceding table have been adjusted for the Reverse Stock Split. The prices
listed above for periods subsequent to June 3, 1997 are as reported by the
Nasdaq National Market.
(2) As reported by AMEX.
(3) No reported trades.
The last trading price of Western Common Stock prior to the announcement of
the Merger on April 29, 1997 of which Western is aware was $30.77 ( after giving
effect to the Reverse Stock Split). The trading price of Western Common Stock,
as reported by the Nasdaq National Market, on September 5, 1997, was $30.50. The
closing price of SCB Common Stock as reported by AMEX on April 28, 1997, the
last trading day prior to the announcement of the execution of the Merger
Agreement, was $11.88 and the closing price of SCB Common Stock on September 5,
1997 was $13.63. The pro forma equivalent per share value of SCB Common Stock on
April 28, 1997 and September 5, 1997 was $14.02 per share and $13.90 per share,
respectively. The pro forma equivalent per share value of SCB Common Stock on
any date equals the closing price of Western Common Stock on such date, as
reported by the Nasdaq National Market, multiplied by the Conversion Number.
Because the Conversion Number is fixed pursuant to the Merger Agreement, a
change in the trading price of Western Common Stock before the Effective Time
will affect the implied market value of the Western Common Stock to be received
in the Merger by SCB Shareholders. THERE CAN BE NO ASSURANCE AS TO THE MARKET
PRICE OF WESTERN COMMON STOCK AT ANY TIME BEFORE, AT OR AFTER THE EFFECTIVE
TIME. SHAREHOLDERS OF WESTERN AND SCB ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR WESTERN COMMON STOCK AND SCB COMMON STOCK.
Upon consummation of the Merger, it is expected that there will be
approximately 1650 holders of record of Western Common Stock.
15
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
WESTERN
The following summary historical financial data for the six months ended
June 30, 1997 and 1996 are derived from unaudited consolidated financial
statements of Western which have been restated to reflect the effect of the CCB
Merger on a pooling-of-interests basis and include, in the opinion of Western's
management, all adjustments (consisting only of normal accruals) necessary to
present fairly the data for such periods. The results for the six month periods
ended June 30, 1997 are not necessarily indicative of the results to be expected
for the full fiscal year. The following summary historical financial data for
the five years ended December 31, 1996 are derived from the audited consolidated
financial statements of Western which have been restated to reflect the effect
of the CCB Merger on a pooling-of-interests basis. The data should be read in
conjunction with the consolidated financial statements, related notes, and other
financial information included or incorporated by reference in this Joint Proxy
Statement-Prospectus. All share data has been adjusted to reflect the Reverse
Stock Split.
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED JUNE
30, (1) AT OR FOR THE YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 (1) 1995 (2) 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS:
Interest income............................... $ 30,323 $ 15,951 $ 39,270 $ 29,233 $ 26,659 $ 27,990 $ 33,889
Interest expense.............................. 8,188 4,095 10,761 8,437 7,283 9,234 12,863
--------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME......................... 22,135 11,856 28,509 20,796 19,376 18,756 21,026
Provision for loan and lease losses........... 750 805 1,488 7,025 4,360 6,169 4,842
--------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
AND LEASE LOSSES.......................... 21,385 11,051 27,021 13,771 15,016 12,587 16,184
Non-interest income........................... 2,771 2,827 5,133 3,288 2,777 3,118 3,050
Non-interest expense.......................... 20,092 10,471 27,157 22,143 18,239 20,815 17,950
--------- --------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES........... 4,064 3,407 4,997 (5,084) (446) (5,110) 1,284
Income tax expense (benefit).................. 3,066 1,348 463 (2,426) 546 (953) 602
--------- --------- --------- --------- --------- --------- ---------
NET INCOME (LOSS)........................... $ 998 $ 2,059 $ 4,534 $ (2,658) $ (992) $ (4,157) $ 682
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
ENDING BALANCE SHEET DATA:
Assets........................................ $ 859,771 $ 432,850 $ 862,900 $ 404,144 $ 360,639 $ 391,669 $ 441,261
Securities.................................... 208,610 108,238 256,228 90,948 88,214 99,336 67,893
Loans, net of deferred fees and costs......... 499,195 233,236 470,183 226,732 231,851 248,842 290,175
Allowance for loan losses..................... 10,283 6,688 10,810 7,396 6,797 8,276 6,810
Goodwill...................................... 28,344 -- 29,342 -- -- -- --
Deposits...................................... 761,469 393,917 761,688 367,246 336,032 363,441 407,100
Borrowed funds................................ 10,852 2,471 13,350 2,483 2,524 2,562 3,250
Common shareholders' equity................... 79,857 33,575 79,128 32,116 20,430 23,110 26,583
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings (loss) per common and common
equivalent share............................ $ 0.14 $ 0.52 $ 0.95 $ (0.84) $ (0.39) $ (1.63) $ 0.26
Dividends declared per share.................. -- -- -- -- -- -- --
Book value per share.......................... 11.30 8.58 11.26 8.26 8.12 9.19 10.93
Shareholders' equity to assets at period
end......................................... 9.29% 7.76% 9.17% 7.95% 5.66% 5.90% 6.02%
Return on average assets...................... 0.24 1.02 0.85 (0.71) (0.26) (1.01) 0.16
Return on average equity...................... 2.48 12.61 10.18 (9.30) (4.22) (17.16) 2.57
Average equity/average assets................. 9.53 8.07 8.39 7.62 6.15 5.87 6.29
Net interest margin........................... 6.14 6.39 6.11 6.16 5.67 4.68 4.97
</TABLE>
- ------------------------------
(1) On September 30, 1996, Western acquired Western Bank. At September 30, 1996,
Western Bank had approximately $410 million in assets, $198 million in net
loans and $353 million in deposits. At the time of such acquisition, Western
also raised approximately $42 million in additional equity in a private
placement by issuing 3,076,045 shares of Western Common Stock. Western
Bank's results of operations are included only since the fourth quarter of
fiscal 1996. Due to the relatively large size of this transaction, any
comparison of data as of and for the six months ended June 30, 1997 and the
year ended December 31, 1996 to data as of or for prior dates or periods may
not be meaningful.
(2) In 1995 Western, through a private placement and a separate shareholders'
rights and public offering, raised approximately $9.1 million in additional
equity, net of approximately $470,000 in offering costs, in connection with
the issuance of 874,589 shares (approximately 7.4 million shares before the
Reverse Stock Split) of Western Common Stock. Also in 1995 Western, through
a private placement of 474,000 shares, raised approximately $3.2 million in
additional equity in connection with the issuance of shares of Western
Common Stock.
16
<PAGE>
SCB
The following summary historical financial data for the six months ended
June 30, 1997 and 1996 are derived from unaudited financial statements of SCB
and include, in the opinion of SCB's management, all adjustments (consisting
only of normal accruals) necessary to present fairly the data for such periods.
The results for the six month period ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full fiscal year. The following
summary historical financial data for the five years ended December 31, 1996 are
derived from the audited financial statements of SCB. The data should be read in
conjunction with the consolidated financial statements, related notes, and other
financial information included or incorporated by reference in this Joint Proxy
Statement-Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED JUNE
30, AT OR FOR THE YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS:
Interest income............................... $ 18,435 $ 17,144 $ 34,967 $ 33,396 $ 26,420 $ 29,732 $ 35,915
Interest expense.............................. 6,246 5,850 11,727 12,015 6,279 9,619 13,665
--------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME......................... 12,189 11,294 23,240 21,381 20,141 20,113 22,250
Provision for (recovery of) loan losses....... 650 (470) (470) 1,539 (850) 11,750 9,072
--------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.................................... 11,539 11,764 23,710 19,842 20,991 8,363 13,178
Non-interest income........................... 2,443 2,533 5,166 5,013 6,683 13,943 8,123
Non-interest expense.......................... 9,790 11,397 21,228 23,293 23,835 26,024 23,835
--------- --------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES........... 4,192 2,900 7,648 1,562 3,839 (3,718) (2,534)
Income tax expense (benefit).................. 1,745 1,217 3,193 693 1,134 (1,026) (1,131)
--------- --------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLES........ 2,447 1,683 4,455 869 2,705 (2,692) (1,403)
Cumulative effect of change in accounting
principle -- -- -- -- -- (41) --
--------- --------- --------- --------- --------- --------- ---------
NET INCOME (LOSS)........................... $ 2,447 $ 1,683 $ 4,455 $ 869 $ 2,705 $ (2,733) $ (1,403)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
ENDING BALANCE SHEET DATA:
Assets........................................ $ 507,894 $ 462,033 $ 476,013 $ 461,779 $ 398,555 $ 407,889 $ 464,229
Securities.................................... 75,581 79,861 76,590 94,030 131,881 149,543 164,546
Loans, net of deferred fees and costs......... 349,946 322,391 347,175 316,310 207,390 212,133 257,622
Allowance for loan losses..................... 5,062 5,327 4,947 5,734 5,318 10,800 6,859
Goodwill...................................... 3,355 3,896 3,626 4,131 2,464 2,616 2,008
Deposits...................................... 446,245 410,603 415,326 406,811 339,939 368,388 402,892
Borrowed funds and other interest-bearing
liabilities................................. 7,342 10,782 8,096 6,407 13,771 8,533 26,174
Common shareholders' equity................... 51,785 46,421 49,919 45,512 41,844 28,462 31,195
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings (loss) per common and common
equivalent share............................ $ 0.33 $ 0.23 $ 0.60 $ 0.12 $ 0.49 $ (0.79) $ (0.40)
Dividends declared per share.................. 0.10 -- -- -- -- -- --
Book value per share.......................... 6.91 6.21 6.67 6.09 5.60 8.21 8.99
Shareholders' equity to assets at period
end......................................... 10.20% 10.05% 10.49% 9.86% 10.50% 6.98% 6.72%
Return on average assets...................... 1.01 0.74 0.96 0.19 0.67 (0.59) (0.30)
Return on average equity...................... 9.64 7.39 9.40 2.14 6.59 (8.90) (4.42)
Average equity/average assets................. 10.43 10.07 10.23 8.87 10.15 6.61 6.73
Net interest margin........................... 5.52 5.57 5.58 5.30 5.75 4.82 5.27
</TABLE>
17
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain summary unaudited pro forma combined
financial data for Western after giving effect to the Merger, as if it had
occurred as of the beginning of each of the periods presented and using the
Conversion Number of 0.4556 and accounting for the Merger as a pooling-of-
interests. See "The Merger--Accounting Treatment." This information should be
read in conjunction with the historical consolidated financial statements of
Western, which have been restated to reflect the effect of the CCB Merger on a
pooling-of-interests basis, and SCB including the notes thereto, appearing
elsewhere in this Joint Proxy Statement-Prospectus or incorporated herein by
reference. See "Unaudited Pro Forma Combined Condensed Financial Information."
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED JUNE AT OR FOR THE YEARS ENDED
30,(1) DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996(1) 1995(2) 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS:
Interest income............................................. $ 48,758 $ 33,095 $ 74,237 $ 62,629 $ 53,079
Interest expense............................................ 14,434 9,945 22,488 20,452 13,562
--------- --------- --------- --------- ---------
NET INTEREST INCOME....................................... 34,324 23,150 51,749 42,177 39,517
Provision for loan and lease losses......................... 1,400 335 1,018 8,564 3,510
--------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE
LOSSES.................................................. 32,924 22,815 50,731 33,613 36,007
Non-interest income......................................... 5,214 5,360 10,299 8,301 9,460
Non-interest expense........................................ 29,882 21,868 48,385 45,436 42,074
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES......................... 8,256 6,307 12,645 (3,522) 3,393
Income taxes................................................ 4,811 2,565 3,656 (1,733) 1,680
--------- --------- --------- --------- ---------
NET INCOME (LOSS)......................................... $ 3,445 $ 3,742 $ 8,989 $ (1,789) $ 1,713
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
ENDING BALANCE SHEET DATA:
Assets...................................................... $1,368,753 $ 894,883 $1,340,001 $ 865,923 $ 759,194
Securities.................................................. 284,191 188,099 332,818 184,978 220,095
Loans, net of deferred fees and costs....................... 849,141 555,627 817,358 543,042 439,241
Allowance for loan and lease losses......................... 15,345 12,015 15,757 13,130 12,115
Goodwill.................................................... 31,699 3,896 32,968 4,131 2,464
Deposits.................................................... 1,207,714 804,520 1,177,014 774,057 675,971
Borrowed funds.............................................. 18,194 13,253 21,446 8,890 16,295
Common shareholders' equity................................. 124,781 79,996 122,186 77,628 62,274
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings (loss) per common and common equivalent share...... $ 0.32 $ 0.50 $ 1.08 $ (0.27) $ 0.33
Dividends declared per share................................ -- -- -- -- --
Shareholders' equity to assets at period end................ 9.12% 8.94% 9.12% 8.96% 8.20%
Return on average assets.................................... 0.52 0.87 0.90 (0.21) 0.22
Return on average equity.................................... 5.24 9.57 9.78 (2.59) 2.65
Average equity/average assets............................... 9.86 9.13 9.25 8.31 8.20
Net interest margin......................................... 5.90 5.90 5.86 5.69 5.71
</TABLE>
- ------------------------------
(1) On September 30, 1996, Western acquired Western Bank. At September 30, 1996,
Western Bank had approximately $410 million in assets, $198 million in net
loans and $353 million in deposits. At the time of such acquisition, Western
also raised approximately $42 million in additional equity in a private
placement by issuing 3,076,045 shares of Western Common Stock. Western
Bank's results of operations are included only since the fourth quarter of
fiscal 1996. Due to the relatively large size of this transaction, any
comparison of data as of and for the six months ended June 30, 1997 and the
year ended December 31, 1996 against data as of or for prior dates or
periods may not be meaningful.
(2) In 1995 Western, through a private placement and a separate shareholders'
rights and public offering, raised approximately $9.1 million in additional
equity, net of approximately $470,000 in offering costs, in connection with
the issuance of 874,589 shares of Western Common Stock. Also in 1995
Western, through a private placement of 474,000 shares raised approximately
$3.2 million in additional equity in connection with the issuance of shares
of Western Common Stock.
18
<PAGE>
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth for Western Common Stock and SCB Common Stock
certain selected historical and unaudited pro forma equivalent per share data at
June 30, 1997 and 1996 and for the six months ended June 30, 1997 and 1996, and
at the end of and for each of the three years ended December 31, 1996, giving
effect to the Merger using the pooling-of-interests method of accounting. The
information is derived from the historical consolidated restated financial
statements of Western and the historical financial statements of SCB, including
the related notes thereto, and the pro forma combined financial information
giving effect to the Merger, including the related notes thereto, appearing
elsewhere herein. The information below should be read in conjunction with the
historical and pro forma combined financial information of Western and SCB,
including the notes thereto, appearing elsewhere in this Joint Proxy
Statement-Prospectus or incorporated herein by reference. See "Unaudited Pro
Forma Combined Condensed Financial Information."
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER
JUNE 30, 31,
---------------------------- -------------------------------
1997 1996 1996 1995 1994
----------- --------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT
SHARE(1):
Western................................................ $ 0.14 $ 0.52 $ 0.95 $ (0.84) $ (0.39)
SCB.................................................... 0.33 0.23 0.60 0.12 0.49
Western combined pro forma............................. 0.32 0.50 1.08 (0.27) 0.33
SCB equivalent pro forma............................... 0.15 0.23 0.49 (0.12) 0.15
Western cash dividends per share....................... -- -- -- -- --
SCB cash dividends per share........................... 0.10 -- -- -- --
Pro forma cash dividends per share..................... -- -- -- -- --
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1997 1996
----------- ---------------
<S> <C> <C> <C> <C> <C>
BOOK VALUE PER SHARE(2):
Western................................................ $ 11.30 $ 11.26
SCB.................................................... 6.91 6.67
Western combined pro forma............................. 11.75 11.55
SCB equivalent pro forma............................... 5.35 5.26
</TABLE>
- ------------------------
(1) The Western combined pro forma earnings (loss) per common and common
equivalent share were calculated by using aggregate historical income
information for the Companies divided by the average pro forma shares
outstanding of the combined entity. The average pro forma shares of the
combined entity were calculated by combining the Western historical average
shares with the historical average shares of SCB as adjusted by the
Conversion Number of 0.4556 plus the number of Western shares to be issued
to holders of SCB common stock options. See "The Merger
Agreement--Conversion of SCB Common Stock." The SCB equivalent pro forma
earnings per share amounts were computed by multiplying the Western combined
pro forma amounts by the Conversion Number of 0.4556.
(2) The Western combined pro forma book value per share is based on the
aggregate historical common shareholders' equity of the Companies divided by
the total pro forma common shares of the combined entity based on the
Conversion Number of 0.4556 plus the number of Western shares to be issued
to holders of SCB common stock options. The SCB equivalent pro forma book
value per share at period end represents the Western pro forma amounts
multiplied by the Conversion Number of 0.4556. See "The Merger
Agreement--Conversion of SCB Common Stock."
19
<PAGE>
SUMMARY FINANCIAL DATA REGARDING SMB
SUMMARY HISTORICAL FINANCIAL DATA
The following summary historical financial data at or for the six months
ended June 30, 1997 and June 30, 1996 and for each of the three years ended
December 31, 1996 are derived solely from certain financial statements of SMB,
which were provided to Western by SMB in connection with the execution and
delivery of the SMB Merger Agreement and which are incorporated herein by
reference from Western's Current Report on Form 8-K, dated August 28, 1997 (the
"SMB Financial Statements"). The data should be read in conjunction with the
financial statements, related notes, and other financial information included in
the SMB Financial Statements.
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED JUNE AT OR FOR THE YEARS ENDED
30, DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income............................................. $ 23,816 $ 22,103 $ 45,314 $ 45,678 $ 41,819
Interest expense............................................ 6,996 6,724 13,498 14,205 12,421
--------- --------- --------- --------- ---------
NET INTEREST INCOME....................................... 16,820 15,379 31,816 31,473 29,398
Provision for loan losses................................... -- -- -- 2,000 3,542
--------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES....... 16,820 15,379 31,816 29,473 25,856
Non-interest income......................................... 3,534 3,417 7,024 7,209 7,277
Non-interest expense........................................ 11,686 13,476 25,757 28,373 32,231
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES................................ 8,668 5,320 13,083 8,309 902
Income tax expense............................................ 3,004 1,214 3,467 3,042 381
--------- --------- --------- --------- ---------
NET INCOME................................................ $ 5,664 $ 4,106 $ 9,616 $ 5,267 $ 521
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
ENDING BALANCE SHEET DATA:
Assets...................................................... $ 672,574 $ 610,402 $ 631,561 $ 618,863 $ 667,519
Securities.................................................. 141,239 120,883 141,139 134,599 167,033
Loans, net of deferred fees and costs....................... 390,243 373,284 374,855 369,226 364,739
Allowance for loan losses................................... 7,992 9,964 8,955 11,032 14,898
Deposits.................................................... 590,785 538,774 553,983 550,278 605,280
Borrowed funds.............................................. 1,972 1,991 1,982 2,000 2,016
Common shareholders' equity................................. 77,263 67,984 72,975 64,466 59,010
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent share............. $ 0.80 $ 0.58 $ 1.36 $ 0.74 $ 0.07
Dividends declared per share................................ 0.18 0.05 0.15 -- --
Book value per share........................................ $ 10.92 $ 9.61 $ 10.31 $ 9.11 $ 8.34
Shareholders' equity to assets at period end................ 11.49% 11.14% 11.55% 10.42% 8.84%
Return on average assets.................................... 1.79 1.36 1.56 0.84 0.07
Return on average equity.................................... 15.37 12.59 14.22 8.68 0.80
Average equity/average assets............................... 11.65 10.80 10.97 9.69 8.70
Net interest margin......................................... 6.12 6.02 6.04 6.03 5.40
</TABLE>
20
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following table sets forth certain unaudited pro forma combined
condensed financial data for Western (after giving effect to the Merger) and
SMB, as if the Merger and the SMB Merger each had occurred at the beginning of
each of the periods presented. See "Proposed Santa Monica Bank Acquisition."
This information should be read in conjunction with the historical consolidated
financial statements of Western, SCB and SMB including the notes thereto,
incorporated herein by reference. Financial data for SMB included herein are
derived solely from the SMB Financial Statements. See "Unaudited Pro Forma
Combined Condensed Financial Information."
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS AT OR FOR THE YEAR
ENDED JUNE 30, 1997 ENDED DECEMBER 31, 1996
---------------------- -----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
RESULTS OF OPERATIONS:
Interest income............................................... $ 70,817 $ 116,038
Interest expense.............................................. 22,264 37,652
----------- --------
NET INTEREST INCOME......................................... 48,553 78,386
Provision for loan losses..................................... 1,400 1,018
----------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES......... 47,153 77,368
Non-interest income........................................... 8,748 17,323
Non-interest expense.......................................... 45,904 82,813
----------- --------
INCOME BEFORE INCOME TAXES.................................. 9,997 11,878
Income tax expense............................................ 6,611 4,715
----------- --------
NET INCOME.................................................. $ 3,386 $ 7,163
----------- --------
----------- --------
ENDING BALANCE SHEET DATA:
Assets........................................................ $ 2,120,575
Securities.................................................... 425,430
Loans, net of deferred fees and costs......................... 1,241,774
Allowance for loan losses..................................... 23,337
Goodwill...................................................... 152,421
Deposits...................................................... 1,798,345
Borrowed funds................................................ 38,331
Common shareholders' equity................................... 251,781
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent share............... $ 0.23 $ 0.57
Dividends declared per share.................................. -- --
Book value per share.......................................... $ 17.02
Shareholders' equity to assets at period end.................. 11.87%
Return on average assets...................................... 0.33 0.42%
Return on average equity...................................... 2.69 3.52
Average equity/average assets................................. 12.31 12.05
Net interest margin........................................... 5.84 5.77
</TABLE>
21
<PAGE>
RISK FACTORS
IN ADDITION TO THE INFORMATION CONTAINED ELSEWHERE IN THIS JOINT PROXY
STATEMENT-PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, PROSPECTIVE INVESTORS
IN WESTERN, INCLUDING SCB SHAREHOLDERS CONSIDERING THE PROPOSAL TO APPROVE THE
PRINCIPAL TERMS OF THE MERGER, AND THE WESTERN SHAREHOLDERS CONSIDERING THE
PROPOSAL TO APPROVE THE PRINCIPAL TERMS OF THE MERGER, SHOULD CAREFULLY CONSIDER
THE FOLLOWING FACTORS, AMONG OTHERS, BEFORE MAKING ANY FINAL DECISION.
THIS JOINT PROXY STATEMENT-PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT. ALTHOUGH EACH OF THE COMPANIES BELIEVES THAT ITS PLANS, INTENTIONS
AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE,
NEITHER CAN GIVE ANY ASSURANCE THAT SUCH PLANS, INTENTIONS OR EXPECTATIONS WILL
BE ACHIEVED. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANIES' FORWARD-LOOKING STATEMENTS ARE SET FORTH BELOW
AND ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS. FURTHERMORE, THE
COMPANIES DO NOT INTEND TO UPDATE OR REVISE THE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS. THE SHAREHOLDERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON ANY OF THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN. ALL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANIES OR PERSONS ACTING ON
EITHER OF THEIR BEHALVES ARE QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS SET FORTH HEREIN.
COMPETITION
The banking business in California generally, and in the Companies' service
areas in particular, is highly competitive with respect to both loans and
deposits and is dominated by a relatively small number of major banks which have
many offices operating throughout wide geographic areas. In addition, there are
numerous other independent commercial banks within Western's and SCB's primary
service area, many of which have greater resources. Certain of Western's and
SCB's competitors may be better able to respond to changing capital and other
regulatory requirements and better able to maintain or improve market share.
ABILITY TO INTEGRATE THE OPERATIONS OF WESTERN AND SCB
Because the markets in which the Companies operate are highly competitive
and because of the inherent uncertainties associated with merging two companies,
there can be no assurance that the Surviving Corporation will be able to realize
fully the operating efficiencies Western currently expects to realize as a
result of the Merger and the consolidation of the administrative operations of
the Companies or that such operating efficiencies will be realized in the time
frame currently anticipated. In addition, Western consummated the CCB Merger on
June 4, 1997, and there can be no assurance that Western will be able to realize
fully the operating efficiencies expected as a result of the CCB Merger and the
additional consolidation of the administrative operations of Western and SCB or
that such operating efficiencies will be realized in the time frame currently
anticipated by Western. See "The Merger--Background of the Merger" and
"--Reasons for the Merger; Recommendations of the Boards of Directors."
GENERAL BUSINESS RISK
The business of the Companies is subject to various business risks. The
volume of loan originations is dependent upon demand for loans of the type
originated and serviced by the Companies. The level of consumer confidence,
fluctuations in real estate values, fluctuations in prevailing interest rates
and fluctuations in investment returns expected by the financial community could
combine to make loans of the type originated by the Companies less attractive.
In addition, the Companies may be adversely affected by other factors that could
(a) increase the cost to the borrower of loans originated by the Companies, (b)
create alternative lending sources for such borrowers, or (c) increase the cost
of funds of the Companies at a faster rate than any increase in interest income,
thereby narrowing their net interest rate margin. In recent months, the
continued recovery of the Southern California economy, particularly in
22
<PAGE>
Orange County, has resulted in strong growth in deposits at both Western and
SCB. Although both the Companies have also seen continued improvement in loan
demand consistent with overall market growth during the continued recovery of
the Southern California economy, the increase in demand to date has not been
sufficient to permit Western to utilize fully new deposits to fund loans, and
accordingly Western has increased its relative holdings of securities
investments. Managements of both the Companies believe that loan demand will
continue to improve, but there can be no assurance that there will be sufficient
loan demand in the future to keep pace with increases in deposits such that
desirable levels of securities held relative to loans can be maintained.
Governmental interventions through elimination of tax benefits for home equity
loans, regulation of an increased scope of loans or introduction of additional
regulations aimed at mortgage loans could also adversely affect the Companies'
business.
In the ordinary course of their business, the Companies are subject to
claims made against them by borrowers and investors arising from, among other
things, losses which are claimed to have been incurred as a result of
allegations relating to (a) breaches of fiduciary obligation, (b)
misrepresentations, errors or omissions by employees and officers of the
Companies (including their appraisers), (c) incomplete documentation, or (d)
failure by the Companies to comply with various laws and regulations applicable
to their business. The Companies believe that any liability with respect to any
currently asserted claims or legal actions against the Companies is not likely
to be material to the consolidated financial position or results of operations
of the Surviving Corporation; however, any claims asserted in the future may
result in legal expense or liabilities which could have a material adverse
effect on the Surviving Corporation's financial position and results of
operations. As of June 30, 1997, Western and SCB had reserves for potential and
pending litigation of $953,000 and $24,000, respectively. One pending claim for
which Western has established reserves is the lawsuit filed by Financial
Institutions Partners. See "FIP Litigation."
CONCENTRATION OF OPERATIONS; RECESSIONARY ENVIRONMENTS; DECLINE IN REAL ESTATE
VALUES
The Companies currently limit their business to Southern California, with
the majority of their business concentrated in Los Angeles and Orange counties,
and the business of the Surviving Corporation after the Merger is expected to
continue to be concentrated in Southern California for the foreseeable future.
Although the Surviving Corporation intends to expand within Southern California,
there can be no assurance when or if such expansion will take place.
Consequently, the results of operations and financial condition of the Companies
are dependent upon general trends in the Southern California economies and
residential and commercial real estate markets. The risks to which the business
of the Companies is subject, and to which the business of the Surviving
Corporation will be subject, become more acute during an economic slow-down or
recession such as that experienced during the recent California recession.
During such periods, delinquencies and foreclosures generally increase and could
result in increased incidents of claims and legal actions and a decline in
demand for the services provided by the Companies. In addition, a significant
decline in market values of properties of the type which secure loans originated
by the Companies would reduce homeowners' equity in their homes and businesses'
equity in their properties, thereby reducing their borrowing power and also
weakening collateral coverage on loans made previously by the Companies. Such a
decline could also diminish the market for loans originated by the Companies.
Any of the foregoing could have a material adverse effect on the financial
position and results of operations of the Surviving Corporation, and could have
a greater adverse impact on the Surviving Corporation than on certain of its
competitors which may have greater resources and capital. In addition, the
concentration of the Surviving Corporation's operations in Los Angeles and
Orange counties exposes it to greater risk in the event of catastrophes, such as
earthquakes, fires and floods in this region, than other banking companies with
a wider geographic base.
INTEREST RATE RISK
It is expected that the Surviving Corporation, through its subsidiaries,
will continue to realize income primarily from the differential or "spread"
between the interest earned on loans, securities and other
23
<PAGE>
interest-earning assets, and interest paid on deposits, borrowings and other
interest-bearing liabilities. Net interest spreads are affected by the
difference between the maturities and repricing characteristics of
interest-earning assets and interest-bearing liabilities. In addition, loan
volume and yields are affected by market interest rates on loans, and rising
interest rates generally are associated with a lower volume of loan
originations. There can be no assurance that the Surviving Corporation's
interest rate risk will be minimized or eliminated. In addition, an increase in
the general level of interest rates may adversely affect the ability of certain
borrowers to pay the interest on and principal of their obligations.
Accordingly, changes in levels of market interest rates could materially
adversely affect the Surviving Corporation's net interest spread, asset quality,
loan origination volume and overall results of operation.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION
Shares of Western Common Stock eligible for future sale could have a
dilutive effect on the market for Western Common Stock and could adversely
affect market prices. As of the Western Record Date, the Restated Articles of
Incorporation of Western authorize 100,000,000 shares of Western Common Stock,
of which 7,071,973 shares were outstanding, and 3,555,015 additional shares will
be issued in the Merger to SCB Shareholders, assuming no shares of SCB Common
Stock reserved for issuance on the Western Record Date are issued on or prior to
the Effective Date. Pursuant to its stock option plans, Western had outstanding
options to purchase an additional 306,369 shares of Western Common Stock on the
Western Record Date with exercise prices of between $5.25 and $32.00. Western
also had outstanding warrants to purchase an additional 140,675 shares of
Western Common Stock with exercise prices between $13.77 and $15.81.
In addition, FIP has asserted that it has the right to (i) acquire up to
266,659 additional shares (the "Additional Shares") of Western Common Stock at
$6.75 per share and (ii) require CCB and Western to comply with the terms of an
agreement pursuant to which FIP alleges a right of first refusal as to any
offers by Western of shares of common stock of CCB or Western in an amount
necessary to obtain and thereafter to maintain FIP's percentage beneficial
ownership in CCB of 9.9 percent. Management of Western (the "Western
Management") estimates that in what it believes to be the unlikely event that
the outcome of the FIP litigation requires the issuance of the Additional Shares
to FIP, the effect would be that the weighted average shares outstanding, for
the purpose of computing earnings per share, would have increased by
approximately 3.7 percent for the three-month period ended June 30, 1997,
resulting in earnings per share dilution of approximately 3.5 percent. In
addition, in what the Western Management believes to be the unlikely event that
FIP obtains a judgment that it has a right of first refusal to obtain and
thereafter maintain a beneficial ownership interest in Western (which is now
being equated to CCB by FIP) at 9.9 percent, approximately 396,590 shares would
be issued to FIP resulting in an increase of approximately 5.4 percent in the
weighted average shares outstanding for the purpose of computing earnings per
share for the three-month period ended June 30, 1997, resulting in earnings per
share dilution of approximately 5.1 percent.
Although Western Management believes that an adverse outcome in the FIP
litigation resulting in the issuance of Western Common Stock to FIP is unlikely,
in the event the litigation remains unresolved at the time of the Special
Meetings, FIP may exercise its Dissenters' Rights, which could adversely impact
the ability of Western and SCB to account for the Merger as a
pooling-of-interests. As of the Western Record Date, FIP beneficially owned
342,797 shares of Western Common Stock, constituting 4.85 percent of the
outstanding Western Common Stock, and as of the SCB Record Date, FIP
beneficially owned 145,000 shares of SCB Common Stock, constituting 1.9 percent
of the outstanding SCB Common Stock. See "The Merger--Dissenters' Rights." In
addition, Western's obligation to effect the Merger is subject to the
satisfaction or waiver prior to the Effective Time of the condition that SCB
Shareholders or Western Shareholders voting against approval of the Merger
Agreement or giving notice in writing to SCB or Western, as the case may be, at
or before the applicable Special Meeting, that such shareholder dissents from
the Merger Agreement in the aggregate hold not more than five percent of the SCB
Common Stock
24
<PAGE>
or the Western Common Stock, as the case may be. See "The Merger
Agreement--Conditions." See "FIP Litigation."
SCB had outstanding options to purchase 542,550 shares of SCB Common Stock
on the SCB Record Date with exercise prices of between $4.50 and $11.87. If the
Merger is consummated, options and rights to purchase shares of SCB Common Stock
outstanding immediately prior to the Effective Time will be converted into the
right to receive for each share otherwise issuable upon exercise thereof a
number of shares of Western Common Stock equal to the quotient obtained by
dividing the Spread (as defined herein) by $31.28. See "The Merger
Agreement--Conversion of SCB Common Stock." At an assumed average exercise price
for such options of $6.25, 138,760 shares of Western Common Stock would be
issued in connection with the conversion of such options and rights to purchase.
Sales of substantial amounts of Western Common Stock in the public market
following the Merger could adversely affect the market price of Western Common
Stock. There are no restrictions in the Merger Agreement preventing Western from
issuing additional shares.
On July 30, 1997, Western executed the SMB Merger Agreement which, if
consummated, could require Western to issue up to 3,096,332 shares of Western
Common Stock and allow Western to elect to issue additional shares of Western
Common Stock, at its sole option, under certain circumstances to certain
shareholders of SMB. See "Proposed Santa Monica Bank Acquisition." It is
Western's intention to pursue acquisitions of other financial institutions from
time to time where such acquisitions are believed by Western to enhance
shareholder value or satisfy other strategic objectives, although there are no
specific pending or contemplated acquisitions at present. Such acquisitions, if
any, could be accomplished by the issuance of additional shares of Western
Common Stock or other securities convertible into or exercisable for Western
Common Stock.
There can be no assurance as to the market value of Western Common Stock
after the Merger, which market value may be affected by the dilutive effects of
the matters described above, if any, and other factors.
REGULATION
The operations of the Companies are subject to extensive regulation by
federal, state and local governmental authorities and are subject to various
laws and judicial and administrative decisions imposing requirements and
restrictions on part or all of their respective operations. Each of the
Companies believes that it is in substantial compliance in all material respects
with applicable federal, state and local laws, rules and regulations. Because
the business of each of the Companies is highly regulated, the laws, rules and
regulations applicable to the Companies are subject to regular modification and
change. Various laws, rules and regulations are currently under consideration
which, if adopted, would impact the Surviving Corporation. There can be no
assurance that these proposed laws, rules and regulations, or other such laws,
rules or regulations, will not be adopted in the future. Adoption of such laws,
rules or regulations could make compliance much more difficult or expensive,
restrict the Surviving Corporation's ability to originate, broker or sell loans,
further limit or restrict the amount of commissions, interest or other charges
earned on loans originated or sold by the Surviving Corporation or otherwise
adversely affect the business or prospects of the Surviving Corporation.
LIMITED MARKET FOR WESTERN COMMON STOCK
There is currently only a limited trading market for Western Common Stock.
Western Common Stock was designated for quotation on the Nasdaq National Market
on June 3, 1997. There can be no assurance that an active trading market for
Western Common Stock will develop, or if developed, will continue, or that
shareholders of the Surviving Corporation will be able to resell their
securities or otherwise liquidate their investment without considerable delay,
if at all, or considerable impact on the sales price. See "Summary--Markets and
Market Prices."
25
<PAGE>
THE COMPANIES
WESTERN
Western is a bank holding company registered under the BHCA, and its
principal business is to serve as a holding company for its banking
subsidiaries, NBSC and Western Bank. Western was organized as a California
corporation on May 20, 1983 and commenced operation as a bank holding company on
June 18, 1984. Western Bank was acquired by Western on September 30, 1996. On
June 4, 1997, Western consummated the CCB Merger pursuant to which CCB merged
with and into Western, and Monarch Bank, a wholly-owned subsidiary of Western
prior to the CCB Merger, merged with and into NBSC, a wholly-owned subsidiary of
CCB prior to the CCB Merger.
Western's principal executive offices are located at 4100 Newport Place,
Suite 900, Newport Beach, California 92660, and its telephone number is (714)
863-2300. NBSC has seven branches, and its primary market area is Orange County,
California, with its head office in Newport Beach, California. Western Bank has
five branches in Los Angeles County, with its head office in Westwood,
California. NBSC and Western Bank both offer a broad range of banking products
and services, including many types of business and personal savings and checking
accounts and other consumer banking services. At June 30, 1997, Western had
consolidated total assets, total deposits and shareholders' equity of
$859,771,000, $761,469,000, and $79,857,000, respectively.
Additional information relating to Western is included in documents
incorporated by reference into this Joint Proxy Statement-Prospectus. See
"Available Information" and "Incorporation of Certain Information by Reference."
QUARTERLY DIVIDEND
On August 20, 1997, the Western Board approved the institution of a
quarterly dividend and thereafter declared a dividend of $0.15 per share of
Western Common Stock payable on December 10, 1997 to Western Shareholders of
record on November 10, 1997.
SCB
SCB is a bank holding company registered under the BHCA and its principal
business is to serve as a holding company for its banking subsidiary, SC Bank.
SCB was incorporated in California on February 9, 1981, and conducts operations
through SC Bank, a California state-chartered commercial bank, its sole,
wholly-owned subsidiary. SCB's principal executive offices are located at 3800
East La Palma Avenue, Anaheim, California 92807-1798 and its telephone number is
(714) 238-3111.
SC Bank was formed in 1981 through the merger of the Bank of Downey and the
National Bank of Whittier, both founded in 1964. SC Bank provides general
commercial banking services to individuals and to small- to medium-sized
businesses in its local service areas through its branch network, which as of
the date hereof, consisted of 14 branches, 3 of which include corporate banking
centers. SC Bank concentrates on marketing to and serving the needs of
individuals and businesses in southeastern Los Angeles County, and in Orange and
San Diego counties. At June 30, 1997, SC Bank had consolidated total assets,
total deposits and shareholders' equity of $507,894,000, $446,245,000 and
$51,785,000, respectively.
SC Bank's primary credit focus is to serve professionals and middle-market
companies, including manufacturers and service providers with sales of up to $50
million. Current commercial lending activities consist primarily of medium-term
commercial real estate loans secured by commercial properties, working capital
loans, and accounts receivable financing. SC Bank is also active in loan
participation purchases and sales. Its primary focus in this area is to manage
potential credit risk by borrower, industry and concentration. SC Bank's
consumer products are tailored to serve the financing needs of its retail
customers and the executives and employees of its business clients. Consumer
loans consist primarily of home equity lines of credit, personal lines of credit
to high net worth individuals and vehicle loans.
26
<PAGE>
SC Bank accepts deposits mostly from small- to medium-sized businesses and
their employees, high net worth individuals, and other consumers. SC Bank's
deposit accounts are insured by the Federal Deposit Insurance Corporation
("FDIC") to the extent permitted by law. SC Bank became a member of the Federal
Reserve System on July 1, 1996. SC Bank's primary federal regulator is now the
Federal Reserve Board.
Additional information relating to SCB is included in documents incorporated
into this Joint Proxy Statement-Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed financial data combines
the historical consolidated condensed restated financial statements of Western,
which have been restated to reflect the effect of the CCB Merger accounted for
on a pooling-of-interests basis, and the historical consolidated condensed
Financial Statements of SCB, giving effect to the Merger as if it had been
effective on June 30, 1997 and December 31, 1996, with respect to the Pro Forma
Combined Condensed Balance Sheets, and as of the beginning of the periods
indicated, with respect to the Pro Forma Combined Condensed Statements of
Income. This information is presented under pooling-of-interests accounting
after giving effect to the Reverse Stock Split. The information for the six
months ended June 30, 1997 is derived from the unaudited financial statements of
the Companies which includes, in the opinion of the management of the Companies,
all adjustments (consisting only of normal accruals) necessary to present fairly
the data for such periods. This information should be read in conjunction with
the historical consolidated financial statements of the Companies, including
their respective notes thereto, which are included and incorporated by reference
into this Joint Proxy Statement-Prospectus, and in conjunction with the combined
condensed historical selected financial data and other pro forma combined
financial information, including the notes thereto, appearing elsewhere in this
Joint Proxy Statement-Prospectus. See "Incorporation of Certain Information by
Reference." The effect of estimated merger and reorganization costs expected to
be incurred in connection with the Merger has been reflected in the unaudited
pro forma combined condensed balance sheets; however, since the estimated costs
are nonrecurring, they have not been reflected in the unaudited pro forma
combined condensed statements of income. See Note 2 to the Unaudited Pro Forma
Combined Condensed Financial Information. The unaudited pro forma combined
condensed financial information does not give effect to any anticipated
operating efficiencies in conjunction with the Merger. The unaudited pro forma
combined condensed balance sheets are not necessarily indicative of the actual
financial position that would have existed had the Merger been consummated on
June 30, 1997 or December 31, 1996, or that may exist in the future. The
unaudited pro forma combined condensed statements of income are not necessarily
indicative of the results that would have occurred had the Merger been
consummated on the dates indicated or that may be achieved in the future.
Assuming the consummation of the Merger, the actual financial position and
results of operations will differ, perhaps significantly, from the pro forma
amounts reflected herein because of a variety of factors, including changes in
value and changes in operating results between the dates of the pro forma
financial data and the date on which the Merger takes place.
27
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
JUNE 30, 1997
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
----------- ----------- ------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks..................... $ 57,656 $ 37,639 $ -- $ 95,295
Federal funds sold.......................... 45,500 27,804 -- 73,304
----------- ----------- ------------- ---------
TOTAL CASH & CASH EQUIVALENTS........... 103,156 65,443 -- 168,599
SECURITIES:
Federal Reserve Bank and Federal Home Loan
Bank stock................................ 3,325 2,116 -- 5,441
Securities held to maturity................. 6,902 -- -- 6,902
Securities available for sale............... 198,383 73,465 -- 271,848
----------- ----------- ------------- ---------
TOTAL SECURITIES........................ 208,610 75,581 -- 284,191
Net loans................................... 488,912 344,884 -- 833,796
Property, plant and equipment............... 6,880 7,017 (635) 13,262
Other real estate owned..................... 7,026 654 -- 7,680
Goodwill.................................... 28,344 3,355 -- 31,699
Other assets................................ 16,843 10,960 1,723 29,526
----------- ----------- ------------- ---------
TOTAL ASSETS............................ $ 859,771 $ 507,894 1,088 $1,368,753
----------- ----------- ------------- ---------
----------- ----------- ------------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits............... $ 269,662 $ 137,616 -- $ 407,278
Interest bearing deposits................... 491,807 308,629 -- 800,436
----------- ----------- ------------- ---------
TOTAL DEPOSITS.......................... 761,469 446,245 -- 1,207,714
Borrowed funds and other interest-bearing
liabilities............................... 10,852 7,342 -- 18,194
Accrued interest payable and other
liabilities............................... 7,593 2,522 7,949 18,064
----------- ----------- ------------- ---------
TOTAL LIABILITIES....................... 779,914 456,109 7,949 1,243,972
SHAREHOLDERS' EQUITY:
Preferred stock............................. -- -- -- --
Common stock................................ 73,379 37,807 -- 111,186
Retained earnings........................... 6,526 14,753 (6,861) 14,418
Unrealized gains (losses) on investments
available for sale, net................... (48) (775) -- (823)
----------- ----------- ------------- ---------
TOTAL SHAREHOLDERS' EQUITY.............. 79,857 51,785 (6,861) 124,781
----------- ----------- ------------- ---------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY................................ $ 859,771 $ 507,894 $ 1,088 $1,368,753
----------- ----------- ------------- ---------
----------- ----------- ------------- ---------
Number of common shares outstanding......... 7,070.1 7,498.4 10,618.2
Common shareholders' equity per share....... $ 11.30 $ 6.91 $ 11.75
</TABLE>
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
28
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
------------ ---------- -------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks........................... $ 66,234 $ 29,968 $-- $ 96,202
Federal funds sold................................ 18,717 3,800 -- 22,517
------------ ---------- ------- ----------
TOTAL CASH & CASH EQUIVALENTS................. 84,951 33,768 -- 118,719
SECURITIES:
Federal Reserve Bank and Federal Home Loan Bank
stock........................................... 3,234 2,057 -- 5,291
Securities held to maturity....................... 7,270 -- -- 7,270
Securities available for sale..................... 245,724 74,533 -- 320,257
------------ ---------- ------- ----------
TOTAL SECURITIES.............................. 256,228 76,590 -- 332,818
Net loans......................................... 459,373 342,228 -- 801,601
Property, plant and equipment..................... 7,215 7,740 (635) 14,320
Other real estate owned........................... 6,546 536 -- 7,082
Goodwill.......................................... 29,342 3,626 -- 32,968
Other assets...................................... 19,245 11,525 1,723 32,493
------------ ---------- ------- ----------
TOTAL ASSETS.................................. $862,900 $476,013 $ 1,088 $1,340,001
------------ ---------- ------- ----------
------------ ---------- ------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits..................... $296,951 $125,903 $-- $ 422,854
Interest bearing deposits......................... 464,737 289,423 -- 754,160
------------ ---------- ------- ----------
TOTAL DEPOSITS................................ 761,688 415,326 -- 1,177,014
Borrowed funds and other interest-bearing
liabilities..................................... 13,350 8,096 -- 21,446
Accrued interest payable and other liabilities.... 8,734 2,672 7,949 19,355
------------ ---------- ------- ----------
TOTAL LIABILITIES............................. 783,772 426,094 7,949 1,217,815
------------ ---------- ------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock................................... -- -- -- --
Common stock...................................... 73,588 37,738 -- 111,326
Retained earnings................................. 5,528 13,055 (6,861) 11,722
Unrealized gains (losses) on investments available
for sale, net................................... 12 (874) -- (862)
------------ ---------- ------- ----------
TOTAL SHAREHOLDERS' EQUITY.................... 79,128 49,919 (6,861) 122,186
------------ ---------- ------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY...... $862,900 $476,013 $ 1,088 $1,340,001
------------ ---------- ------- ----------
------------ ---------- ------- ----------
Number of common shares outstanding............... 7,027.9 7,486.4 10,582.0
Common shareholders' equity per share............. $ 11.26 $ 6.67 $ 11.55
</TABLE>
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
29
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
----------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................. $ 22,846 $ 15,759 $ -- $ 38,605
Interest on investment securities.......... 6,541 1,959 -- 8,500
Interest on federal funds sold............. 936 717 -- 1,653
----------- ----------- ------------- -----------
TOTAL INTEREST INCOME.................... 30,323 18,435 -- 48,758
INTEREST EXPENSE:
Interest expense on deposits............... 7,704 6,031 -- 13,735
Interest expense on other borrowings....... 484 215 -- 699
----------- ----------- ------------- -----------
TOTAL INTEREST EXPENSE................... 8,188 6,246 -- 14,434
----------- ----------- ------------- -----------
NET INTEREST INCOME: 22,135 12,189 -- 34,324
Less: provision for loan and lease
losses................................... 750 650 -- 1,400
----------- ----------- ------------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
AND LEASE LOSSES........................... 21,385 11,539 -- 32,924
NON-INTEREST INCOME:
Service charges............................ 1,777 2,076 -- 3,853
Gain on sale of loans and other assets..... -- 82 -- 82
Securities gains........................... 337 -- -- 337
Other income............................... 657 285 -- 942
----------- ----------- ------------- -----------
TOTAL NON-INTEREST INCOME................ 2,771 2,443 -- 5,214
NON-INTEREST EXPENSE:
Salaries and benefits...................... 7,764 4,951 -- 12,715
Occupancy, furniture and equipment......... 2,200 1,720 -- 3,920
Advertising and business development....... 447 239 -- 686
Other real estate owned.................... 53 (5) -- 48
Professional services...................... 1,294 757 -- 2,051
Telephone, stationery and supplies......... 785 635 -- 1,420
Goodwill amortization...................... 998 270 -- 1,268
Data processing for company................ 666 125 -- 791
Customer services cost..................... 553 -- -- 553
Merger costs(a)............................ 3,404 -- -- 3,404
Other...................................... 1,928 1,098 -- 3,026
----------- ----------- ------------- -----------
TOTAL NON-INTEREST EXPENSE............... 20,092 9,790 -- 29,882
----------- ----------- ------------- -----------
Income before income taxes................... 4,064 4,192 -- 8,256
Income taxes................................. 3,066 1,745 -- 4,811
----------- ----------- ------------- -----------
NET INCOME............................... $ 998 $ 2,447 $ -- $ 3,445
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
PER SHARE INFORMATION:
Number of shares (weighted average)........ 7,303.2 7,491.0 10,847.9
Income per share (dollars)................. $ 0.14 $ 0.33 $ 0.32
</TABLE>
- ------------------------
(a) Represents the costs associated with the CCB merger which was consummated on
June 4, 1997.
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
30
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
----------- ----------- ------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans.................. $ 11,666 $ 14,768 $ -- $ 26,434
Interest on investment securities......... 3,077 2,204 -- 5,281
Interest on federal funds sold............ 1,208 172 -- 1,380
----------- ----------- ------------- ---------
TOTAL INTEREST INCOME................... 15,951 17,144 -- 33,095
----------- ----------- ------------- ---------
INTEREST EXPENSE:
Interest expense on deposits.............. 3,964 5,361 -- 9,325
Interest expense on other borrowings...... 131 489 -- 620
----------- ----------- ------------- ---------
TOTAL INTEREST EXPENSE.................. 4,095 5,850 -- 9,945
----------- ----------- ------------- ---------
NET INTEREST INCOME......................... 11,856 11,294 -- 23,150
Less: provision for (recovery of) loan and
lease losses............................ 805 (470) -- 335
----------- ----------- ------------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
AND LEASE LOSSES.......................... 11,051 11,764 -- 22,815
----------- ----------- ------------- ---------
NON-INTEREST INCOME:
Service charges........................... 1,148 2,272 -- 3,420
Gain (loss) on sale of loans and other
assets.................................. 1,003 (24) -- 979
Securities gains.......................... -- 14 -- 14
Other income.............................. 676 271 -- 947
----------- ----------- ------------- ---------
TOTAL NON-INTEREST INCOME............... 2,827 2,533 -- 5,360
----------- ----------- ------------- ---------
NON-INTEREST EXPENSE:
Salaries and benefits..................... 5,130 5,178 -- 10,308
Occupancy, furniture and equipment........ 1,516 2,188 -- 3,704
Advertising and business development...... 395 300 -- 695
Other real estate owned................... (252) 482 -- 230
Professional services..................... 1,470 1,001 -- 2,471
Telephone, stationery and supplies........ 516 675 -- 1,191
Goodwill amortization..................... -- 235 -- 235
Data processing for company............... 260 147 -- 407
Customer services cost.................... 268 -- -- 268
Other..................................... 1,168 1,191 -- 2,359
----------- ----------- ------------- ---------
TOTAL NON-INTEREST EXPENSE.............. 10,471 11,397 -- 21,868
----------- ----------- ------------- ---------
Income before income taxes.................. 3,407 2,900 -- 6,307
Income taxes................................ 1,348 1,217 -- 2,565
----------- ----------- ------------- ---------
NET INCOME.............................. $ 2,059 $ 1,683 $ -- $ 3,742
----------- ----------- ------------- ---------
----------- ----------- ------------- ---------
PER SHARE INFORMATION:
Number of shares (weighted average)....... 3,969.1 7,473.5 7,511.8
Income per share (dollars)................ $ 0.52 $ 0.23 $ 0.50
</TABLE>
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
31
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
------------ ---------- -------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans...................... $28,229 $30,145 $-- $58,374
Interest on interest bearing deposits in other
banks......................................... 3 -- -- 3
Interest on investment securities............... 8,606 4,256 -- 12,862
Interest on federal funds sold.................. 2,432 566 -- 2,998
------------ ---------- -------------- ---------
TOTAL INTEREST INCOME......................... 39,270 34,967 -- 74,237
------------ ---------- -------------- ---------
INTEREST EXPENSE:
Interest expense on deposits.................... 10,292 11,090 -- 21,382
Interest expense on notes payable............... 469 637 -- 1,106
------------ ---------- -------------- ---------
TOTAL INTEREST EXPENSE........................ 10,761 11,727 -- 22,488
------------ ---------- -------------- ---------
NET INTEREST INCOME............................... 28,509 23,240 -- 51,749
Less: provision for (recovery of) loan and lease
losses........................................ 1,488 (470) -- 1,018
------------ ---------- -------------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND
LEASE LOSSES.................................... 27,021 23,710 -- 50,731
------------ ---------- -------------- ---------
NON-INTEREST INCOME:
Service charges and fees........................ 3,553 4,698 -- 8,251
Gain (loss) on sale of loans and other assets... 665 (28) -- 637
Securities gains................................ 267 14 -- 281
Other income.................................... 648 482 -- 1,130
------------ ---------- -------------- ---------
TOTAL NON-INTEREST INCOME..................... 5,133 5,166 -- 10,299
------------ ---------- -------------- ---------
NON-INTEREST EXPENSE:
Salaries and benefits........................... 12,869 10,147 -- 23,016
Occupancy....................................... 3,593 4,056 -- 7,649
Advertising and business development............ 499 626 -- 1,125
Other real estate owned......................... (573) 439 -- (134)
Professional services........................... 3,533 1,676 -- 5,209
Telephone, stationery and supplies.............. 1,095 1,280 -- 2,375
Goodwill amortization........................... 499 505 -- 1,004
Data processing for company..................... 773 291 -- 1,064
Customer services cost.......................... 832 -- -- 832
Other........................................... 4,037 2,208 -- 6,245
------------ ---------- -------------- ---------
TOTAL NON-INTEREST EXPENSE.................... 27,157 21,228 -- 48,385
------------ ---------- -------------- ---------
Income before income taxes........................ 4,997 7,648 -- 12,645
Income taxes...................................... 463 3,193 -- 3,656
------------ ---------- -------------- ---------
NET INCOME.................................... $ 4,534 $ 4,455 $-- $ 8,989
------------ ---------- -------------- ---------
------------ ---------- -------------- ---------
PER SHARE INFORMATION:
Number of shares (weighted average)............. 4,770.8 7,476.5 8,320.4
Income per share (dollars)...................... $ 0.95 $ 0.60 $ 1.08
</TABLE>
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
32
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
------------ ---------- -------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans...................... $23,054 $25,960 $-- $49,014
Interest on interest bearing deposits in other
banks......................................... 43 -- -- 43
Interest on investment securities............... 4,427 6,299 -- 10,726
Interest on federal funds sold.................. 1,709 1,137 -- 2,846
------------ ---------- -------------- ---------
TOTAL INTEREST INCOME......................... 29,233 33,396 -- 62,629
------------ ---------- -------------- ---------
INTEREST EXPENSE:
Interest expense on deposits.................... 8,169 10,998 -- 19,167
Interest expense on notes payable............... 268 1,017 -- 1,285
------------ ---------- -------------- ---------
TOTAL INTEREST EXPENSE........................ 8,437 12,015 -- 20,452
------------ ---------- -------------- ---------
NET INTEREST INCOME............................... 20,796 21,381 -- 42,177
Less: provision for loan and lease losses....... 7,025 1,539 -- 8,564
------------ ---------- -------------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND
LEASE LOSSES.................................... 13,771 19,842 -- 33,613
------------ ---------- -------------- ---------
NON-INTEREST INCOME:
Service charges and fees........................ 2,526 4,787 -- 7,313
Gain on sale of other assets.................... -- 58 -- 58
Securities losses............................... (72) (620) -- (692)
Other income.................................... 834 788 -- 1,622
------------ ---------- -------------- ---------
TOTAL NON-INTEREST INCOME..................... 3,288 5,013 -- 8,301
------------ ---------- -------------- ---------
NON-INTEREST EXPENSE:
Salaries and benefits........................... 9,170 10,405 -- 19,575
Occupancy....................................... 2,751 5,127 -- 7,878
Advertising and business development............ 359 751 -- 1,110
Other real estate owned......................... 2,861 219 -- 3,080
Professional services........................... 1,699 1,288 -- 2,987
Telephone, stationery and supplies.............. 729 1,458 -- 2,187
Goodwill amortization........................... -- 821 -- 821
Lower of cost or market adjustment on loans
available for sale............................ 756 -- -- 756
Data processing for company..................... 174 253 -- 427
Customer services cost.......................... 322 -- -- 322
Other........................................... 3,322 2,971 -- 6,293
------------ ---------- -------------- ---------
TOTAL NON-INTEREST EXPENSE.................... 22,143 23,293 -- 45,436
------------ ---------- -------------- ---------
Income (loss) before income taxes................. (5,084) 1,562 -- (3,522)
Income taxes...................................... (2,426) 693 -- (1,733)
------------ ---------- -------------- ---------
NET INCOME (LOSS)............................. $(2,658) $ 869 $-- $(1,789)
------------ ---------- -------------- ---------
------------ ---------- -------------- ---------
PER SHARE INFORMATION:
Number of shares (weighted average)............. 3,160.6 7,468.8 6,675.7
Income (loss) per share (dollars)............... $ (0.84) $ 0.12 $ (0.27)
</TABLE>
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
33
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
WESTERN SCB PRO FORMA WESTERN
(HISTORICAL) (HISTORICAL)(1) ADJUSTMENTS(2) PRO FORMA
------------ ---------- -------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans...................... $21,225 $18,971 -- $40,196
Interest on interest bearing deposits in other
banks......................................... 111 -- -- 111
Interest on investment securities............... 4,667 7,166 -- 11,833
Interest on federal funds sold.................. 656 283 -- 939
------------ ---------- -------------- ---------
TOTAL INTEREST INCOME......................... 26,659 26,420 -- 53,079
------------ ---------- -------------- ---------
INTEREST EXPENSE:
Interest expense on deposits.................... 6,981 5,956 -- 12,937
Interest expense on notes payable............... 302 323 -- 625
------------ ---------- -------------- ---------
TOTAL INTEREST EXPENSE........................ 7,283 6,279 -- 13,562
------------ ---------- -------------- ---------
NET INTEREST INCOME............................... 19,376 20,141 -- 39,517
Less: provision for (recovery of) loan and lease
losses........................................ 4,360 (850) -- 3,510
------------ ---------- -------------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND
LEASE LOSSES.................................... 15,016 20,991 -- 36,007
------------ ---------- -------------- ---------
NON-INTEREST INCOME:
Service charges and fees........................ 2,354 5,640 -- 7,994
Gain on sale of other assets.................... -- 624 -- 624
Securities gains (losses)....................... (41) 17 -- (24)
Other income.................................... 464 402 -- 866
------------ ---------- -------------- ---------
TOTAL NON-INTEREST INCOME..................... 2,777 6,683 -- 9,460
------------ ---------- -------------- ---------
NON-INTEREST EXPENSE:
Salaries and benefits........................... 8,242 9,518 -- 17,760
Occupancy....................................... 2,690 4,678 -- 7,368
Advertising and business development............ 198 594 -- 792
Other real estate owned......................... 1,313 1,832 -- 3,145
Professional services........................... 954 1,476 -- 2,430
Telephone, stationery and supplies.............. 652 1,297 -- 1,949
Goodwill amortization........................... -- 211 -- 211
Data processing for company..................... 130 235 -- 365
Customer services cost.......................... 329 -- -- 329
Other........................................... 3,731 3,994 -- 7,725
------------ ---------- -------------- ---------
TOTAL NON-INTEREST EXPENSE.................... 18,239 23,835 -- 42,074
------------ ---------- -------------- ---------
Income (loss) before income taxes................. (446) 3,839 -- 3,393
Income taxes...................................... 546 1,134 -- 1,680
------------ ---------- -------------- ---------
NET INCOME (LOSS)........................... $ (992) $ 2,705 $-- $ 1,713
------------ ---------- -------------- ---------
------------ ---------- -------------- ---------
PER SHARE INFORMATION:
Number of shares (weighted average)............. 2,520.5 5,507.0 5,123.0
Income (loss) per share (dollars)............... $ (0.39) $ 0.49 $ 0.33
</TABLE>
See "Notes to Unaudited Pro Forma Combined Condensed Financial Data."
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL DATA
NOTE 1: BASIS OF PRESENTATION. Certain historical data of SCB have been
reclassified on a pro forma basis to conform to Western's classifications.
Transactions between the Companies are not material in relation to the pro forma
combined financial statements, and have not been eliminated from the pro forma
combined amounts. The pro forma number of common shares outstanding, common
shareholders' equity per share, number of shares (weighted average) and income
per share are based on the share amounts for Western plus the historical share
amounts for SCB multiplied by an assumed Conversion Number of 0.4556 plus the
number of Western shares to be issued to holders of SCB Common Stock options.
NOTE 2: MERGER COSTS. The unaudited pro forma combined condensed financial
data reflects Western management's current estimate, for purposes of pro forma
presentation, of the aggregate estimated merger costs of $8,584,000 ($6,861,000
net of taxes, computed using the combined federal and state tax rate of 41.5%)
expected to be incurred in connection with the Merger. While a portion of these
costs may be required to be recognized over time, the current estimate of these
costs has been recorded in the unaudited pro forma combined condensed balance
sheets in order to disclose the aggregate effect of these activities on
Western's pro forma combined financial position. The estimated aggregate costs
include the following:
<TABLE>
<S> <C>
Severance costs................................................. $2,365,000
Write-offs of leasehold improvements............................ 99,000
Termination of interest rate swap............................... 902,000
Write off of capitalized data processing costs.................. 328,000
Conversion costs................................................ 250,000
Software cost write-offs........................................ 208,000
----------
4,152,000
Tax effects..................................................... (1,723,000)
----------
2,429,000
Investment banking and other professional fees.................. 4,432,000
----------
TOTAL ESTIMATED AGGREGATE COSTS............................. $6,861,000
----------
----------
</TABLE>
In reviewing the operations of SC Bank, Western Management observed that SC
Bank utilizes interest rate swaps in the management of its interest rate
exposure and to reduce the impact of changes in interest rates on its floating
rate loan portfolio. Western Management concluded that such practice by SC Bank
is inconsistent with the asset and liability management practices followed at
Western. As a matter of corporate policy, Western Management does not utilize
interest rate swaps in any aspect of Western's business. Accordingly, Western
Management concluded that upon consummation of the Merger with SCB, the interest
rate swaps would be terminated with the resulting gain or loss charged or
credited to combined earnings. Western Management believes that the pro forma
adjustment for the termination of the interest rate swaps at SC Bank is directly
attributable to the Merger and that such adjustment is factually supportable
because (i) Western does not utilize interest rate swaps in any aspect of its
business and (ii) at the time of consummation of the Merger, Western Management
plans to terminate such interest rate swaps.
Prior to execution of the Merger Agreement, Western engaged an independent
third party to perform a due diligence review of the credit portfolio of SCB. As
a result of that review it was recommended to Western that certain adjustments
be made to increase SCB's allowance for loan and lease losses on certain loans
(the "Loans"). After execution of the Merger Agreement, Western Management made
its own review of the Loans, held discussions with the management of SCB, and
monitored the progress of the Loans. Based thereon, Western concluded that the
allowance for loan and lease losses allocated to the Loans by SCB was reasonable
at June 30, 1997.
35
<PAGE>
Western Management's cost estimates are forward-looking. While the costs
represent Western Management's current estimate of merger costs that will be
incurred, the ultimate level and timing of recognition of such costs will be
based on the final merger and integration plan to be completed prior to
consummation of the Merger, which will soon be developed by various of the
Companies' task forces and integration committees. Readers are cautioned that
the completion of the merger and integration plan and the resulting management
plans detailing actions to be undertaken to effect the Merger will impact these
estimates; the type and amount of actual costs incurred could vary materially
from these estimates if future developments differ from the underlying
assumptions used by management in determining the current estimate of these
costs.
36
<PAGE>
PROPOSED SANTA MONICA BANK ACQUISITION
TERMS OF THE SMB MERGER
On July 30, 1997, Western executed the SMB Merger Agreement pursuant to
which a subsidiary of Western will merge with SMB. The SMB Merger Agreement
provides that each shareholder of SMB will have the right to elect to receive
either $28.00 per share in cash (the "Cash Alternative") or, with certain
limitations, 0.875 shares of Western Common Stock (the "Stock Alternative") for
each share of SMB Common Stock. In the event that shareholders owning more than
50 percent of SMB Common Stock elect to receive Western Common Stock in the SMB
Merger, each shareholder of SMB Common Stock electing to receive Western Common
Stock will receive cash and a pro rata share of the stock available for
distribution (if, for example, 60 percent of the holders of shares of SMB Common
Stock elect to receive Western Common Stock in the SMB Merger, each holder of
shares of SMB Common Stock who elects stock will receive 5/6 of such election in
the form of Western Common Stock and 1/6 of such election in the form of cash).
In the event that the number of shareholders of SMB Common Stock electing to
receive cash is so great as to prevent a tax-free reorganization, then all
holders of SMB Common Stock, regardless of their election, will receive $28.00
per share in cash upon consummation of the SMB Merger. Assuming that the maximum
number of shares of Western Common Stock Western can be required to issue
pursuant to the SMB Merger Agreement are issued, 3,096,332 shares of Western
Common Stock would be issued in connection with the SMB Merger; PROVIDED, THAT,
under certain circumstances Western may, at its sole option, increase the
percentage of stock to be issued as consideration in the SMB Merger. If no
Western Common Stock is issued as consideration in the SMB Merger, the cash
consideration will equal approximately $198 million. Western anticipates that
some portion of the cash consideration to be paid in the SMB Merger will be
raised through the sale of Western Common Stock.
All options granted by SMB to purchase shares of SMB Common Stock
outstanding at the effective time of the SMB Merger will be adjusted to entitle
the holders thereof to receive, in lieu of shares of SMB Common Stock that would
otherwise have been issuable upon exercise thereof, an amount in cash computed
by multiplying (i) the difference between $28.00 and the per share exercise
price applicable to such option by (ii) the number of shares of SMB Common Stock
subject to such option. Such cash payments must be made within seven days of the
effective time of the SMB Merger.
Pursuant to the SMB Merger Agreement, SMB will merge with Western Bank and
the combined entity will operate under the name "Santa Monica Bank." For
information concerning the financial impact of the SMB Merger on Western after
giving effect to the Merger, see "Pro Forma Effect of the SMB Merger." In
addition, the respective obligations of Western and SMB to consummate the SMB
Merger are subject to certain conditions, including, among others, (a) the
approval by the requisite vote of the shareholders of both Western and SMB; (b)
receipt of all regulatory approvals required; and (c) certain other conditions
customary in similar transactions.
On the SCB Record Date there were (i) 7,498,365 shares of SCB Common Stock
outstanding, (ii) 542,550 shares of SCB Common Stock reserved for issuance upon
exercise of options to acquire SCB Common Stock, (iii) 7,071,973 shares of
Western Common Stock outstanding, and (iv) 447,044 shares of Western Common
Stock reserved for issuance upon exercise of options and warrants to acquire
Western Common Stock. Based on the foregoing and assuming that (a) the maximum
number of shares that Western can be required to issue pursuant to the SMB
Merger Agreement (3,096,332) are issued upon consummation of the SMB Merger and
(b) no Dissenters' Rights are exercised by either the Western Shareholders or
the SCB Shareholders, then the current Western Shareholders, SCB Shareholders
and holders of SMB Common Stock would hold 51.5 percent, 25.9 percent and 22.6
percent, respectively, of Western Common Stock upon consummation of the SMB
Merger, assuming that none of the shares of Western Common Stock and SCB Common
Stock reserved for issuance were issued by the effective date of the SMB Merger,
and 52.6 percent, 25.7 percent and 21.7 percent, respectively, if all such
reserved shares were issued by the effective date of the SMB Merger.
37
<PAGE>
Approval of the principal terms of the Merger solicited hereby is
independent of and does not constitute approval of the SMB Merger. Another
shareholder meeting will be held to consider and vote upon the SMB Merger and
more detailed information will be provided to Western Shareholders (including
SCB Shareholders who become Western Shareholders as a result of the Merger,
assuming the Merger is consummated) prior to such meeting.
PRO FORMA EFFECT OF THE SMB MERGER
The following unaudited pro forma combined condensed financial data combines
the unaudited pro forma combined condensed financial data of (i) Western and SCB
giving effect to the Merger and (ii) SMB giving effect to the SMB Merger, as if
the Merger and the SMB Merger had been effective on June 30, 1997, with respect
to the Pro Forma Combined Condensed Balance Sheet, and as of the beginning of
the periods indicated herein, with respect to the Pro Forma Condensed Income
Statements. This information is presented under the purchase method of
accounting with respect to the SMB Merger. Under the purchase method of
accounting, assets and liabilities of SMB are adjusted to their estimated fair
value and
combined with the recorded book values of the assets and liabilities of Western.
Applicable income tax effects of such adjustments are included as a component of
Western's net deferred taxes with a corresponding offset to goodwill. This
information should be read in conjunction with the historical consolidated
financial statements of Western, SCB and SMB including their respective notes
thereto, which are incorporated by reference into this Joint Proxy
Statement--Prospectus, and in conjunction with the condensed historical selected
financial data and other pro forma combined financial information, including the
notes thereto, appearing elsewhere in this Joint Proxy Statement--Prospectus
(See "Incorporation of Certain Information by Reference" and "Unaudited Pro
Forma Combined Condensed Financial Data"), the financial statements contained in
Western's restated consolidated financial statements filed on Form 8-K, the
financial statements contained in SCB's Annual Report filed on Form 10-K, as
amended on Form 10K/A and the historical financial statements of SMB filed on
Form 8-K. The effect of estimated merger and reorganization costs expected to be
incurred in connection with the SMB Merger has been reflected in the pro forma
combined balance sheet; however, since the estimated costs are nonrecurring,
they have not been reflected in the pro forma combined statements of income. The
pro forma combined condensed financial data does not give effect to any
anticipated cost savings in conjunction with the SMB Merger. The pro forma
balance sheet is not necessarily indicative of the financial position that would
have existed had the SMB Merger been consummated on June 30, 1997 or that may
exist in the future. The pro forma combined statements of income are not
necessarily indicative of the results that would have occurred had the SMB
Merger been consummated on the dates indicated or that may be achieved in the
future.
38
<PAGE>
WESTERN-SCB-SMB
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
WESTERN PRO FORMA
AND SCB SMB ADJUSTMENTS WESTERN
PRO FORMA (HISTORICAL)(1) (2)(3)(4) PRO FORMA
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks................................. $ 95,295 $ 50,010 -- $ 145,305
Federal funds sold...................................... 73,304 76,000 (53,000) 96,304
------------ ------------- ----------- ------------
TOTAL CASH & CASH EQUIVALENTS....................... 168,599 126,010 (53,000) 241,609
Federal Reserve Bank and Federal Home Loan Bank stock... 5,441 -- -- 5,441
Securities:
Securities held to maturity........................... 6,902 -- -- 6,902
Securities available for sale......................... 271,848 141,239 -- 413,087
------------ ------------- ----------- ------------
TOTAL SECURITIES.................................... 284,191 141,239 -- 425,430
Net loans............................................... 833,796 382,251 2,390 1,218,437
Property, plant and equipment........................... 13,262 10,358 12,456 36,076
Other real estate owned................................. 7,680 5,686 -- 13,366
Goodwill................................................ 31,699 -- 120,722 152,421
Other assets............................................ 29,526 7,030 (3,320) 33,236
------------ ------------- ----------- ------------
TOTAL ASSETS........................................ $ 1,368,753 $ 672,574 $ 79,248 $ 2,120,575
------------ ------------- ----------- ------------
------------ ------------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits........................... $ 407,278 $ 178,907 -- $ 586,185
Interest bearing deposits............................... 800,436 411,878 (154) 1,212,160
------------ ------------- ----------- ------------
TOTAL DEPOSITS...................................... 1,207,714 590,785 (154) 1,798,345
Borrowed funds.......................................... 18,194 1,972 18,165 38,331
Accrued interest payable and other liabilities.......... 18,064 2,554 11,500 32,118
------------ ------------- ----------- ------------
TOTAL LIABILITIES................................... 1,243,972 595,311 29,511 1,868,794
------------ ------------- ----------- ------------
------------ ------------- ----------- ------------
SHAREHOLDERS' EQUITY:
Preferred stock......................................... -- -- -- --
Common stock............................................ 111,186 21,232 105,768 238,186
Additional paid-in capital.............................. -- 2,983 (2,983) --
Retained earnings....................................... 14,418 52,601 (52,601) 14,418
Unrealized net gains (losses) on investments available
for sale, net......................................... (823) 447 (447) (823)
------------ ------------- ----------- ------------
TOTAL SHAREHOLDERS' EQUITY.......................... 124,781 77,263 49,737 251,781
------------ ------------- ----------- ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY............ $ 1,368,753 $ 672,574 $ 79,248 $ 2,120,575
------------ ------------- ----------- ------------
------------ ------------- ----------- ------------
Number of common shares outstanding..................... 10,618.2 7077.3 14,796.7
Common shareholders' equity per share................... $ 11.75 10.92 $ 17.02
</TABLE>
See "Notes to SMB Unaudited Pro Forma Combined Condensed Financial Data."
39
<PAGE>
WESTERN-SCB-SMB
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
WESTERN PRO FORMA
AND SCB SMB ADJUSTMENTS WESTERN
PRO FORMA (HISTORICAL)(1) (2)(3)(4) PRO FORMA
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans............................... $ 38,605 $ 18,106 $ (299) $ 56,412
Interest on investment securities........................ 8,500 4,030 -- 12,530
Interest on federal funds sold........................... 1,653 1,680 (1,458) 1,875
---------- ------------- ----------- ----------
TOTAL INTEREST INCOME.................................. 48,758 23,816 (1,757) 70,817
INTEREST EXPENSE:
Interest expense on deposits............................. 13,735 6,898 16 20,649
Interest expense on other borrowings..................... 699 98 818 1,615
---------- ------------- ----------- ----------
TOTAL INTEREST EXPENSE................................. 14,434 6,996 834 22,264
---------- ------------- ----------- ----------
NET INTEREST INCOME:....................................... 34,324 16,820 (2,591) 48,553
Less: provision for loan losses.......................... 1,400 -- -- 1,400
---------- ------------- ----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES........ 32,924 16,820 (2,591) 47,153
NON-INTEREST INCOME:
Service charges.......................................... 3,853 1,570 -- 5,423
Trust fees............................................... -- 1,612 -- 1,612
Gain on sale of loans and other assets................... 82 -- -- 82
Securities gains......................................... 337 -- -- 337
Other income............................................. 942 352 -- 1,294
---------- ------------- ----------- ----------
TOTAL NON-INTEREST INCOME.............................. 5,214 3,534 -- 8,748
NON-INTEREST EXPENSE:
Salaries and benefits.................................... 12,715 7,064 -- 19,779
Occupancy, furniture and equipment....................... 3,920 2,068 312 6,300
Advertising and business development..................... 686 426 -- 1,112
Other real estate owned.................................. 48 (518) -- (470)
Professional services.................................... 2,051 1,185 -- 3,236
Telephone, stationery and supplies....................... 1,420 671 -- 2,091
Goodwill amortization.................................... 1,268 -- 4,024 5,292
Data processing for company.............................. 791 -- -- 791
Customer services cost................................... 553 -- -- 553
Merger costs............................................. 3,404 -- -- 3,404
Other.................................................... 3,026 790 -- 3,816
---------- ------------- ----------- ----------
TOTAL NON-INTEREST EXPENSE............................. 29,882 11,686 4,336 45,904
---------- ------------- ----------- ----------
Income before income taxes................................. 8,256 8,668 (6,927) 9,997
Income taxes............................................... 4,811 3,004 (1,204) 6,611
---------- ------------- ----------- ----------
NET INCOME............................................. $ 3,445 $ 5,664 $ (5,723) $ 3,386
---------- ------------- ----------- ----------
---------- ------------- ----------- ----------
PER SHARE INFORMATION:
Number of shares (weighted average)...................... 10,847.9 7077.3 15,026.5
Income per share (dollars)............................... $ 0.32 0.80 $ 0.23
</TABLE>
See "Notes to SMB Unaudited Pro Forma Combined Condensed Financial Data."
40
<PAGE>
WESTERN-SCB-SMB
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
WESTERN PRO FORMA
AND SCB SMB ADJUSTMENTS WESTERN
PRO FORMA (HISTORICAL)(1) (2)(3)(4) PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................ $ 58,374 $ 35,379 $ (598) $ 93,155
Interest on interest bearing deposits in other banks...... 3 -- -- 3
Interest on investment securities......................... 12,862 7,286 -- 20,148
Interest on federal funds sold............................ 2,998 2,649 (2,915) 2,732
----------- ------------- ----------- -----------
TOTAL INTEREST INCOME (LOSS)............................ 74,237 45,314 (3,513) 116,038
INTEREST EXPENSE:
Interest expense on deposits.............................. 21,382 13,303 31 34,716
Interest expense on notes payable......................... 1,106 195 1,635 2,936
----------- ------------- ----------- -----------
TOTAL INTEREST EXPENSE.................................. 22,488 13,498 1,666 37,652
----------- ------------- ----------- -----------
NET INTEREST INCOME (LOSS):................................. 51,749 31,816 (5,179) 78,386
Less: provision for loan losses........................... 1,018 -- -- 1,018
----------- ------------- ----------- -----------
NET INTEREST INCOME (LOSS) AFTER PROVISION FOR LOAN
LOSSES.................................................... 50,731 31,816 (5,179) 77,368
NON-INTEREST INCOME:
Service charges and fees.................................. 8,251 3,644 -- 11,895
Trust fees................................................ -- 3,160 -- 3,160
Gain on sale of loans and other assets.................... 637 -- -- 637
Securities gains.......................................... 281 -- -- 281
Other income.............................................. 1,130 220 -- 1,350
----------- ------------- ----------- -----------
TOTAL NON-INTEREST INCOME............................... 10,299 7,024 -- 17,323
NON-INTEREST EXPENSE:
Salaries and benefits..................................... 23,016 14,001 -- 37,017
Occupancy, furniture and equipment........................ 7,649 4,060 623 12,332
Advertising and business development...................... 1,125 669 -- 1,794
Other real estate owned................................... (134) 1,471 -- 1,337
Professional services..................................... 5,209 2,023 -- 7,232
Telephone, stationery and supplies........................ 2,375 1,331 -- 3,706
Goodwill amortization..................................... 1,004 -- 8,048 9,052
Data processing........................................... 1,064 -- -- 1,064
Customer services cost.................................... 832 -- -- 832
Other..................................................... 6,245 2,202 -- 8,447
----------- ------------- ----------- -----------
TOTAL NON-INTEREST EXPENSE.............................. 48,385 25,757 8,671 82,813
----------- ------------- ----------- -----------
Income before income taxes.................................. 12,645 13,083 (13,850) 11,878
Income taxes................................................ 3,656 3,467 (2,408) 4,715
----------- ------------- ----------- -----------
NET INCOME.............................................. $ 8,989 $ 9,616 $ (11,442) $ 7,163
----------- ------------- ----------- -----------
----------- ------------- ----------- -----------
PER SHARE INFORMATION:
Number of shares (weighted average)....................... 8,320.4 7077.3 12,499.0
Income per share (dollars)................................ $ 1.08 $ 1.36 $ 0.57
</TABLE>
See "Notes to SMB Unaudited Pro Forma Combined Condensed Financial Data."
41
<PAGE>
NOTES TO SMB UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
NOTE 1: BASIS OF PRESENTATION
Certain historical data of SMB have been reclassified on a pro forma basis
to conform to Western's classifications.
NOTE 2: PURCHASE PRICE AND FUNDING
The purchase price is based on $28.00 per share for SMB Shareholders
choosing the Cash Alternative and an exchange ratio of 0.875 Western shares for
each SMB share for SMB shareholders choosing the Stock Alternative. Based on the
$32.00 closing price of Western on the day prior to the announcement of the SMB
Merger, those SMB shareholders choosing the Stock Alternative would receive a
value of $28.00 per share.
The total consideration to be paid in connection with the SMB Merger is
calculated as follows (in thousands, except per share amounts):
<TABLE>
<S> <C>
Shares of SMB Common Stock outstanding at June 30, 1997........... 7,077.3
Price per share................................................... $ 28.00
---------
Total purchase price.............................................. $ 198,165
---------
---------
</TABLE>
For purposes of these pro forma combined condensed financial data, it is
assumed that the purchase price will be financed as follows through a
combination of cash ($118.2 million) and Western Common Stock ($80.0 million)
(dollars in thousands):
<TABLE>
<CAPTION>
Issuance of Western Common Stock for cash......................... $ 47,000
<S> <C>
Proceeds from additional borrowings............................... 18,165
Use of Federal funds balances..................................... 53,000
Issuance of 2,500,000 shares of Western Common to SMB
Shareholders.................................................... 80,000
---------
Total purchase price............................................ $ 198,165
---------
---------
</TABLE>
SMB shareholders will have the option to elect cash of $28.00 or 0.875
shares of Western stock for each share of SMB stock owned. The SMB Merger is
structured such that Western will accept a maximum of 50 percent of the SMB
Common Stock being converted into shares of Western Common Stock. For purposes
of these pro forma financial statements, it is assumed that approximately 40
percent or 2,500,000 shares of SMB Common Stock elect to receive Western Common
Stock and that Western will raise an additional $47,000,000 through a sale of
approximately 1,678,600 shares of Western Common Stock. Although Western's
management believes that the assumptions contained in these pro forma financial
statements regarding the percentage of holders of shares of SMB Common Stock
electing to receive shares of Western Common Stock in the SMB Merger and
Western's ability to raise the additional capital through an offering of Western
Common Stock are reasonable, Western cannot give any assurance that such
assumptions will be achieved. Western cannot predict the number of holders of
SMB Common Stock who will elect to receive shares of Western Common Stock in the
SMB Merger. Moreover, there is no assurance that Western will be able to sell
the assumed number of shares of Western Common Stock or that Western will be
able to obtain the assumed aggregate sales price. In addition, there is no
assurance that an active trading market will exist at the time Western attempts
to raise additional capital.
Federal funds sold have been reduced on a pro forma basis by $53.0 million
at June 30, 1997, representing a portion of the total pro forma cash purchase
price. As a result, historical interest income on the accompanying pro forma
combined condensed income statements for the six months ended June 30,
42
<PAGE>
NOTES TO SMB UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
NOTE 2: PURCHASE PRICE AND FUNDING (CONTINUED)
1997, and the year ended December 31, 1996, has been reduced by $1.5 million and
$2.9 million, respectively, representing the lost interest income on Federal
funds at 5.5 percent. Borrowings have been increased on a pro forma basis by
$18.2 million at June 30, 1997. As a result, historical interest expense on the
accompanying pro forma combined condensed income statements for the six months
ended June 30, 1997, and the year ended December 31, 1996, has been increased by
$0.8 million and $1.6 million, respectively, representing the additional
interest expense on the incremental borrowings at 9.0 percent.
NOTE 3: ALLOCATION OF PURCHASE PRICE
The purchase price of SMB has been allocated as follows (in thousands):
<TABLE>
<S> <C>
Cash and equivalents............................................. $ 126,010
Securities....................................................... 141,239
Net loans........................................................ 384,641
Goodwill......................................................... 120,722
Property, plant and equipment.................................... 22,814
Other real estate owned.......................................... 5,686
Other assets..................................................... 3,710
Deposits......................................................... (590,631)
Borrowed funds................................................... (1,972)
Other liabilities................................................ (14,054)
---------
Total purchase price......................................... $ 198,165
---------
---------
</TABLE>
In allocating the purchase price, the following adjustments were made to
SMB's historical amounts. Loans and property were increased by $2,390,000 and
$12,456,000, respectively, representing the premium and adjustment,
respectively, necessary to state such amounts at fair value. Deposits were
reduced by $154,000, representing the adjustment necessary to state deposits at
fair value. Other liabilities were increased by $11,500,000, representing the
estimated merger costs. Other assets were decreased by $3,320,000, representing
the tax effects of the fair value adjustments and certain of the estimated
merger costs.
The premium on loans is amortized using the level yield method over a period
of seven years. The new basis in property is amortized on a straight line basis
over twenty years. The adjustment on deposits is amortized on a straight line
basis over five years. Goodwill is amortized on a straight line basis over
fifteen years. The reduction in the deferred tax asset is amortized in
conjunction with the applicable premiums and discounts.
NOTE 4: MERGER COSTS
The table below reflects Western's current estimate, for purposes of pro
forma presentation, of the aggregate estimated merger costs of $11,500,000
($8,595,000 net of taxes, computed using the combined federal and state tax rate
of 41.5%) expected to be incurred in connection with the SMB Merger. While a
portion of these costs may be required to be recognized over time, the current
estimate of these costs has been recorded in the pro forma combined balance
sheet in order to disclose the aggregate effect of these
43
<PAGE>
NOTES TO SMB UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
NOTE 4: MERGER COSTS (CONTINUED)
activities on Western's pro forma combined financial position. The estimated
aggregate costs, primarily comprised of anticipated cash charges, include the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Investment banking and other professional fees................................ $ 4,500
Employee reduction costs and conversion....................................... 7,000
-------
Total estimated costs..................................................... $ 11,500
-------
-------
</TABLE>
Western's cost estimates are forward looking. While the costs represent
management's current estimate of merger and restructuring costs that will be
incurred, the ultimate level and timing of recognition of such costs will be
based on the final merger and integration plan to be completed prior to
consummation of the SMB Merger. The completion of this merger and integration
plan and the resulting management plans detailing actions to be undertaken to
effect the SMB Merger will impact these estimates; the type and amount of actual
costs incurred could vary materially from these estimates if future developments
differ from the underlying assumptions used by management in determining its
current estimate of these costs.
44
<PAGE>
THE SPECIAL MEETINGS
DATE, TIME AND PLACE
WESTERN
The Western Special Meeting is scheduled to be held at 4100 Newport Place,
Third Floor, Newport Beach, California 92660 on Friday, October 10, 1997 at
10:30 a.m., local time.
SCB
The SCB Special Meeting is scheduled to be held at the Embassy Suites, 3100
East Frontera St., Anaheim, CA 92806 on Friday, October 10, 1997 at 10:00 a.m.,
local time.
SHAREHOLDERS ARE REQUESTED TO PROMPTLY SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID PRE-ADDRESSED ENVELOPE.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE MEETING WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE PRINCIPAL TERMS OF THE MERGER AND
OTHER MATTERS TO BE VOTED UPON IN CONNECTION WITH THE MERGER.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
WESTERN
The purpose of the Western Special Meeting is to (a) consider and vote upon
the approval of the principal terms of the Merger; (b) consider and vote upon
approval of the Amendment; and (c) consider and act upon such other business as
may properly come before the Western Special Meeting or any adjournments or
postponements thereof.
THE WESTERN BOARD HAS, BY UNANIMOUS VOTE, APPROVED THE MERGER AGREEMENT AND
RECOMMENDS A VOTE "FOR" APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER. THE
WESTERN BOARD HAS ALSO, BY UNANIMOUS VOTE, APPROVED, AND RECOMMENDS A VOTE "FOR"
APPROVAL OF, THE AMENDMENT.
SCB
The purpose of the SCB Special Meeting is to (a) consider and vote upon the
approval of the principal terms of the Merger; and (b) consider and act upon
such other business as may properly come before the SCB Special Meeting or any
adjournments or postponements thereof.
THE SCB BOARD HAS, BY UNANIMOUS VOTE, APPROVED THE MERGER AGREEMENT AND
RECOMMENDS A VOTE "FOR" APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER.
RECORD DATE; STOCK ENTITLED TO VOTE
WESTERN
Only holders of record of Western Common Stock on the Western Record Date
will be entitled to receive notice of, and to vote at, the Western Special
Meeting and any postponements or adjournments thereof.
SCB
Only holders of record of SCB Common Stock on the SCB Record Date will be
entitled to receive notice of, and to vote at, the SCB Special Meeting and any
postponements or adjournments thereof.
VOTES REQUIRED; QUORUM
WESTERN
The affirmative vote of the holders of at least a majority of the total
number of outstanding shares of Western Common Stock entitled to vote at the
Western Special Meeting is required to approve the principal terms of the Merger
and the Amendment.
45
<PAGE>
As of the Western Record Date, there were 7,071,973 shares of Western Common
Stock outstanding. Each holder of shares of Western Common Stock outstanding on
the Western Record Date will be entitled to one vote for each share held of
record upon each matter properly submitted at the Western Special Meeting and
any postponement or adjournment thereof.
Western will appoint one or three employees to function as inspectors of the
election in advance of the Western Special Meeting, to tabulate votes, to
ascertain whether a quorum is present and to determine the voting results on all
matters presented to the Western Shareholders. A majority of all shares of
Western Common Stock entitled to vote, represented in person or by proxy,
constitutes a quorum. Abstentions and broker non-votes are each included in the
determination of the number of shares present; however, they are not counted as
votes in favor of the principal terms of the Merger and the Amendment. THE
FAILURE TO VOTE, AN ABSTENTION OR A BROKER NON-VOTE THUS HAS THE SAME EFFECT AS
A VOTE AGAINST THE PRINCIPAL TERMS OF THE MERGER AND THE AMENDMENT.
If a quorum is not obtained, or fewer shares of Western Common Stock are
voted in favor of the principal terms of the Merger and the Amendment than the
number required for approval of the principal terms of the Merger and the
Amendment, it is expected that the Western Special Meeting will be postponed or
adjourned for the purpose of allowing additional time for obtaining additional
proxies or votes, and at any subsequent reconvening of the Western Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the Western Special Meeting (except for
any proxies which have theretofore effectively been revoked or withdrawn).
SCB
The affirmative vote of the holders of at least a majority of the total
number of outstanding shares of SCB Common Stock entitled to vote at the SCB
Special Meeting is required to approve the principal terms of the Merger.
As of the SCB Record Date, there were 7,498,365 shares of SCB Common Stock
outstanding. Each holder of shares of SCB Common Stock outstanding on the SCB
Record Date will be entitled to one vote for each share held of record upon each
matter properly submitted at the SCB Special Meeting and any postponement or
adjournment thereof.
SCB will appoint an inspector of the election in advance of the SCB Special
Meeting to tabulate votes, to ascertain whether a quorum is present and to
determine the voting results on the matter presented to the SCB Shareholders. A
majority of all shares of SCB Common Stock entitled to vote, represented in
person or by proxy, constitutes a quorum. Abstentions and broker non-votes are
each included in the determination of the number of shares present; however,
they are not counted as votes in favor of the principal terms of the Merger. THE
FAILURE TO VOTE, AN ABSTENTION OR A BROKER NON-VOTE THUS HAS THE SAME EFFECT AS
A VOTE AGAINST THE PRINCIPAL TERMS OF THE MERGER.
If a quorum is not obtained, or fewer shares of SCB Common Stock are voted
in favor of the principal terms of the Merger than the number required for
approval of the principal terms of the Merger, it is expected that the SCB
Special Meeting will be postponed or adjourned for the purpose of allowing
additional time for obtaining additional proxies or votes, and at any subsequent
reconvening of the SCB Special Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
SCB Special Meeting (except for any proxies which have theretofore effectively
been revoked or withdrawn).
VOTING OF PROXIES
Shares represented by proxies properly executed and received in time to be
voted at the Special Meetings will be voted in accordance with the instructions
indicated on the proxies. Proxies which do not contain voting instructions will
be voted "FOR" the proposal to approve the principal terms of the Merger and, in
the case of proxies for Western Common Stock, "FOR" the Amendment. All proxies
voted "FOR" such matters, including proxies on which no instructions are
indicated, may, at the discretion of the proxy
46
<PAGE>
holder, be voted "FOR" a motion to adjourn or postpone the Special Meeting to
another time and/or place for the purpose of soliciting additional proxies or
otherwise; PROVIDED, HOWEVER, that no proxy which is voted against approval of
the principal terms of the Merger or on which the relevant shareholder
specifically abstains from voting with respect to such approval will be voted in
favor of any such adjournment or postponement.
It is not expected that any matter other than as described herein will be
brought before either of the Special Meetings. If, however, other matters are
properly brought before a Special Meeting, persons appointed as proxies will
have discretion to vote or act thereon in their best judgment.
REVOCABILITY OF PROXIES
The presence of a Shareholder at the relevant Special Meeting (or at any
postponement or adjournment thereof) will not automatically revoke such
shareholder's proxy. However, a shareholder may revoke a proxy at any time prior
to its exercise by (a) delivery to the Secretary of the relevant Company of a
written notice of revocation prior to or at the relevant Special Meeting (or, if
such Special Meeting is adjourned or postponed, prior to or at the time the
adjourned or postponed meeting is actually held); (b) submission of a duly
executed proxy bearing a later date; or (c) attending the relevant Special
Meeting (or, if such Special Meeting is adjourned or postponed, by attending the
adjourned or postponed meeting) and voting in person thereat. In the case of
Western Shareholders, any written revocation of proxy or other related
communications should be addressed to Arnold C. Hahn, Secretary, Western
Bancorp, 4100 Newport Place, Suite 900, Newport Beach, California 92660. In the
case of SCB Shareholders, any written revocation of proxy or other related
communications should be addressed to William C. Greenbeck, Secretary, SC
Bancorp, 3800 East La Palma Avenue, Anaheim, California 92807-1798.
SOLICITATION OF PROXIES
The Companies each have engaged D.F. King to assist in soliciting proxies in
connection with the Special Meetings on behalf of each of the Companies. The fee
to be paid by SCB is $4,000 plus an additional fee of $3.00 for each telephone
contact with a SCB Shareholder, and the fee to be paid by Western is $3,500 plus
an additional fee of $3.00 for each telephone contact with a Western
Shareholder. Each of the Companies will reimburse D.F. King for all reasonable
expenses, costs and disbursements incurred by D.F. King in connection with the
solicitation of proxies for such Company. In addition to solicitation by mail,
directors, officers and employees of each Company and its subsidiaries may
solicit proxies from shareholders of such Company personally or by telephone or
telegram without additional remuneration therefor. Each of the Companies will
also provide persons, firms, banks and corporations holding shares in their
names or in the names of nominees, which in any case are beneficially owned by
others, with proxy materials for transmittal to such beneficial owners and will
reimburse such record owners for their expenses of doing so. Each of Western and
SCB will bear the cost of solicitation of proxies from its own shareholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
WESTERN
As of the Western Record Date, the directors and executive officers of
Western beneficially held, in the aggregate, the ability to direct the voting
with respect to 2,487,139 shares of Western Common Stock, comprising
approximately 35.2 percent of the voting power of the Western Common Stock
outstanding. Such directors and executive officers of Western have informed
Western that they intend to vote their shares of Western Common Stock for the
approval of the principal terms of the Merger.
The following table reflects, as of the Western Record Date, the beneficial
ownership of Western Common Stock, including stock options which will become
exercisable within 60 days, by Western's directors, executive officers and
shareholders known to Western to be holding more than five percent of such
stock, and by Western's directors and executive officers as a group.
47
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS*
- ------------------------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
Castle Creek Capital Partner's Fund-I(2)....................................... 1,504,156 21.2%
4370 La Jolla Village, Suite 400,
San Diego, CA 92122
Launch & Co. Mutual Discovery Fund............................................. 400,000 5.7%
51 John F. Kennedy Parkway,
Short Hills, NJ 07078
John M. Eggemeyer(2)........................................................... 1,580,791 22.1%
4370 La Jolla Village, Suite 400,
San Diego, CA 92122
Hugh S. Smith, Jr.(3)(4)....................................................... 7,843 0.1%
1251 Westwood Blvd.
Los Angeles, CA 90024
Rice E. Brown(5)(6)............................................................ 1,482 **
27127 Calle Arroyo
Suite 1907
San Juan Capistrano, CA 92675
John W. Rose(5)(7)............................................................. 29,646 0.4%
c/o FNB Corporation
Hermitage Square
Hermitage, PA 16148
Dale E. Walter(5).............................................................. 7,059 0.1%
50855 Washington Square
Suite C-211
La Quinta, CA 92253
Matthew P. Wagner(4)(8)........................................................ 30,196 0.4%
1251 Westwood Blvd.
Los Angeles, CA 90024
E. Lynn Caswell(9)............................................................. 11,122 0.2%
2332 Mill Creek Drive
Suite 230
Laguna Hills, CA 92653
Robert L. McKay(5)(10)......................................................... 721,049 10.2%
4100 Newport Place
Newport Beach, CA 92660
William H. Jacoby(5)(11)....................................................... 234,981 3.3%
4100 Newport Place
Newport Beach, CA 92660
Mark H. Stuenkel(5)(12)........................................................ 53,528 0.8%
4100 Newport Place
Newport Beach, CA 92660
Joseph J. Digange(5)(13)....................................................... 7,843 0.1%
1251 Westwood Blvd.
Los Angeles, CA 90024
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS*
- ------------------------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
Arnold C. Hahn(14)............................................................. 5,294 0.1%
4100 Newport Place
Newport Beach, CA 92660
Directors and Executive Officers as a group (11 persons)(15)................... 2,679,712 36.8%
</TABLE>
- ------------------------
* In computing the percentage of shares beneficially owned, the number of
shares which the person or group has the right to acquire within 60 days of
the Western Record Date are deemed outstanding for the purposes of computing
the percentage of Common Stock beneficially owned by such person or group,
but are not deemed outstanding for the purpose of computing the percentage
of shares beneficially owned by any other person.
** Represents holdings of less than 0.1%.
(1) The term "beneficial owner" includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise, has or shares: (a) voting power, which includes the power to
vote, or to direct the voting power, of such security; and/or (b) investment
power, which includes the power to dispose, or to direct the disposition of,
such security. The term "beneficial owner" also includes any person who has
the right to acquire beneficial ownership of such security as defined above
within 60 days of the Western Record Date. Ownership includes vested stock
options and warrants exercisable within 60 days.
(2) Mr. Eggemeyer has direct beneficial ownership of 18,879 shares of Western
Common Stock and warrants to purchase 57,756 shares of Western Common Stock
and has or shares voting power and/or investment power, through Castle Creek
Capital Partner's Fund-I (the "Fund"), of which he is a principal, with
respect to 1,470,588 shares of Western Common Stock and warrants to purchase
33,568 shares of Western Common Stock. Mr. Eggemeyer disclaims any
beneficial ownership of the shares held by the Fund except to the extent of
his interest in the Fund. See "The Merger--Interests of Certain Persons in
the Merger--Ownership of BPI."
(3) Mr. Smith beneficially owns options to purchase 7,843 shares of Western
Common Stock.
(4) Executive Officer and Director.
(5) Director.
(6) Mr. Brown beneficially owns 894 shares of Western Common Stock and options
to purchase 588 shares of Western Common Stock.
(7) Mr. Rose beneficially owns 18,886 shares of Western Common Stock and
warrants to purchase 10,760 shares of Western Common Stock.
(8) Mr. Wagner beneficially owns 10,588 shares of Western Common Stock and
options to purchase 19,608 shares of Western Common Stock.
(9) E. Lynn Caswell is a former Chief Executive Officer and director of
Western.
(10) Mr. McKay beneficially owns 714,382 shares of Western Common Stock and
options to purchase 6,667 shares of Western Common Stock.
(11) Mr. Jacoby beneficially owns 211,996 shares of Western Common Stock,
options to purchase 16,667 shares of Western Common Stock and 6,318 shares
of Western Common Stock subject to a PAYSOP.
(12) Mr. Stuenkel beneficially owns 23,116 shares of Western Common Stock,
options to purchase 25,979 shares of Western Common Stock and 4,433 shares
subject to a PAYSOP.
(13) Mr. Digange beneficially owns options to purchase 7,843 shares of Western
Common Stock.
(14) Mr. Hahn, an executive officer of Western, beneficially owns options to
purchase 5,294 shares of Western Common Stock.
(15) Does not include 11,122 shares beneficially owned by E. Lynn Caswell.
49
<PAGE>
SCB
As of the SCB Record Date, the directors and officers of SCB beneficially
held, in the aggregate, the ability to direct the voting with respect to 332,209
shares of SCB Common Stock, comprising approximately 4.4 percent of the voting
power of the SCB Common Stock outstanding. Such directors and executive officers
of SCB have informed SCB that they intend to vote their shares of SCB Common
Stock for the approval of the principal terms of the Merger.
The following table reflects, as of the SCB Record Date, the beneficial
ownership of SCB Common Stock, including stock options which will become
exercisable within 60 days, by SCB's directors, executive officers and
shareholders known to SCB to be holding more than five percent of such stock,
and by SCB's directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS*
- ------------------------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
Western Bancorp................................................................ 1,496,750(1) 19.9%
4100 Newport Place, Suite 900
Newport Beach, CA 92660
Basswood Partners L.P.,........................................................ 730,499(2) 9.8%
Bennett Lindenbaum,
Matthew Lindenbaum
52 Forest Avenue
Paramus, NJ 07852
Castle Creek Capital Partners Fund-I L.P....................................... 648,825(3) 8.7%
4370 La Jolla Village, Suite 400
San Diego, CA 92122
Frank Neeld Tomlinson.......................................................... 406,646(4) 5.4%
P.O. Box 2577
Capistrano Beach, CA 92624
Franklin Resources, Inc........................................................ 401,700(5) 5.4%
Franklin Mutual Advisors, Inc.
The Common Fund
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Blvd.
San Mateo, CA 94404
N. Keith Abbott................................................................ 8,347(6) **
3800 East La Palma Avenue
Anaheim, CA 92807
Robert C. Ball................................................................. 48,185(7) **
Adohr Farms
4002 West Westminster
Santa Ana, CA 92702
H.A. Beisswenger............................................................... 33,656(8) **
3800 East LaPalma Avenue
Anaheim, CA 92807
Michael V. Cummings............................................................ 67,750(9) **
3800 East LaPalma Avenue
Anaheim, CA 92807
James E. Cunningham............................................................ 39,711(10) **
Security Express, Inc.
7100 Honold Avenue
Garden Grove, CA 92641
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS*
- ------------------------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
William C. Greenbeck........................................................... 154,103(11) 2.1%
Downey Land Limited
9530 East Imperial Highway
Suite S
Downey, CA 90242
Larry D. Hartwig............................................................... 141,057(12) 1.9%
3800 East LaPalma Avenue
Anaheim, CA 92807
David A. McCoy................................................................. 67,000(13) **
3800 East LaPalma Avenue
Anaheim, CA 92807
Ann E. McPartlin............................................................... 43,500(14) **
3800 East LaPalma Avenue
Anaheim, CA 92807
Irving J. Pinsky............................................................... 190,718(15) 2.5%
9355 Lubec Street
Downey, CA 90240
Bruce W. Roat.................................................................. 27,000(16) **
3800 East LaPalma Avenue
Anaheim, CA 92807
Peer A. Swan................................................................... 22,122(17) **
Pacific Scientific Company
620 Newport Center Drive
Newport Beach, CA 92660
Donald E. Wood................................................................. 113,235(18) 1.5%
Community Buick and Honda
13839 West Whittier Boulevard
Whittier, CA 90605
Directors and Executive officers as a group (13 persons)....................... 956,348 12.8%
</TABLE>
- ------------------------
* In computing the percentage of shares beneficially owned, the number of
shares which the person or group has the right to acquire within 60 days of
the SCB Record Date are deemed outstanding for the purposes of computing the
percentage of Common Stock beneficially owned by such person or group, but
are not deemed outstanding for the purpose of computing the percentage of
shares beneficially owned by any other person.
** Represents holdings of less than 1%.
(1) Based on Schedule 13D/A filed with the Commission and dated July 2, 1997
and includes up to 1,491,050 shares acquirable by stock options pursuant to
the Stock Option Agreement. Western expressly disclaims beneficial ownership
of any such shares. The options may be exercised only upon the happening of
certain events, none of which has occurred as of the date hereof, and none
of which is in the control of Western. 5,700 shares were acquired directly
by Western in open market transactions on May 29, 1997.
(2) Based on Schedule 13D/A filed with the Commission and dated February 18,
1997. Basswood Partners, L.P., Mr. Bennett Lindenbaum and Mr. Matthew
Lindenbaum have shared voting and investment power as to 730,499 shares.
(3) Based on Schedule 13D/A filed with the Commission and dated July 2, 1997.
Castle Creek Capital Partners Fund-I L.P. expressly disclaims beneficial
ownership of 310,139 shares, the beneficial ownership of which is through
its ownership interest in Western. Castle Creek Capital Partners Fund-I L.P.
directly owns 337,500 shares.
51
<PAGE>
(4) Based on Schedule 13D/A filed with the Commission and dated July 16, 1996.
Mr. Frank N. Tomlinson has shared voting power as to 306,090 shares and sole
voting power as to 100,556 shares.
(5) Based on Schedule 13D filed with the Commission and dated December 18,
1996. Franklin Mutual Advisors, Inc. has sole voting power and investment
power as to 401,700 shares.
(6) Mr. N. Keith Abbott has sole voting and investment power as to 3,347
shares. Includes 5,000 shares acquirable by stock options currently
exercisable.
(7) Mr. Robert C. Ball has shared voting and investment power as to 23,263
shares and sole voting and investment power as to 24,922 shares.
(8) Mr. Beisswenger has shared voting and investment power as to 28,656 shares.
Includes 5,000 shares acquirable by stock options currently exercisable.
(9) Mr. Cummings has sole voting and investment power as to 7,250 shares.
Includes 60,500 shares acquirable by stock options currently exercisable.
(10) Mr. Cunningham has shared voting power as to 16,408 shares and sole voting
power as to 18,303 shares. Mr. Cunningham has sole investment power over
34,711 shares. Includes 5,000 shares acquirable by stock options currently
exercisable.
(11) Mr. Greenbeck has sole voting and investment power as to 86,530 shares and
shared voting and investment power as to 50,000 shares. Includes 9,073
shares held by Aileen G. Lima, Mr. Greenbeck's mother, as to which shares
Mr. Greenbeck disclaims beneficial ownership. Includes 8,500 shares
acquirable by stock options currently exercisable.
(12) Mr. Hartwig has sole voting and investment power as to 20,000 shares and
shared voting and investment power as to 5,057 shares. Includes 116,000
shares acquirable by stock options exercisable within 60 days of the SCB
Record Date.
(13) Mr. McCoy has sole voting and investment power as to 17,500 shares.
Includes 49,500 shares acquirable by stock options exercisable within 60
days of the SCB Record Date.
(14) Ms. McPartlin has sole voting and investment power as to 6,000 shares.
Includes 37,500 shares acquirable by stock options exercisable within 60
days of the SCB Record Date.
(15) Mr. Pinsky has shared voting and investment power as to 18,000 shares and
sole voting and investment power as to 164,218 shares. Includes 8,500 shares
acquirable by stock options currently exercisable.
(16) Mr. Roat's ownership consists of 27,000 shares acquirable by stock options
exercisable within 60 days of the SCB Record Date.
(17) Mr. Swan has sole voting and investment power as to 17,122 shares. Includes
5,000 shares acquirable by stock options currently exercisable.
(18) Mr. Wood has sole voting and investment power as to 113,235 shares.
Includes 5,000 shares acquirable by stock options currently exercisable.
52
<PAGE>
FIP LITIGATION
In December 1995, Financial Institution Partners, L.P., ("FIP") purchased
288,888 shares of common stock of CCB (the "Initial Shares") in a private
placement at $6.75 per share ($1,949,994 in the aggregate). Under the terms of
FIP's agreement with CCB, FIP agreed to purchase an additional 266,659 shares of
common stock of CCB (the "Additional Shares") on or prior to May 5, 1996,
subject to satisfaction of certain closing conditions.
FIP received confirmation from the Federal Reserve Bank of San Francisco
dated April 12, 1997 that no Federal Reserve regulatory approval was required
for the purchase of the Additional Shares. On April 24, 1996, Hovde Financial,
Inc. ("Hovde"), the corporate general partner of FIP, purchased 53,909 shares of
common stock of CCB in the open market. FIP has alleged, among other things,
that CCB failed to cooperate fully in the due diligence review of CCB which FIP
alleges was a condition precedent to its purchase of the Additional Shares
subsequent to receipt of the Federal Reserve confirmation.
On June 11, 1996, FIP asserted that it had not been able to complete its due
diligence review and requested that CCB either (a) amend the agreement to allow
FIP until December 31, 1996 to purchase the Additional Shares at an increased
purchase price based upon the earnings of CCB from June 1, 1996 through November
30, 1996, or (b) repurchase the Initial Shares for an amount equal to the
purchase price, plus $6.00 per share, plus nine percent interest, plus FIP's
legal, accounting and due diligence expenses. On June 28, 1996, CCB informed FIP
that its rights to purchase the Additional Shares had expired under the terms of
the parties' agreement and declined either to amend the agreement or to
repurchase the Initial Shares.
On December 12, 1996, FIP informed CCB that it intended to sue CCB for fraud
and breach of contract unless FIP's demands were met. On December 19, 1996, FIP
and Hovde Capital, Inc. filed a Complaint in the United States District Court
for the Central District of California against CCB, NBSC, and certain of their
respective officers and directors alleging claims for breach of contract
(declaratory relief and specific performance), violation of the Exchange Act and
Rule 10b-5 thereunder, intentional misrepresentation, negligent
misrepresentation, suppression of fact and breach of contract (rescission,
restitution and damages). On August 20, 1997, FIP and Hovde Capital, Inc. filed
a Third Amended Complaint adding Western as a defendant and alleging additional
claims for breach of contract (right of first refusal and civil violation of
Penal Code Section 496). The complaint seeks rescission of FIP's purchase of the
Initial Shares, consequential damages in excess of $1,650,000 and punitive
damages. In the alternative, FIP seeks a declaratory judgment requiring CCB to
sell the Additional Shares to FIP at $6.75 per share if FIP determines it wishes
to purchase such shares and requiring CCB and Western to comply with the terms
of the agreement which FIP contends provides it with a right of first refusal as
to any offers by defendants of shares of common stock of CCB or Western in an
amount necessary to maintain FIP's agreed beneficial ownership interest in CCB
of 9.9 percent. None of CCB, NBSC or Western has yet answered the complaint.
Western Management estimates that in what it believes to be the unlikely
event that the outcome of the FIP litigation requires the issuance of the
Additional Shares to FIP, the effect would be that the weighted average shares
outstanding, for the purpose of computing earnings per share, would have
increased by approximately 3.7 percent for the three month period ended June 30,
1997, resulting in earnings per share dilution of approximately 3.5 percent. In
addition, in what it believes to be the unlikely event that FIP obtains a
judgment that it has a right of first refusal to obtain and thereafter maintain
a beneficial ownership interest of Western (which is now being equated to CCB by
FIP) at 9.9 percent, approximately 396,590 shares ("Right of First Refusal
Shares") would be issued to FIP resulting in an increase of approximately 5.4
percent in the weighted average shares outstanding for the purpose of computing
earnings per share for the three month period ended June 30, 1997, resulting in
earnings per share dilution of approximately 5.1 percent.
53
<PAGE>
SCB was provided with information related to FIP's demands prior to
execution of the Merger Agreement. Although Western Management believes that an
adverse outcome in the FIP litigation resulting in the issuance of Additional
Shares or Right of First Refusal Shares to FIP is unlikely, in the event the
litigation remains unresolved at the time of the Special Meetings, FIP may
exercise its Dissenters' Rights, which could adversely impact the ability of
Western and SCB to account for the Merger as a pooling-of-interests. As of the
Western Record Date, FIP beneficially owned 342,797 shares of Western Common
Stock, constituting 4.85 percent of the outstanding Western Common Stock, and as
of the Western Record Date, assuming that the Right of First Refusal Shares
(which include the Additional Shares) had been issued to FIP as a result of the
FIP Litigation, FIP would have beneficially owned 739,387 shares of Western
Common Stock, constituting 9.9 percent of the outstanding Western Common Stock.
As of the SCB Record Date, FIP beneficially owned 145,000 shares of SCB Common
Stock, constituting 1.9 percent of the outstanding SCB Common Stock. See "The
Merger--Dissenters' Rights" and "Risk Factors--Shares Eligible for Future Sale;
Dilution." In addition, Western's obligation to effect the Merger is subject to
the satisfaction or waiver prior to the Effective Time of the condition that the
SCB Shareholders or Western Shareholders voting against approval of the Merger
Agreement or giving notice in writing to SCB or Western, as the case may be, at
or before the applicable Special Meeting, that such shareholder dissents from
the Merger Agreement in the aggregate hold not more than five percent of the SCB
Common Stock or the Western Common Stock, as the case may be. See "The Merger
Agreement-- Conditions."
54
<PAGE>
THE MERGER
THIS SECTION OF THE JOINT PROXY STATEMENT-PROSPECTUS DESCRIBES CERTAIN
ASPECTS OF THE PROPOSED MERGER, AND SUCH INFORMATION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE OTHER INFORMATION CONTAINED ELSEWHERE IN THIS JOINT
PROXY STATEMENT-PROSPECTUS, INCLUDING THE APPENDICES HERETO, AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS SET FORTH AS
APPENDIX A TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND THE TEXT THEREOF IS
INCORPORATED HEREIN BY REFERENCE, AND REFERENCE IS MADE THERETO FOR A COMPLETE
DESCRIPTION OF THE TERMS OF THE MERGER. SHAREHOLDERS ARE URGED TO READ CAREFULLY
THE MERGER AGREEMENT AND EACH OF THE OTHER APPENDICES HERETO IN THEIR ENTIRETY.
BACKGROUND OF THE MERGER
Western, principally through its wholly-owned subsidiaries NBSC and Western
Bank, and SCB, principally through its wholly-owned subsidiary SC Bank, each
conducts general banking operations in Los Angeles, Orange and San Diego
counties, California. In serving individuals, small businesses and mid-market
corporations, each historically has focused on a community-based approach to
banking. The Managements of the Companies have been cognizant of the rapidly
changing structure of the banking market in Southern California, in part as a
result of the severe problems associated with the savings and loan industry and
the problems experienced by other independent banks within Los Angeles, Orange
and San Diego counties during the recent recession. As is the case throughout
the United States, the managements of the Companies believe that a process of
consolidation will continue to occur in the Southern California financial
services industry resulting in, among other things, a reduction in the number of
independent banks and bank holding companies.
In order to compete effectively with the larger financial institutions
resulting from the various consolidations and mergers in the industry locally,
the managements of the Companies saw the need to expand prudently. At the same
time, each recognized the opportunity to build a larger regional, independent
financial institution in the Los Angeles, Orange and San Diego counties market
as a result of the reduced number of independent banks headquartered in those
counties. Accordingly, as part of their efforts to achieve long-term, stable
profitability, both of the Companies sought a strong partner with which to join
forces in order to achieve greater market share in Southern California, as
detailed below.
Throughout 1996, the principals at BPI held discussions, on behalf of
Western, with a number of Southern California-based institutions with respect to
potential business combinations. The institutions contacted were only those
institutions that focused on the community-based approach to banking and were
located in markets that would provide Western with both strategic and
synergistic benefits. Specifically, Western identified SCB as a potential
acquisition target because of SCB's proximity to the small business and
mid-market corporations located along the Interstate 5 corridor, its strong loan
generating capabilities and because of the potential operational costs savings
that could be garnered from merging the respective institution's duplicative
operational functions. Since the Board of Directors of SCB made the decision to
obtain proposals from prospective acquirors in February 1997, the Board of
Directors of Western decided to participate in the due diligence and bidding
process. During the course of such process, Western confirmed that SCB fit the
acquisition criteria described above; therefore, the Board of Directors of
Western decided to proceed with the acquisition of SCB. The details of the
bidding and negotiation processes are described more fully below.
From time to time in 1995 and 1996, SCB held discussions with a number of
institutions with respect to prospective business combinations, including the
possibility of acquisitions of such institutions by SCB, a sale of SCB to such
institutions or a "merger of equals" between SCB and such institutions. In
connection therewith, in August 1996, John Eggemeyer of BPI met with Harold A.
Beisswenger, Chairman of the Board of SCB, Larry D. Hartwig, President and Chief
Executive Officer of SCB and legal counsel for SCB to discuss Western's interest
in a possible business combination with SCB. Thereafter, Mr. Eggemeyer had
55
<PAGE>
further sporadic conversations with Mr. Beisswenger or Mr. Hartwig reaffirming
Western's interest in a potential business combination.
At the October 1996 meeting of the SCB Board, the SCB Board authorized SCB's
management to interview and recommend the selection of investment bankers to
advise the SCB Board on the strategic alternatives available to SCB. Thereafter,
in November 1996, SCB retained CSFB as SCB's financial advisor in connection
with SCB's consideration of strategic alternatives. In addition, in December
1996 SCB retained Hovde to provide its perspectives on strategic alternatives.
The engagement letter with Hovde did not obligate Hovde to provide, nor was
Hovde requested to provide, any opinion with respect to the proposed Merger
between Western and SCB or the indications of interest received from Western or
any of the other prospective purchasers.
At the December 1996 meeting, the SCB Board considered the presentation of
CSFB as to strategic alternatives available to SCB, including SCB's stand alone
prospects, alternative stand alone strategies and a sale of SCB. No decision was
made as to the appropriate course of action, although management was authorized
to prepare materials to assist with a discreet inquiry of potential acquirors in
determining the values that might be received by SCB shareholders in a sales
transaction.
In January 1997, the SCB Board considered the presentation of Hovde on
strategic alternatives available to SCB, including prospects for growth by
acquisitions and the practical implications thereof. The SCB Board also
considered the recommendation of CSFB that preliminary inquiries be made to
gauge the level of interest in a possible sale of SCB, and authorized CSFB to
make a limited number of such inquiries.
On January 21, 1997, Basswood Partners, the holder of approximately 9.8
percent of the outstanding SCB Common Stock filed preliminary consent
solicitation materials on Schedule 14A with the Commission regarding a Basswood
proposal to expand the size of the SCB Board and to elect certain Basswood
designees in order to promote a sale of SCB. Following such filing,
representatives of SCB contacted representatives of Basswood to indicate that
the SCB Board already was in the process of considering strategic alternatives
and to urge Basswood not to take actions that would unreasonably interfere with
such process. In addition, the SCB Board adopted an amendment to its Bylaws
regulating actions by written consent. In its February 3, 1997 press release
announcing adoption of the Bylaw amendment, SCB also disclosed that it had
previously engaged financial advisors to assist it in connection with
consideration of strategic alternatives.
In February and March of 1997, CSFB and management of SCB prepared
background materials on SCB for evaluation by prospective acquirors. Western
reviewed such materials and began its preliminary analysis with regard to a
potential transaction to determine the viability of a potential merger, and
thereafter a preliminary non-binding indication of interest was delivered by
Western to SCB on February 21, 1997. Western's preliminary non-binding
indication of interest provided for each share of SCB Common Stock to be
exchanged for 0.4706 shares of Western Common Stock which, based on the closing
price of Western Common Stock on February 20, 1997 implied a value for SCB of
$12.00 per share. This offer was predicated upon: (a) SCB having 7,477,805
shares of common stock outstanding, (b) SCB having 219,720 shares of common
stock reserved for the issuance upon exercise of employee stock options, (c) the
merger being accounted for as a pooling of interests, and (d) the merger being
completed as a tax-free reorganization to Western, SCB and their respective
shareholders under the Code.
Following a review of various preliminary indications of interest submitted
to the SCB Board and a discussion thereof with CSFB, the SCB Board authorized
management to proceed with further discussions with four prospective purchasers,
one of which was Western, and each of which was afforded the opportunity to
conduct expanded due diligence of SCB. During the expanded due diligence
process, Western revised its preliminary analysis. On April 7, 1997, the Western
Board held a special meeting and the proposed Merger was considered in detail
with Western's senior management and BPI. All members of the Western Board were
present at the Meeting. The Western Board approved the transaction in principle
56
<PAGE>
at such meeting and authorized Western's management and BPI to proceed with
continued discussions and negotiations with SCB. Thereafter BPI, on behalf of
Western, submitted a revised non-binding indication of interest. Western's
revised non-binding indication of interest provided for each share of SCB Common
Stock issued and outstanding to be converted into that number of shares of
Western Common Stock as determined by dividing (i) $14.00 by (ii) a price per
share for Western Common Stock of no less than $25.50 and no greater than
$34.00. Further, this offer was predicated upon: (a) SCB having 7,486,975 shares
of common stock outstanding, (b) SCB having 558,940 shares of common stock
reserved for the issuance upon exercise of employee stock options, (c) the
merger being accounted for as a pooling of interests, and (d) the merger being
completed as a tax-free reorganization to Western, SCB and their respective
shareholders under the Internal Revenue Code. Two other prospective purchasers
also submitted revised indications of interest.
At its April 14, 1997 special meeting, the SCB Board considered three
revised indications of interest and directed CSFB to approach such prospective
purchasers with a request that each submit its best proposal. At a special
meeting of the Western Board held on April 15, 1997, the Western Board
authorized BPI to submit a revised proposal. The revised proposal provided (i)
for each share of SCB Common Stock issued and outstanding to be converted into
that number of shares of Western Common Stock as determined by dividing (A)
$14.25 by (B) a price per share for Western Common Stock of no less than $23.38
and no greater than $31.88 or (ii) for each share of SCB Common Stock to be
exchanged for 0.5158 shares of Western Common Stock, provided that during a
predetermined pricing period, Western Common Stock traded within a range between
$25.50 and $29.75. Further, the fixed exchange ratio option would become a
floating exchange ratio at the lower bound of the collar as determined by
dividing (i) $14.25 by (ii) a price per share for Western Common Stock of no
less than $21.25 and no greater than $24.44 and become a floating exchange ratio
at the upper bound of the collar as determined by dividing (i) $14.25 by (ii) a
price per share for Western Common Stock of no less than $30.81 and no greater
than $34.00. Similar to Western's revised non-binding indication of interest,
this revised proposal was predicated upon: (a) SCB having 7,486,975 shares of
common stock outstanding, (b) SCB having 558,940 shares of common stock reserved
for the issuance upon exercise of employee stock options, (c) the merger being
accounted for as a pooling of interests, and (d) the merger being completed as a
tax-free reorganization to Western, SCB and their respective shareholders under
the Internal Revenue Code. This revised proposal differed from the proposal
contained in the Merger Agreement primarily in that the fixed exchange ratio
option was eliminated.
On April 17, 1997, the SCB Board considered the revised indications of
interests from the three prospective purchasers. In contrast to the revised
Western proposal, one prospective purchaser submitted a revised proposal for a
tax-free merger based on an assumed value of its common stock (which was not
publicly traded) of $12.24 per share of SCB Common Stock, and the other
prospective purchaser submitted a revised proposal for a taxable transaction of
stock and cash with an indicated value of $12.00 per share. The SCB Board then
authorized management to proceed with negotiations to determine whether a
definitive agreement with Western could be reached. Thereafter, representatives
of Western and SCB commenced negotiation of the terms of the Merger Agreement
and the Stock Option Agreement.
On April 24, 1997, following continuing negotiations with Western, the SCB
Board considered the proposed Merger between Western and SCB. At such meeting,
the SCB Board, in consultation with CSFB and SCB's legal counsel, deliberated at
length about the strategic alternatives available to SCB, the background of the
negotiations with Western and the provisions of the draft Merger Agreement and
Stock Option Agreement. In addition, CSFB rendered to the SCB Board an oral
opinion, which was later confirmed in a written opinion dated April 29, 1997,
that the Conversion Number to be received in the proposed Merger was fair to the
SCB Shareholders from a financial point of view. See "--Opinions of Financial
Advisors--SCB." Following such deliberations, the SCB Board authorized
management to complete the negotiation of and enter into a definitive Merger
Agreement and Stock Option Agreement.
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On April 25, 1997, the Western Board held a special meeting at which the
principal terms of the Merger Agreement were reviewed and Western's management
was authorized to proceed with the final negotiation of the Merger Agreement.
On April 29, 1997, the Merger Agreement and the Stock Option Agreement were
executed and delivered. In addition, as an inducement to Western entering into
the Merger Agreement, N. Keith Abbott, Robert C. Ball, Harold A. Beisswenger,
James E. Cunningham, William C. Greenbeck, Larry D. Hartwig, Irving J. Pinsky,
Peer A. Swan and Donald E. Wood each entered into a Shareholder Agreement with
Western, pursuant to which each committed to vote his respective shares in favor
of the Merger and against certain other transactions. Messrs. Abbott, Ball,
Beisswenger, Cunningham, Greenbeck, Pinsky and Wood each also agreed not to
compete with Western for a period of one year or three years in the banking
business in the counties of Los Angeles, Orange and San Diego in the State of
California so long as Western or its assigns remain engaged in the banking
business in such counties. Immediately after its execution and delivery, the
Merger Agreement was publicly announced.
The managements of the Companies saw opportunities for increased operating
efficiencies and cost savings due to the high degree of geographic and
operational overlap between the companies. In particular, the managements
believe that cost savings can be achieved as a result of economies of scale, the
elimination of redundant executive management and central staff, the
consolidation of data processing and operations activities and the elimination
of duplicative administrative functions. As part of the examination of the books
and records of SCB, Western personnel and its advisors reviewed staffing levels
and transaction volumes in various areas and the details of other expenses. As a
result of these analyses, Western estimates the following annual synergies and
cost savings from throughout the consolidated Western organization resulting
from the Merger:
<TABLE>
<S> <C>
Compensation & Benefits......................................... $3,500,000
Data Processing Consolidation................................... 600,000
Professional Fees............................................... 250,000
Other........................................................... 350,000
---------
TOTAL....................................................... $4,700,000
---------
---------
</TABLE>
Western expects to recognize half of these benefits in 1998, and full
benefits in 1999.
Although the above described synergies and cost savings are Western's best
estimates formulated during Western's due diligence review of SCB, and Western
believes them to be reasonable, due to the inherent uncertainties associated
with merging two companies, there can be no assurance that Western will be able
to realize fully these synergies and cost savings or that such synergies and
cost savings will be realized in the time frame currently anticipated.
Managements of the Companies believe that Western and SCB complement each
other both in their community-based approach to banking and in terms of
geographic service areas. Consequently, the Companies believe that by combining
forces, they will be able more effectively to compete and successfully to take
advantage of banking opportunities in the Southern California market.
EFFECT OF MERGER
At the Effective Time, SCB will merge with and into Western, and Western
will be the surviving corporation and will continue its corporate existence
under California law under the name "Western Bancorp." The separate corporate
existence of SCB will cease at the Effective Time.
Upon the Merger becoming effective, each share of SCB Common Stock issued
and outstanding at the Effective Time (other than (a) shares which have not been
voted in favor of the approval of the principal terms of the Merger and with
respect to which Dissenters' Rights shall have been perfected in
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accordance with the CGCL and (b) shares held directly or indirectly by Western,
other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) will be converted automatically into the right to receive
0.4556 shares of Western Common Stock.
Once the Merger has been consummated, the trading of SCB Common Stock on the
American Stock Exchange will cease, and SCB will no longer be required to file
reports pursuant to the Exchange Act. It is anticipated that the management and
operation of Western and SCB will be integrated after the Merger. SCB has
agreed, subject to certain conditions, at or before the Effective Time, to make
such accounting adjustments as Western requests in order to implement its plans
regarding SC Bank or to reflect merger-related expenses and costs incurred by
SCB. See "The Merger Agreement--Certain Covenants."
Pursuant to the Merger Agreement, the Board of Directors of the Surviving
Corporation will include Harold A. Beisswenger, Larry D. Hartwig, William C.
Greenbeck and Donald E. Wood, each currently a director of SCB. Prior to the
Effective Time, the Bylaws of Western will be amended to increase the authorized
number of directors from a minimum of seven and a maximum of 13 to a minimum of
nine and a maximum of 16, assuming approval of the Amendment by the Western
Shareholders. Immediately prior to the Effective Time, the Western Board will
adopt resolutions fixing the exact number of directors at 14 and appointing
Messrs. Beisswenger, Hartwig, William C. Greenbeck and Donald E. Wood to fill
the vacancies created thereby. All members of the SCB Board and all members of
the board of directors of SC Bank will resign as of the Effective Time. See "The
Merger Agreement--Conditions."
After the Merger, the Surviving Corporation will be headquartered at 4100
Newport Place, Suite 900, Newport Beach, California 92660. The telephone number
at such offices will be (714) 863-2300.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
WESTERN
The Western Board has unanimously approved the Merger Agreement and the
Amendment and has determined that the Merger is fair to, and in the best
interests of, the Western Shareholders. The Western Board, therefore,
unanimously recommends that the Western Shareholders vote "FOR" the approval of
the principal terms of the Merger and the Amendment. The Western Board believes
that the Merger will enable Western to participate in opportunities for growth
that the Merger makes possible. See "--Background of the Merger" and "--Opinions
of Financial Advisors."
In reaching its determination that the Merger is fair to, and in the best
interests of, Western Shareholders, the Western Board considered a number of
factors, from both a short-term and long-term perspective, including, without
limitation, the following:
(a) The potential to leverage management, data processing and
operations, the expansion of products at SCB throughout the Western
organization, an increased consolidated lending limit and additional
customer convenience due to additional branches, which Western's management
believes will enhance the potential for Western's business, financial
condition, results of operations and prospects, including, but not limited
to, its potential growth, development, productivity and profitability;
(b) The current and prospective environment in which Western operates,
including national and local economic conditions, the competitive
environment for banks and other financial institutions generally, the
increased regulatory burden on financial institutions generally and the
trend towards consolidation in the financial services industry;
(c) Data processing systems, talented employees and improving financial
results at SCB, which Western's management believes, based on the
examination of SCB's business, financial condition and results of
operations, will control risks normally associated with a merger;
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(d) The review by the Western Board with its legal advisors and BPI of
the provisions of the Merger Agreement;
(e) The Piper Opinion;
(f) The likelihood that the proposed transaction would be consummated;
(g) Improved customer relations and satisfaction through enhancement of
the employee base of Western and an increase in point of service locations
and products from which to choose; and
(h) The compatibility of the respective businesses and management
philosophies of the Companies.
While each member of the Western Board individually evaluated each of the
foregoing as well as other factors, the Western Board collectively did not
assign any specific or relative weight to the factors under consideration and
did not make any determinations with respect to any individual factor. The
Western Board collectively made its determination with respect to the Merger
based on the unanimous conclusion reached by its members that the Merger, in
light of the factors that each of them individually considered as appropriate,
is fair and in the best interests of the Western Shareholders.
FOR THE REASONS SET FORTH ABOVE THE WESTERN BOARD HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AS IN THE BEST INTERESTS OF WESTERN AND ITS SHAREHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT WESTERN SHAREHOLDERS APPROVE THE PRINCIPAL TERMS
OF THE MERGER AND THE AMENDMENT.
SCB
The SCB Board has unanimously concluded that the Merger is in the best
interests of SCB Shareholders and unanimously recommends that SCB Shareholders
approve the principal terms of the Merger. In reaching its determination to
approve the principal terms of the Merger, the SCB Board considered the
following factors, which constitute all of the material factors considered by
the SCB Board:
(a) Information concerning the financial performance and condition,
business operations, capital levels, asset quality and prospects of Western
and the other offerors and the due diligence review of the loan portfolio,
material contracts, litigation and other contingent liabilities of Western
and other offerors conducted by SCB and its advisors;
(b) Information concerning the ability of Western, the other offerors
and SCB to achieve operating efficiencies;
(c) The current and prospective economic, regulatory and competitive
environment facing SCB, including in particular the franchise value of SCB
due to its branch locations in Los Angeles, Orange and San Diego Counties,
its high level of demand deposits and business lending focus, its leverage
capital ratios and data processing systems;
(d) The unprecedented consolidation currently underway in the banking
industry and increased competition from larger independent banks in
California;
(e) The business strategies and the strength and depth of management of
Western and the other offerors and the extent of their interest in
continuing SCB's significant business relationships in Los Angeles, Orange
and San Diego Counties;
(f) The geographic concentration of Western in Southern California;
(g) The advantages of being part of a larger entity, including the
potential for operating efficiencies, a higher legal lending limit and the
generally higher trading multiples of larger financial institutions;
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(h) The value of the consideration offered by Western and the other
offerors compared to the value of the consideration offered in other
acquisitions of financial institutions in California during 1995 and 1996
and the prospects for enhanced value of the combined entity in the future;
(i) The terms of the Merger Agreement and the Stock Option Agreement and
its review of those agreements with its financial and legal advisors;
(j) The financial and other presentations of CSFB (including the
assumptions and methodologies underlying its analyses and presentations of
pro forma financial information with respect to both the Merger and the
other offers), the results of the contacts and discussions between SCB, its
advisors and various third parties and the opinion of CSFB that, as of the
date of such opinion, and based upon, and subject to, the matters stated in
such opinion, the Conversion Number is fair, from a financial point of view,
to SCB Shareholders;
(k) The tax-free nature of the Western offer;
(l) The commitment of Western to have the Western Common Stock listed on
the Nasdaq National Market and the anticipated increase in the liquidity
thereof following consummation of the CCB Merger;
(m) The prospects and valuation of SCB on a stand alone basis and on the
basis of alternative stand alone strategies, such as dividends, share
repurchases, restructurings and growth through acquisitions; and
(n) The willingness of Western to provide SCB Shareholders with certain
protections against fluctuations in the value of the consideration offered
by Western.
The foregoing discussion of the information and factors considered by the
SCB Board is not intended to be exhaustive, but constitutes the material factors
considered by the SCB Board. In reaching its determination to approve and
recommend the principal terms of the Merger, the SCB Board did not assign
relative or specific weights to the foregoing factors and individual directors
may have weighed such factors differently.
FOR THE REASONS SET FORTH ABOVE, THE SCB BOARD HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AS IN THE BEST INTERESTS OF SCB AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SCB SHAREHOLDERS APPROVE THE PRINCIPAL TERMS OF THE
MERGER.
OPINIONS OF FINANCIAL ADVISORS
WESTERN
Piper Jaffray was retained by Western pursuant to an engagement letter dated
July 9, 1997 to render its opinion to the Western Board regarding the fairness,
from a financial point of view, to Western Shareholders of the Merger
Consideration.
Piper Jaffray is an investment banking firm engaged, among other things, in
the valuation of businesses and their securities in connection with mergers and
acquisitions, underwriting and secondary distributions of securities, private
placements and valuations for estate, corporate and other purposes. Piper
Jaffray was selected to prepare a fairness opinion based on its experience and
expertise in transactions similar to the Merger and its reputation in the
financial services and investment banking sectors. Except as set forth above,
Piper Jaffray has not otherwise acted as financial advisor to Western or the
Western Board in connection with the Merger and did not participate in the
discussions or negotiations with respect to the Merger.
Piper Jaffray delivered to the Western Board on July 14, 1997, its oral
opinion, subsequently confirmed by a written opinion dated as of the same date,
to the effect that, as of the date of the opinion
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and based on and subject to the assumptions, factors and limitations as set
forth in the opinion and as described below, the Merger Consideration pursuant
to the Merger Agreement was fair, from a financial point of view, to the Western
Shareholders. A copy of the Piper Opinion is attached to this Joint Proxy
Statement-Prospectus as Appendix C and is incorporated herein by reference.
While Piper Jaffray rendered its opinion and provided certain analyses to
the Western Board, Piper Jaffray was not requested to and did not make any
recommendation to the Western Board as to the form or amount of the
consideration to be exchanged by Western in the Merger, which was determined
through negotiations between SCB and Western. The Piper Opinion, which was
delivered for use and considered by the Western Board, is directed only to the
fairness, from a financial point of view, of the Merger Consideration, does not
address the value of a share of Western Common Stock, does not address Western's
underlying business decision to participate in the Merger and does not
constitute a recommendation to any Western Shareholder as to how such
shareholder should vote with respect to the Merger. Piper Jaffray does not admit
that it is an expert within the meaning of the term "expert" as used in the Act
and the rules and regulations promulgated thereunder, or that its opinions
constitute a report or valuation within the meaning of Section 11 of the
Securities Act and the rules and regulations promulgated thereunder.
Piper Jaffray was not advised by Western, SCB or their respective legal
counsel concerning the probable outcome of, or estimated damages which might
arise from, any pending or threatened litigation, possible unasserted claims or
other contingent liabilities, to which Western or SCB or their affiliates was a
party or may be subject and undertook no analysis independent thereof.
Accordingly, the Piper Opinion made no assumption concerning, and therefore did
not consider, the possible assertion of claims, outcomes or damages arising out
of any such matters.
THE SUMMARY OF THE PIPER OPINION SET FORTH BELOW IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE PIPER OPINION. WESTERN
SHAREHOLDERS ARE URGED TO READ THE PIPER OPINION IN ITS ENTIRETY FOR A COMPLETE
DESCRIPTION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW
UNDERTAKEN.
In arriving at the Piper Opinion, Piper Jaffray reviewed, analyzed and
relied upon material bearing upon the financial and operating condition and
prospects of Western and SCB and material prepared in connection with the
Merger, and considered such financial and other factors as it deemed appropriate
under the circumstances, including, among other things, the following: (i) the
Merger Agreement, (ii) information relative to the business, financial condition
and operations of Western and SCB furnished by management of Western and SCB,
respectively, (iii) certain internal financial planning information of SCB
furnished by management of SCB and revised by Western, and certain pro forma
internal financial planning information for SCB and Western furnished by
management of Western, (iv) certain financial and securities data of Western,
(v) to the extent publicly available, the financial terms of certain merger and
acquisition transactions deemed relevant; (vi) publicly available information
relative to Western and SCB, and (vii) certain financial and securities data of
SCB and companies deemed similar to SCB or representative of the business sector
in which SCB operates. In addition, Piper Jaffray engaged in discussions with
members of management of SCB and Western concerning the respective financial
condition, current operating results and business outlook of SCB and Western,
including the prospects for the combined companies and any potential operating
efficiencies and synergies which may arise from the Merger.
For purposes of the Piper Opinion, Piper Jaffray relied upon and assumed the
accuracy, completeness and fairness of the financial and other information made
available to it and did not attempt to independently verify such information.
Piper Jaffray relied upon the assurances of Western and SCB management that the
information provided by Western and SCB had a reasonable basis and, with respect
to financial planning data and other business outlook information, reflected the
best available estimates, and that they were not aware of any information or
fact that would make the information provided to Piper Jaffray incomplete or
misleading. Piper Jaffray relied, without independent verification, on the
assessments by management of Western of the amount and timing of nonrecurring
acquisition costs and potential cost
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savings and other projected synergies realizable as a result of the Merger and
assumed that the Merger would be treated as a tax-free reorganization and
accounted for as a pooling-of-interests under generally accepted accounting
principles. In arriving at the Piper Opinion, Piper Jaffray did not perform, nor
was it furnished, any appraisal or valuation of specific assets or liabilities
of Western or SCB and expressed no opinion regarding the liquidation value of
any entity. No limitations were imposed by Western on the scope of Piper
Jaffray's investigation or the procedures to be followed in rendering its
opinion. Piper Jaffray expressed no opinion as to the price at which shares of
Western Common Stock or SCB Common Stock may trade at any future time. The Piper
Opinion is based upon information available to Piper Jaffray and the facts and
circumstances as they existed and were subject to evaluation on the date of the
Piper Opinion. Events occurring after such date could materially affect the
assumptions used in preparing the Piper Opinion.
Piper Jaffray performed certain financial and comparative analyses,
including those summarized below, which it discussed with the Western Board on
July 14, 1997. In delivering the Piper Opinion to the Western Board as of July
14, 1997, Piper Jaffray prepared and delivered to the Western Board certain
written materials containing various analyses and other information relevant to
the Piper Opinion. The discussion below summarizes those material analyses
performed in connection with rendering the Piper Opinion.
SELECTED MARKET INFORMATION. Piper Jaffray reviewed certain stock trading
characteristics of Western Common Stock and SCB Common Stock, including stock
price and volume comparisons for the periods ending July 10, 1997. Piper Jaffray
concluded that the trading volume represented by Western Common Stock and SCB
Common Stock were similar. Piper Jaffray also utilized the stock trading
information in its analysis of the per share purchase price and aggregate
transaction value based on the Conversion Number and other terms set forth in
the Merger Agreement. The specific analyses performed by Piper Jaffray, based in
part on this information, are described in the paragraphs below.
PRO FORMA ANALYSIS. Piper Jaffray analyzed the hypothetical pro forma
effects of the Merger on Western's earnings per share and tangible book value
per share for the years ending December 31, 1997, 1998 and 1999. In this
analysis, Western's projected pre-Merger earnings per share and tangible book
values per share were compared to the projected post-Merger earnings per share
and tangible book values per share reflecting the addition of SCB's earnings and
projected synergies as well as certain other pro forma changes. This analysis
was completed on earnings per share according to generally accepted accounting
principles ("GAAP"), cash earnings per share and tangible book value bases,
using projections for SCB provided by SCB's management and revised by Western's
management. The projected earnings per share and tangible book values per share
for the combined entities were then compared to Western's projected earnings and
tangible book values over the same periods on a stand alone basis. Based on an
assumed Conversion Number of 0.47899 shares of Western Common Stock for each
share of SCB Common Stock, this analysis indicated that the Merger would have an
accretive effect on Western's projected earnings per share in 1997, 1998 and
1999, on both a GAAP and cash basis, taking into account the projected synergies
relating to the Merger. Without such synergies, the analysis showed that the
Merger would have an accretive effect on Western's projected earnings per share
in 1997, but have a dilutive effect on Western's projected earnings per share in
1998 and 1999. The analysis also indicated that the Merger would have an
accretive effect on Western's tangible book value per share in 1997, 1998 and
1999, whether or not the projected synergies relating to the Merger are taken
into account.
CONTRIBUTION ANALYSIS. Piper Jaffray analyzed the hypothetical pro forma
contribution of each of Western and SCB to the combined company for the year
ended December 31, 1996 and the years ending December 31, 1997 through 2001. For
these periods, Piper Jaffray analyzed SCB's expected contribution, with and
without projected synergies from the Merger, to the consolidated net interest
income, GAAP net income, cash net income, total assets, net loans, deposits and
tangible book value of the combined entity and the post-Merger equity interest
to be held by SCB's shareholders. This analysis is based on projections
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for SCB provided by SCB's management and revised by Western's management,
without taking into account the projected synergies relating to the Merger
except in the case of GAAP net income and cash net income. This analysis shows
that SCB will contribute 36.0 percent, 39.1 percent, 36.4 percent, 36.4 percent,
41.6 percent, 36.3 percent and 47.4 percent to the consolidated net interest
income, GAAP net income, cash net income, total assets, net loans, deposits and
tangible book value, respectively, of the combined entity in fiscal 1997. This
analysis shows that in fiscal 2001, SCB will contribute 33.8 percent, 29.7
percent, 28.9 percent, 31.9 percent, 39.3 percent, 31.4 percent and 38.8 percent
to the consolidated net interest income, GAAP net income, cash net income, total
assets, net loans, deposits and tangible book value, respectively, of the
combined entity. Taking into account the projected synergies from the Merger,
the analysis shows that SCB will contribute 39.1 percent and 36.4 percent to the
GAAP net income and cash net income, respectively, of the combined entity in
fiscal 1997 and 39.0 percent and 37.6 percent to the GAAP net income and cash
net income, respectively, of the combined entity in fiscal 2001. Assuming a
Conversion Number of 0.47899 shares of Western Common Stock for each share of
SCB Common Stock, SCB stockholders will account for approximately 33.5 percent
of the combined company.
DISCOUNTED IMPLIED DIVIDEND ANALYSIS. Using a discounted implied dividend
analysis, Piper Jaffray calculated a range of theoretical per share values for
SCB based on the net present value of (i) SCB's implied annual dividend income,
subject to a constraint of maintaining a minimum ratio of equity to assets of
six percent, and (ii) a terminal value for SCB in 2001 calculated based upon a
multiple of net income. The projected financial data for SCB for 1997 through
2001 utilized by Piper Jaffray in this analysis was prepared by SCB management
and revised by Western management. Piper Jaffray calculated the range of net
present values per share for SCB based on a range of discount rates of 12
percent to 16 percent and a range of terminal value multiples of forecasted 2001
earnings of 14.0x to 16.0x. This analysis yielded a range of estimated present
values per share for SCB of approximately $16.64 to $20.54 (taking into account
the projected synergies relating to the Merger) and approximately $11.95 to
$14.51 (without such projected synergies).
COMPARABLE MERGER AND ACQUISITION ANALYSIS. Piper Jaffray reviewed selected
transactions involving acquired banks located in California deemed comparable to
SCB that have been completed from January 1, 1996 to June 30, 1997 and whereby
the target was 100 percent acquired. This analysis was based on publicly
available information obtained from filings with the Commission, public company
disclosures, press releases, industry and popular press reports, data bases and
other sources. This search yielded 13 comparable transactions. Based on its
analysis of the comparable transactions, Piper Jaffray derived the mean, median
and ranges of various operating and valuation ratios for the comparable
transaction group and compared such ratios to SCB's comparable ratios. The
comparable transactions group's mean and median equity value to latest 12 months
net income multiples of 20.1x and 20.4x, and range of 16.2x to 29.6x, were
compared with SCB's multiple of 23.0x; the mean and median equity value to
latest 12 months cash net income multiples of 19.8x and 20.3x, and range of
14.7x to 29.6x, were compared with SCB's multiple of 20.7x; the mean and median
equity value to tangible book value multiples of 1.9x and 1.8x, and range of
1.1x to 3.6x, were compared with SCB's multiple of 2.4x; the mean and median
equity value to assets ratios of 18.0 percent and 18.0 percent, and range of 9.9
percent to 25.5 percent, were compared with SCB's ratio of 21.9 percent; the
mean and median tangible equity to tangible assets ratios of 9.6 percent and 9.6
percent, and range of 6.7 percent to 14.3 percent, were compared with SCB's
ratio of 9.3 percent; the mean and median latest 12 months return on average
assets ratio of 0.7 percent and 0.9 percent, and range of -1.0 percent to 2.0
percent, were compared with SCB's ratio of 1.0 percent; the mean and median
latest 12 months return on average equity ratios of 7.5 percent and 10.9
percent, and range of -9.4 percent to 18.7 percent, were compared with SCB's
ratio of 10.1 percent; and the mean and median non-performing assets to total
assets ratios of 2.2 percent and 2.1 percent, and range of 0.3 percent to 4.2
percent, were compared with SCB's ratio of 1.7 percent.
PREMIUM ANALYSIS. Piper Jaffray reviewed publicly available information for
selected completed transactions from January 1, 1996 to June 30, 1997 involving
publicly traded banks located in California that had
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total assets greater than $100 million and less than $1.0 billion. Piper Jaffray
selected nine transactions which were deemed comparable. Based on its review of
the comparable transactions, Piper Jaffray derived the mean, median and range of
premiums paid in the comparable transactions and compared them to the premium to
be paid to SCB's shareholders. The comparable transaction group's mean and
median premiums of 29.1 percent and 19.0 percent above the trading price on the
day prior to announcement, and range of 1.4 percent to 91.0 percent, were
compared to the 20.0 percent premium to be paid to SCB's shareholders; the mean
and median premiums of 40.2 percent and 33.3 percent above the trading price one
month prior to the announcement, and range of 8.9 percent to 117.6 percent, were
compared to the 34.1 percent premium to be paid to SCB's shareholders; and the
mean and median premiums of 50.2 percent and 37.9 percent above the trading
price three months prior to the announcement, and range of 25.2 percent to 131.3
percent, were compared to the 44.3 percent premium to be paid to SCB's
shareholders.
COMPARABLE PUBLIC COMPANY ANALYSIS. Piper Jaffray reviewed information
relating to six publicly traded banks in southern California with assets between
$200 million and $1.0 billion. Share pricing for the publicly traded companies
in the public market reflects the value of a minority interest and does not
reflect a control premium. Based on its review, Piper Jaffray derived mean and
median return on average assets ratios of 1.3 percent and 1.1 percent, and a
range of 1.0 percent to 1.7 percent, compared with SCB's return on average
assets of 1.0 percent; mean and median return on average equity ratios of 14.9
percent and 14.7 percent, and a range of 10.0 percent to 22.3 percent, compared
with SCB's return on average equity of 10.1 percent; mean and median asset
growth of 30.6 percent and 29.2 percent, and a range of 3.7 percent to 62.1
percent, compared with SCB's asset growth of 10.9 percent; mean and median
dividend yield of 0.7 percent and 0.5 percent, and a range of 0.0 percent to 1.6
percent, compared with SCB's dividend yield of 1.4 percent; mean and median
tangible equity to assets ratios of 7.3 percent and 6.8 percent, and range of
3.9 percent to 11.6 percent, compared with SCB's ratio of 9.3 percent; mean and
median net loans to deposits ratios of 70.1 percent and 72.7 percent, and a
range of 58.8 percent to 78.7 percent, compared with SCB's ratio of 76.2
percent; mean and median deposits to assets ratios of 89.7 percent and 89.4
percent, and a range of 87.6 percent to 92.9 percent, compared with SCB's ratio
of 88.5 percent; mean and median non-performing loans to net loans ratios of 2.1
percent and 0.9 percent, and a range of 0.5 percent to 4.8 percent, compared
with SCB's ratio of 2.3 percent; mean and median reserves to loans ratio of 1.6
percent and 1.7 percent, and a range of 0.6 percent to 2.3 percent, compared
with SCB's ratio of 1.6 percent; mean and median price to last 12 months
earnings per share multiples of 16.6x and 15.9x, and a range of 13.3x to 22.1x,
compared with SCB's multiple of 23.0x; mean and median price to latest 12 months
cash earnings per share multiples of 16.4x and 15.8x, and a range of 12.5x to
22.1x, compared with SCB's multiple of 20.7x; mean and median price to estimated
1997 earnings per share multiples of 14.7x and 14.8x, and a range of 11.8x to
16.5x, compared with SCB's multiple of 21.3x; mean and median price to estimated
1998 earnings per share multiples of 13.3x and 14.2x, and a range of 11.1x to
14.5x, compared with SCB's multiple of 19.0x; and mean and median price to
tangible book value multiples of 2.3x and 2.1x, and a range of 1.7x to 2.8x,
compared with SCB's multiple of 2.4x.
In reaching its conclusions as to the fairness to the Western Shareholders
of the Merger Consideration (as defined herein) and in its presentation to the
Western Board, Piper Jaffray did not rely on any single analysis or factor
described above, assign relative weights to the analyses or factors considered
by it, or make any conclusions as to how the results of any given analysis,
taken alone, supported its fairness opinion. The preparation of a fairness
opinion is a complex process and not necessarily susceptible to partial analyses
or summary description. Piper Jaffray believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all factors and analyses, would
create a misleading view of the process underlying the Piper Opinion. The
analyses of Piper Jaffray are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Analyses relating to the value of companies do not purport to
be appraisals or valuations or necessarily reflect the price at which companies
may actually be sold. No company or transaction used in any comparable analysis
as a comparison is identical to Western, SCB or the Merger. Accordingly, an
analysis of the results is not mathematical, rather
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it involves complex considerations and judgments concerning, among other things,
differences in financial and operating characteristics of the comparable
companies and other factors that could affect the public trading value of such
companies.
Piper Jaffray has provided its consent to the filing of its opinion with the
Registration Statement of which this Proxy Statement-Prospectus is a part and to
the references to Piper Jaffray in this Joint Proxy Statement-Prospectus. By
providing this consent, Piper Jaffray does not admit that it is within the
category of persons whose consent is required under Section 7 of the Securities
Act, or the rules and regulations of the Commission thereunder, nor does Piper
Jaffray admit that they are experts with respect to any part of the Registration
Statement within the meaning of the term "experts" as used in the Securities
Act, or the rules or regulations of the Commission thereunder.
For acting as financial advisor to Western in connection with the Merger,
Western has agreed to pay Piper Jaffray a fee of $75,000. Western has also
agreed to pay the reasonable out-of-pocket expenses of Piper Jaffray and to
indemnify Piper Jaffray against certain liabilities incurred (including
liabilities under the federal securities laws) in connection with the engagement
of Piper Jaffray by Western. The fees and expenses payable to Piper Jaffray are
not contingent upon consummation of the Merger.
SCB
CSFB has acted as financial advisor to SCB in connection with the Merger.
CSFB was selected by SCB based on CSFB's experience and expertise. CSFB is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with CSFB's engagement, SCB requested that CSFB evaluate the
fairness of the Conversion Number from a financial point of view. On April 24,
1997, CSFB rendered to the SCB Board an oral opinion, which was later confirmed
in a written opinion dated April 29, 1997, to the effect that, as of such date
and based upon and subject to certain matters stated in such opinion, the
Conversion Number was fair to the holders of SCB Common Stock from a financial
point of view. CSFB has confirmed its written opinion dated April 29, 1997 by
delivery of a written opinion dated the date of this Joint Proxy
Statement-Prospectus. In connection with its opinion dated the date of this
Joint Proxy Statement-Prospectus, CSFB updated certain of the analyses performed
in connection with its opinion delivered on April 29, 1997 and reviewed the
assumptions on which such analyses were based and the factors considered in
connection therewith.
The full text of CSFB's written opinion to the SCB Board dated the date of
this Joint Proxy Statement-Prospectus, which sets forth the procedures followed,
assumptions made, matters considered and limitations on the review undertaken,
is attached as Appendix B to this Joint Proxy Statement-Prospectus and is
incorporated herein by reference. Shareholders of SCB are urged to read this
opinion carefully in its entirety. CSFB's opinion is directed to the SCB Board
and relates only to the fairness of the Conversion Number from a financial point
of view, and does not address any other aspect of the proposed Merger or any
related transaction. The summary of the opinion of CSFB set forth in the Joint
Proxy Statement-Prospectus is qualified in its entirety by reference to the full
text of such opinion.
In arriving at its opinion, CSFB reviewed the Merger Agreement and certain
publicly available business and financial information relating to the Companies
(including information relating to Western's acquisition of CCB). CSFB also
reviewed certain other information relating to the Companies, including
financial forecasts provided to CSFB by the Companies, and met with the
managements of the Companies to discuss the businesses and prospects of the
Companies. CSFB also considered certain financial and stock market data of the
Companies and compared that data with similar data for other publicly held
companies in businesses similar to those of the Companies and considered, to the
extent publicly available, the financial tenets of certain other business
combinations and other transactions recently effected. CSFB
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also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which CSFB deemed
relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by CSFB and relied on such information being complete and accurate in
all material respects. With respect to the financial forecasts, CSFB assumed
that such forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of the Companies
as to the future financial performance of the Companies. CSFB also assumed
Western successfully closed the CCB Merger in a manner contemplated by the
merger agreement related to such acquisition. CSFB also was not requested to
conduct, and did not conduct, a review of individual credit files or make an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of the Companies, nor was CSFB furnished with any such comprehensive
evaluations or appraisals, including loan or lease portfolios or the allowances
for losses with respect thereto. CSFB's opinion was necessarily based upon
information available to CSFB, and financial, economic, market and other
conditions as they existed and could be evaluated, on the date of its opinion.
CSFB did not express any opinion as to the actual value of the Western Common
Stock when issued pursuant to the Merger or the prices at which the Western
Common Stock will trade subsequent to the Merger. In connection with its
engagement, CSFB approached certain third parties to solicit indications of
interest in a possible acquisition of SCB and held preliminary discussions with
certain of these parties prior to the date of its opinion. Although CSFB
evaluated the Conversion Number from a financial point of view, CSFB was not
requested to, and did not, recommend the specific consideration payable in the
Merger. No other limitations were imposed by SCB on CSFB with respect to the
investigations made or procedures followed by CSFB in rendering its opinion.
In preparing its opinion to the SCB Board, CSFB performed a variety of
financial and comparative analyses, including those described below performed by
CSFB in connection with its opinion dated April 29, 1997. The summary of CSFB's
analyses set forth below does not purport to be a complete description of the
analyses underlying CSFB's opinion, but rather, sets forth a description of the
material analyses for purposes of such opinion. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analyses and the application
of those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. In arriving at its opinion,
CSFB made qualitative judgments as to the significance and relevance of each
analysis and factor considered by it. Accordingly, CSFB believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying such analyses and
its opinion. In its analyses, CSFB made numerous assumptions with respect to
SCB, Western and industry performance, regulatory, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of SCB and Western. No company, transaction or business used in such
analyses as a comparison is identical to SCB, Western or the proposed Merger,
nor is an evaluation of the results of such analyses entirely mathematical;
rather, such analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions being analyzed. The estimates contained in such analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. CSFB's opinion and financial
analyses were only one of many factors considered by the SCB Board in its
evaluation of the proposed Merger and should not be viewed as determinative of
the views of SCB's Board or management with respect to the Conversion Number or
the Merger.
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The following is a summary of the material financial analyses performed by
CSFB in connection with its opinion dated April 29, 1997.
CALCULATION OF THE IMPLIED VALUE OF THE CONVERSION NUMBER. CSFB calculated
the implied value of the Conversion Number based on the closing price of Western
Common Stock on April 21, 1997. The implied equity value of $14.25 per share
equaled implied multiples for SCB of the latest 12 months' earnings per share
("EPS"), estimated calendar 1997 EPS, estimated calendar 1998 EPS and book value
and tangible book value of 21.9x, 17.6x, 2.13x and 2.28x, respectively, and an
implied premium to the closing price of SCB Common Stock on April 21, 1997 of
approximately 31 percent.
CSFB compared the implied value of the Conversion Number to valuations for
SCB derived three stand-alone valuation methodologies, including a comparable
company analysis, a regression analysis based on the correlation between return
on average equity and price to book value or selected bank holding companies and
a discounted cash flow analysis (without giving effect to the potential net cost
savings realizable from the Merger), and analyzed implied value to acquisition
values for SCB utilizing three valuation methodologies, including a discounted
cash flow analysis (after giving effect to the potential cost savings realizable
by an in-market buyer), a comparable company analysis including a 30 percent
control premium and an analysis of recent mergers and acquisitions involving
comparable banking institutions. These methodologies are discussed below:
SELECTED COMPANIES ANALYSIS. CSFB compared certain financial, operating and
stock market data of SCB to corresponding data of selected publicly traded
companies in the banking industry. Such companies included: Bank of Commerce,
California State Bank, CVB Financial Corp., Foothill Independent Bancorp, FP
Bancorp, North County Bancorp, Santa Barbara Bancorp and Santa Monica Bank
(collectively, the "Selected Companies"). EPS estimates for the Selected
Companies were based on estimates of selected investment banking firms as
compiled by First Call, and EPS estimates for SCB were based on internal
estimates of the management of SCB. All multiples were based on closing stock
prices on April 23, 1997. This analysis indicated average multiples for the
Selected Companies of latest twelve months' EPS, estimated calendar 1997 EPS,
and estimated calendar 1998 EPS of 13.9x, 12.8x and 11.0x, respectively. CSFB
then calculated an imputed per-share equity reference range for SCB by applying
these multiples to corresponding financial data of SCB, which indicated an
implied equity reference range for SCB of approximately $8.91 to $9.09 per
share.
REGRESSION ANALYSIS. CSFB undertook an analysis to determine the price to
book multiple at which SCB might trade on a stand-alone basis. A regression
analysis of publicly available data on comparable bank holding companies
indicated a high degree of correlation between return on equity and price to
book value. Based on SCB's first quarter return on equity of ten percent, this
analysis yielded a price to book at which the SCB might trade of 1.42x and an
implied value of $9.47 per share for SCB.
DISCOUNTED CASH FLOW ANALYSIS. CSFB estimated the present value of the
future streams of after-tax free cash flows that SCB could produce on a
stand-alone basis through fiscal year 2001 based on a six percent Tier-1
leverage ratio, both before and after giving effect to, among other things,
potential cost savings that could be realized in a sale to an in-market
acquiror. CSFB utilized SCB management projections (the "Management Plan") as
well as an alternative set of projections (the "Adjusted Plan"), which were
identical to the Management Plan through 1998, but assumed seven percent annual
earnings growth thereafter, after giving effect to certain planned earnings
benefits in 1999 (including funds invested in the termination of an unfavorable
swap, a reduction in computer expenses and the reinvestment of funds invested in
low yielding securities). The range of estimated terminal values was calculated
by applying multiples ranging from 12.0x to 14.0x to the projected 2001 net
income of SCB. The free cash flow streams and estimated terminal values were
then discounted to present values using discount rates ranging from 15 percent
to 20 percent. This analysis indicated an implied equity reference range for SCB
of approximately $9.66 to $12.36 per share based on the Management Plan and
$8.04 and $10.10 per share based on the Adjusted Plan, without giving effect to
certain cost savings anticipated by the management of
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Western to result from the Merger. Additionally, CSFB noted that the discounted
value of the cost savings of 35 percent of SCB's projected expense base that
should theoretically be achievable by an in-market acquiror of SCB amounted to
$3.60 per share, based on a 15 percent discount rate and a three percent
perpetual dividend growth rate.
SELECTED TRANSACTION ANALYSIS. Using publicly available information, CSFB
analyzed the purchase prices and implied transaction multiples paid in the
following selected transactions in the banking industry (acquiror/target):
Bancorp Hawaii/CU Bancorp, Commerce Security/Eldorado Bancorp, Western/CCB,
Westamerica/ValliCorp, Glendale Federal/Transworld, City National Bank/Riverside
National Bank, Banc SinoPac/Far East National, City National Bank/Ventura
National Bank and Western/Western Bank (collectively, the "Selected
Transactions"). With respect to the Selected Transactions analyzed, CSFB focused
primarily on the Bancorp Hawaii/CU Bancorp and the Commerce Security/Eldorado
Bancorp transactions, which transactions CSFB considered to be the most similar
to the Merger. All multiples were based on information available at the time of
announcement of the transaction. This analysis indicated average multiples for
the Selected Transactions of latest twelve months' EPS, estimated 1997 EPS and
most recently reported book value and tangible book value of 18.3x (21.6x for
the Bancorp Hawaii/CU Bancorp transaction and 16.2x for the Commerce
Security/Eldorado transaction), 14.7x (15.8x for the Bancorp Hawaii/CU Bancorp
transaction and 14.6x for the Commerce Security/Eldorado transaction), 1.95x
(1.98x for the Bancorp Hawaii/CU Bancorp transaction and 1.91x for the Commerce
Security/Eldorado Bancorp transaction), and 2.04x (2.12x for the Bancorp
Hawaii/CU Bancorp transaction and 2.12x for the Commerce Security/Eldorado
transaction), respectively. In addition, CSFB reviewed the premiums paid in the
Selected Transactions based on the closing stock prices of the acquired
companies one month prior to public announcement of the transaction, which
indicated an average premium of 29 percent for the Selected Transactions (25
percent for the Bancorp Hawaii/CU Bancorp transaction and nine percent for the
Commerce Security/Eldorado transaction). CSFB then calculated an imputed per
share equity reference range for SCB by applying the range of multiples derived
for the Selected Transaction to corresponding financial data of SCB, which
indicated an implied equity reference range for SCB of approximately $10.41 to
$13.65 per share.
SELECTED COMPANIES CONTROL PREMIUM ANALYSIS. CSFB also compared the
multiples of certain financial, operating and stock market data of SCB implied
by the Conversion Number to multiples of corresponding data of the Selected
Companies, after applying a hypothetical equity control premium of 30 percent.
EPS estimates for the Selected Companies were based on estimates of selected
investment banking firms as compiled by First Call and EPS estimates for SCB
were based on internal estimates of the management of SCB. All multiples were
based on closing stock prices on April 21, 1997. This analysis indicated average
multiples for the Selected Companies of latest twelve months' EPS, estimated
calendar 1997 EPS, estimated calendar 1998 EPS and mostly reported recently
reported book value and tangible book value of 18.1x, 16.7x, 14.3x, 2.35x and
2.54x, respectively. CSFB then calculated an imputed per-share equity reference
range for SCB by applying these multiples to corresponding financial data of
SCB, which indicated an implied equity reference range for SCB of approximately
$11.58 to $15.90 per share.
CONTRIBUTION ANALYSIS. CSFB analyzed the relative contributions of SCB and
Western, to, among other things, the estimated net income of the pro forma
combined company for fiscal 1997 and 1998. This analysis indicated that SCB
would contribute approximately 37 percent and 32 percent of the net income of
the combined company in fiscal 1997 and 1998, respectively. Based on the
Conversion Number, current holders of SCB Common Stock and Western Common Stock
would own approximately 39 percent and 61 percent at the upper end of the
collar, and 32 percent and 68 percent at the lower end of the collar,
respectively, of the Surviving Corporation upon consummation of the Merger.
PRO FORMA MERGER ANALYSIS. CSFB analyzed the potential pro forma effect of
the Merger on SCB's EPS during the calendar years 1997 and 1998 and on SCB's
tangible book value. This analysis indicated that the proposed Merger could be
accretive to SCB's EPS in each of the years analyzed and dilutive to SCB's
tangible book value per share. CSFB also analyzed the potential pro forma effect
of the proposed Merger on Western's EPS during the calendar years 1997 and 1998
relative to Western on a stand-alone basis. This
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analysis indicated that the proposed Merger could be accretive to Western's EPS
in calendar year 1997 and calendar year 1998. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
MISCELLANEOUS. CSFB also performed certain other analyses in connection
with its opinions, including a summary of certain operating data and financial
ratios and, performed for Western, an analysis of recent acquisition
transactions by Western, an overview of Western management and an analysis of
the trading history of Western Common Stock. Pursuant to the terms of CSFB's
engagement, SCB has agreed to pay CSFB for its services in connection with the
proposed Merger an aggregate financial advisory fee of $1.6 million, which will
be payable upon consummation of the proposed Merger, plus expenses which will be
paid as incurred. SCB also has agreed to indemnify CSFB and certain related
persons and entities against certain liabilities, including liabilities under
the federal securities laws, arising out of CSFB's engagement. CSFB has in the
past provided financial services to SCB unrelated to the proposed Merger, for
which services CSFB has received compensation.
In the ordinary course of its business, CSFB and its affiliates may actively
trade the equity securities of both SCB and Western for their own accounts and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
CSFB has consented to the inclusion of its fairness opinion and the
reference to such opinion and to CSFB in the Joint Proxy Statement-Prospectus.
In giving such consent, CSFB does not admit that it comes within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations thereunder, nor did CSFB admit that it is an expert with
respect to any part of the Joint Proxy Statement-Prospectus within the meaning
of the term "expert" as used in the Securities Act and the rules and regulations
thereunder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain material Federal income tax
consequences of the Merger applicable to holders of SCB Common Stock who,
pursuant to the Merger, exchange their SCB Common Stock solely for Western
Common Stock and, in lieu of fractional shares, if any, cash. The discussion
does not address all aspects of Federal income taxation that may be important to
particular taxpayers in light of their personal investment circumstances or to
taxpayers subject to special treatment under the Federal income tax laws
(including, without limitation, certain financial institutions, insurance
companies, foreign persons, tax-exempt entities, dealers in securities, persons
who hold SCB Common Stock as part of a straddle or hedging or conversion
transaction, and holders who acquired their SCB Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation). The discussion
also assumes that the SCB common stock will be held as a capital asset at the
Effective Time. Further, the following does not discuss any aspects of state,
local or foreign taxation. This discussion is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to change
(possibly with retroactive effect) by legislation, administrative action or
judicial decision. No ruling has been or will be requested from the Internal
Revenue Service on any tax matter relating to the Merger.
Sullivan & Cromwell, special counsel to Western, and Dewey Ballantine,
counsel to SCB, have advised Western and SCB, respectively, that in their
opinion the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and that Western and SCB will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. The following
discussion assumes that the Merger will be treated in accordance with those
opinions. Accordingly, for U.S. Federal income tax purposes:
(a) no income, gain or loss will be recognized by any SCB Shareholder
upon the exchange of shares of SCB Common Stock solely for Western Common
Stock pursuant to the Merger, except as discussed below with respect to cash
received in lieu of a fractional share interest in Western Common Stock;
(b) the adjusted tax basis of the Western Common Stock received by each
SCB Shareholder pursuant to the Merger (less any basis allocable to
fractional share interests) will be equal to the adjusted tax basis of the
shares of SCB Common Stock surrendered in exchange therefor; and
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(c) the holding period of the Western Common Stock received by each SCB
Shareholder in the Merger (including any fractional share interest) will
include the period during which the shares of SCB Common Stock surrendered
in exchange therefor were held.
An SCB Shareholder who receives cash in the Merger in lieu of a fractional
share interest in Western Common Stock generally will be treated for Federal
income tax purposes as having received the fractional share interest and then
having received cash in exchange for such interest. The SCB Shareholder will
recognize gain or loss as of the Effective Time equal to the difference between
the amount of cash received and the portion of the SCB Shareholder's adjusted
tax basis in the shares of SCB Common Stock allocable to such fractional share
interest. Any gain or loss generally will be capital gain or loss if the SCB
Shareholder holds the SCB Common Stock as a capital asset at the Effective Time
and will be long-term capital gain or loss if the holding period (determined as
described above) for the fractional share interest deemed to be received and
then exchanged is more than one year. Under recently enacted legislation, in the
case of an individual, any such long-term capital gain will generally be subject
to a maximum tax rate of 28% if the holding period for the fractional share
interest is greater than one year. The maximum tax rate is reduced to 20% in the
case of an individual whose holding period is in excess of 18 months.
SCB Shareholders and Western Shareholders who exercise their Dissenters'
Rights and who receive cash in exchange for their respective shares will be
treated as having received such payment in exchange for such shares. In general,
if such shares are held as a capital asset at the Effective Time, the holder
will recognize capital gain or loss measured by the difference between the
amount of cash received and the holder's adjusted tax basis for the shares. If,
however, the holder owns, either actually or constructively, any SCB Common
Stock that is exchanged in the Merger for Western Common Stock or any Western
Common Stock, the payment for dissenting shares to such holder could, in certain
circumstances, be treated as dividend income. In very general terms, under the
constructive ownership rules of the Code, a holder may be considered to own
stock that is owned, and in some cases constructively owned, by certain related
individuals or entities, as well as stock that the holder (or related
individuals or entities) has the right to acquire by exercising an option or
converting a convertible security. Each holder who contemplates exercising
Dissenters' Rights should consult such holder's own tax advisor as to the tax
consequences of the receipt of such payments including, without limitation, the
possibility that any payment to such holder may be treated as dividend income.
A holder who receives cash pursuant to the Merger (as a result of exercising
Dissenters' Rights or in lieu of a fractional share interest in Western Common
Stock) may be subject to information reporting and "backup withholding" at a
rate of 31 percent if the holder fails to provide its taxpayer identification
number on IRS Form W-9, fails to establish an exemption from backup withholding,
or is otherwise subject to backup withholding. Any amounts withheld under the
backup withholding rules may be allowed as a refund or a credit against such
holder's U.S. Federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
Consummation of the Merger is conditioned, among other things, on receipt by
Western of an opinion of Sullivan & Cromwell and receipt by SCB of an opinion of
Dewey Ballantine, each dated the Effective Date, to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, and (ii) Western and SCB will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. An opinion of counsel is not
binding on the Internal Revenue Service, and there can be no assurance that the
Internal Revenue Service will not take a position contrary to one or more of the
positions reflected herein or that the positions herein will be upheld by the
courts if challenged by the Internal Revenue Service. The opinions of Sullivan &
Cromwell and Dewey Ballantine described herein are or will be based, among other
things, on representations contained in certificates of Western, SCB and others.
The condition that Sullivan & Cromwell and Dewey Ballantine issue the
above-described opinions is a principal term of the Merger, and as such the
condition may not be waived under California law by either Western or SCB after
their shareholders have approved the principal terms of the Merger. See "The
Merger Agreement--Waiver and Amendment."
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BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING ON THE
PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF WESTERN COMMON STOCK AND SCB COMMON
STOCK AND OTHER FACTORS AND BECAUSE THE SUMMARY CONTAINED HEREIN IS NOT INTENDED
TO BE A COMPREHENSIVE DISCUSSION OF ALL POTENTIALLY RELEVANT TAX CONSEQUENCES,
EACH SUCH HOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER (INCLUDING THE
APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS).
REGULATORY APPROVALS
FEDERAL RESERVE BOARD APPROVAL
The Merger is subject to prior approval by the Federal Reserve Board under
Section 3 of the BHCA, which requires that the Federal Reserve Board take into
consideration, among other things, competition, the financial and managerial
resources and future prospects of the holding companies and banks concerned and
the convenience and needs of the communities to be served. The BHCA prohibits
the Federal Reserve Board from approving the Merger if (a) it would result in a
monopoly or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States; or (b) its effect in any section of the country may be
substantially to lessen competition or tend to create a monopoly, or if it would
in any other manner be in restraint of trade, unless the Federal Reserve Board
finds that the anti-competitive effects of the Merger are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. The Federal Reserve Board
has the authority to deny an application if it concludes that the combined
organization would have an inadequate capital structure, taking into account,
among other factors, the nature of the business and operations and plans for
expansion. Furthermore, the Federal Reserve Board must also assess the records
of the depository institution subsidiaries of the Companies under the Community
Reinvestment Act of 1977, as amended (the "CRA"). The CRA requires that the
Federal Reserve Board assess, when evaluating an application, each depository
institution's record of meeting the credit needs of its local communities,
including low- and moderate-income neighborhoods, consistent with safe and sound
operation and take such record into account when evaluating certain regulatory
applications. NBSC, Western Bank and SC Bank have CRA ratings of "outstanding,"
"satisfactory" and "satisfactory," respectively.
Under the BHCA, the Merger may not be consummated until the fifteenth day
following the date of Federal Reserve Board approval. If the United States
Department of Justice commenced an action challenging the Merger on antitrust
grounds during such fifteen-day period, commencement of such action would stay
the effectiveness of the Federal Reserve Board approval, unless a court
specifically orders otherwise.
The Companies submitted an application seeking approval of the Merger and
related matters to the Federal Reserve Board on June 18, 1997. Such approval was
obtained on July 29, 1997.
CALIFORNIA COMMISSIONER OF FINANCIAL INSTITUTIONS' APPROVAL
Since SC Bank is a state-chartered bank, Western must obtain the approval of
the State Commissioner pursuant to Section 700 ET SEQ. of the California
Financial Code. Western submitted an application seeking approval of the Merger
to the State Commissioner on July 3, 1997. Such approval was obtained on July
29, 1997.
The Companies are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
above. Should any such approval or action be required, it is currently
contemplated that such approval or action would be sought. The Merger cannot
proceed in the absence of the required regulatory approvals.
RESALE OF WESTERN COMMON STOCK
All shares of Western Common Stock received by SCB Shareholders in the
Merger will be freely transferrable, except that shares of Western Common Stock
received by such shareholders who are
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deemed to be "affiliates" (as defined for purposes of Rule 145 under the
Securities Act) of SCB as of the date of the SCB Special Meeting may be resold
by them only pursuant to an effective registration statement under the
Securities Act covering resales of such shares or in transactions permitted by
the resale provisions of Rule 145 of the Securities Act (or pursuant to Rule 144
under the Securities Act in the case of such persons who become affiliates of
Western) or as otherwise permitted under the Securities Act. Persons who may be
deemed to be affiliates of the Companies generally include individuals or
entities that control, are controlled by, or are under common control with, such
entities and may include certain officers and directors of such entities as well
as principal shareholders of such entities.
SCB has agreed in the Merger Agreement to use its reasonable efforts to
obtain a written agreement from each person who is identified as a possible
"affiliate" (as defined for purposes of Rule 145 under the Securities Act) of
SCB providing that such person will not sell, pledge, transfer or otherwise
dispose of any shares of Western Common Stock to be received by such person in
the Merger, except in compliance with the applicable provisions of the
Securities Act and until such time as financial results covering at least 30
days of combined operations of Western and SCB have been published. In addition,
each person who is an affiliate of Western or will become an affiliate of
Western on the Effective Date will be required to execute a standstill letter
with respect to his or her ability to sell shares of Western Common Stock
acquired in the Merger following consummation of the Merger. See "The Merger
Agreement--Exchange of Stock Certificates."
It is a condition to the consummation of the Merger that the Merger be
accounted for as a pooling-of-interests for accounting and financial reporting
purposes. Certain Commission guidelines indicate that the pooling-of-interests
method generally will not be challenged on the basis of selling of shares by
affiliates of the acquiring or the acquired company if such affiliates do not
dispose of any shares (other than a "DE MINIMIS" number of shares) of the stock
they received in connection with the Merger during the period beginning 30 days
before the Merger and ending when financial results covering at least 30 days of
post-merger operations of the combined enterprise have been published. See "The
Merger--Accounting Treatment."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL
In considering the recommendations of the Boards, the Shareholders should be
aware that certain members of management and the Boards of each of the Companies
have certain interests in the transactions contemplated by the Merger Agreement
that are in addition to the interests of Shareholders generally and which may
create potential conflicts of interest. These interests include, among others,
provisions in the Merger Agreement relating to the indemnification of SCB and SC
Bank officers and directors; directors' and officers' liability insurance; the
appointment of four members of the SCB Board to the Western Board immediately
prior to the Effective Time; certain employment agreements and employee benefits
discussed below; and the beneficial ownership by John M. Eggemeyer, a director
of Western, of 80 percent of BPI which provided and will be compensated for
financial advisory and consulting services in connection with the Merger.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that from and after the Effective Time,
Western will indemnify each director and officer of SCB, determined as of the
Effective Time, against certain liabilities arising out of matters existing or
occurring at or prior to the Effective Time to the extent to which such
indemnified parties were entitled under California law, SCB's Articles of
Incorporation and SCB's Bylaws in effect on April 29, 1997. Western will also
advance expenses as incurred to the extent permitted under California law, SCB's
Articles of Incorporation and SCB's Bylaws. In addition, for a period of six
years after the Effective Time, Western will maintain in effect all rights to
indemnification or exculpation existing as of April 29, 1997 in favor of
directors, officers, employees and agents of SCB as provided in SCB's Articles
of
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Incorporation, SCB's Bylaws, indemnification agreements or otherwise in effect
on April 29, 1997, with respect to matters occurring prior to the Effective
Time; provided that pursuant to the Merger Agreement Western is not obligated to
expend in excess of 200 percent of the amount SCB expends as of April 29, 1997
for annual premiums to provide insurance coverage. See "The Merger
Agreement--Conditions."
APPOINTMENT OF DIRECTORS
Pursuant to the Merger Agreement, Harold A. Beisswenger, Larry D. Hartwig,
William C. Greenbeck and Donald E. Wood, each currently a director of SCB, will
be appointed a member of the Western Board upon consummation of the Merger.
Immediately prior to the Effective Time, the Western Board will adopt
resolutions fixing the exact number of directors at 14 and appointing Messrs.
Beisswenger, Hartwig, William C. Greenbeck and Donald E. Wood to fill the
vacancies created thereby.
The following schedule of director's fees was approved by the Western Board
for 1997:
<TABLE>
<CAPTION>
<S> <C>
Annual Retainer.............................. $ 5,000
Meeting Fee.................................. $ 750
Special Meeting Fee.......................... $ 300
Committee Meeting Fee........................ $ 300
</TABLE>
EMPLOYMENT AGREEMENTS
Western will honor the Employment Agreement of Larry D. Hartwig and the
Amended and Restated Employment Security Agreements of David A. McCoy, Bruce W.
Roat, Ann E. McPartlin, and Michael V. Cummings in accordance with their terms.
In January 1997, SCB amended certain non-material aspects of its Employment
Agreement with Larry D. Hartwig. The agreement provides for a minimum base
salary of $210,000 per year with increases in base salary as determined by the
Board of Directors of SCB. Mr. Hartwig's base salary currently is $228,800.
Pursuant to the Employment Agreement, Mr. Hartwig is entitled to participate in
certain welfare benefits available to employees and executive officers of SCB,
including vacation, health and life insurance, and incentive and deferred
compensation benefits. Pursuant to the agreement, SCB also provides Mr. Hartwig
with term life insurance in the face amount of $400,000 during the term of the
agreement.
If SCB terminates Mr. Hartwig's employment without cause, Mr. Hartwig shall
be entitled to (i) 18 months' base salary, (ii) full vesting of his stock
options and (iii) continuation of insurance benefits for 12 months. This
agreement is binding on and inures to the benefit of the Surviving Corporation
after the Merger.
If Mr. Hartwig's employment is terminated following, or in contemplation of,
a change in control, and such termination is a Covered Termination (as defined
herein), Mr. Hartwig shall receive a payment equal to the sum of (x) two and
one-half times the highest annual base salary paid to him within the three years
preceding the termination and (y) the amount of his target bonus under the
Employee's Senior Management Incentive Compensation Program (the "Target Bonus")
(subject to proration) in the year that such covered termination occurs. SCB
must also continue to maintain Mr. Hartwig's benefits, including life insurance
and health and disability benefits, for a 30-month period following the
termination. A "Covered Termination" is (i) termination of employment by SCB
other than for "Cause," or the disability of Mr. Hartwig or (ii) termination for
"Good Reason." In general, "Good Reason" is defined to include (i) a reduction
in Mr. Hartwig's current level of annual base salary following a change in
control; or (ii) any reduction in the employee benefit coverage provided to Mr.
Hartwig; or (iii) a material diminution in Mr. Hartwig's title, position,
reporting relationship, responsibilities, authority or offices; or (iv) certain
relocations of Mr. Hartwig's principal business office. A change in control will
be deemed to have occurred under Mr. Hartwig's agreement at the Effective Time,
and Mr. Hartwig will be entitled to receive the
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above benefits if, following, or in contemplation of the change of control Mr.
Hartwig's employment is terminated under circumstances that constitute a covered
termination.
In January 1997, SCB amended certain non-material aspects of the Amended and
Restated Employment Security Agreements with David A. McCoy, Bruce W. Roat, Ann
E. McPartlin, and Michael V. Cummings. The agreements provide Messrs. McCoy and
Roat, Ms. McPartlin and Mr. Cummings with base salaries as determined by the
Board of Directors, and participation in certain welfare benefits available to
employees and executive officers of SCB, including vacation, health and life
insurance, and incentive and deferred compensation benefits. The Executives'
current base salaries are $158,600, $145,600, $114,400 and $145,600,
respectively. It is anticipated that the employment of all of Messrs. Hartwig,
McCoy, Roat, Cummings and McPartlin will be terminated following the Merger
entitling them to certain benefits pursuant to their respective employment
agreements.
The agreements provide each Executive with certain termination benefits in
the event that any of the Executives' employment is terminated following, or in
contemplation of, a "change in control."
A change in control will be deemed to have occurred under each of the above
agreements at the Effective Time, and the Executive will be entitled to receive
the following benefits if, following, or in contemplation of, a change in
control, the Executive is terminated under circumstances that constitute a
covered termination. The Executive shall receive, within 15 business days
following such covered termination, payment equal to one and one-half times the
highest annual base salary paid to the Executive within the three years
preceding termination. The Executive shall also receive payment equal to the
amount of such Executive's Target Bonus (subject to proration) in the year that
such covered termination takes place. Any stock options granted to the Executive
under any SCB incentive plan shall become fully vested and immediately
exercisable. SCB must continue to maintain for 18 months, in full force and
effect, any welfare benefits, including life insurance coverage and health and
disability benefits which were provided to the Executive at the time of the
termination.
If any of the payments provided for in any of the agreements for Mr. Hartwig
or the Executives, together with any other payments or benefits which Mr.
Hartwig or the Executives have the right to receive from SCB, would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code, the payments
pursuant to any such agreement would be reduced so that the present value of the
total amount received by Mr. Hartwig or the Executives that would constitute a
"parachute payment" will be one dollar ($1.00) less than three (3) times Mr.
Hartwig's or such Executive's salary and so that no portion of the payments or
benefits received by Mr. Hartwig or such Executive would be subject to the
excise tax imposed by Section 4999 of the Code.
STOCK OPTIONS
At the Effective Time, all rights with respect to SCB Common Stock pursuant
to SCB stock options outstanding at the Effective Time, whether or not then
exercisable, will accelerate and be converted into and become rights to receive,
for each share otherwise issuable upon exercise thereof, a number of shares of
Western Common Stock equal to the quotient obtained by dividing the Spread by
the Average Price. See "The Merger Agreement--Conversion of SCB Common Stock."
As a result of the Merger, all unvested options under the SC Bancorp 1989
Stock Option Plan will vest at the Effective Time. All outstanding options were
granted pursuant to the SC Bancorp 1989 Stock Option Plan.
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As of the SCB Record Date, executive officers of SCB held the following
unvested options to purchase SCB Common Stock which will vest at the Effective
Time as a result of the Merger:
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF UNVESTED THE SCB RECORD DATE
OPTIONS WHICH OF OPTIONS WHICH
BECOME EXERCISABLE VEST AT THE
AT THE EFFECTIVE EFFECTIVE
NAME TIME TIME ($)(1)
- --------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Michael V. Cummings................................ 22,000 $ 171,871
Larry D. Hartwig................................... 44,000 334,000
David A. McCoy..................................... 18,000 137,247
Ann E. McPartlin................................... 15,000 117,372
Bruce W. Roat...................................... 23,000 182,125
</TABLE>
- ------------------------
(1) Value is based on the closing sale price for SCB Common Stock on the AMEX on
the SCB Record Date, less the weighted average per share exercise price. For
a recent quote of the closing sale price of SCB Common Stock, see
"Summary--Markets and Market Prices."
OTHER BENEFIT PLANS AND AGREEMENTS
A change in control will be deemed to have occurred under the Retention
Incentive Program at the Effective Time. SCB is unable to determine the cost, if
any, of the benefits payable under such plan as a result of the change in
control. As a result of the Merger, at the Effective Time, the vesting of all
unvested shares of SCB Common Stock held by SCB's 401(k) Plan, including 359
shares held on Mr. Roat's behalf, will be accelerated. As of the SCB Record
Date, the value of such shares was $4,936 based on the closing sale price for
SCB Common Stock on the AMEX on such date. Mr. Hartwig and the Executives also
participate in certain SCB employee benefit plans that are generally applicable
to all SCB employees. Western has agreed to assume and honor in accordance with
their terms all accrued benefits and other obligations of SCB under such plans.
See "The Merger Agreement--Certain Covenants--Employee Benefits."
OWNERSHIP OF BPI
BPI, an entity 80 percent of which is beneficially owned by John M.
Eggemeyer, serves as a financial advisor to Western under an engagement letter
dated May 17, 1995. In that capacity, it is anticipated that BPI will be paid by
Western fees of approximately $1,812,000 in connection with the acquisition of
SCB by Western. See "The Special Meetings--Security Ownership of Certain
Beneficial Owners and Management--WESTERN."
RELATED TRANSACTIONS
Other than the Merger Agreement, the Stock Option Agreement, the Shareholder
Agreements, Employment Agreements and the other transactions contemplated by and
described in this Joint Proxy Statement-Prospectus, the Companies do not know of
any past, present or proposed material contracts, arrangements or understandings
between Western or its affiliates on the one hand and SCB and its affiliates on
the other hand.
DISSENTERS' RIGHTS
In connection with the Merger, the Shareholders may be entitled to
dissenters' rights under Chapter 13 of the CGCL ("Dissenters' Rights"), the text
of which is attached hereto as Appendix D. The description of Dissenters' Rights
contained in this Joint Proxy Statement-Prospectus is qualified in its entirety
by reference to Chapter 13 of the CGCL.
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If no instructions are indicated on proxies received by the Companies, such
proxies will be voted for the proposal to approve the principal terms of the
Merger at the relevant Special Meeting. Those Shareholders who return their
proxies without instructions, resulting in a vote for the approval of the
principal terms of the Merger, will not be entitled to Dissenters' Rights.
In addition, the Shareholders will not have Dissenters' Rights unless
demands for purchase in cash of such shares at their fair market value as of
April 28, 1997 pursuant to Section 1301 of the CGCL (a "Demand") are made with
respect to five percent or more of the outstanding shares of Western Common
Stock or SCB Common Stock, as the case may be (before giving effect to the
Merger). Such Demands must be received by the Companies, or their respective
transfer agents not later than the date of the respective Special Meeting. In
the event that Demands are made with respect to five percent or more of the
outstanding shares of Western Common Stock or SCB Common Stock, as the case may
be, on or before the date of the respective Special Meeting, the Shareholders,
who made Demands will be entitled to Dissenters' Rights, provided that such
Dissenters' Rights are perfected pursuant to Chapter 13 of the CGCL. However, it
is a condition to Western's obligation to consummate the Merger that Dissenters'
Rights have been exercised by no more than five percent of the outstanding
shares of Western Common Stock or SCB Common Stock, as the case may be.
Consequently, if Demands are made by holders of more than five percent of the
Western Common Stock or SCB Common Stock, as the case may be, giving rise to
Dissenters' Rights for the Shareholders who have perfected such Dissenters'
Rights, the Merger will not be consummated unless Western waives the Dissenters'
Rights Condition.
In the event that (i) the Merger is approved by the Shareholders, (ii)
Demands are made by holders of five percent or more of the Western Common Stock
or SCB Common Stock, as the case may be, and (iii) Western elects nonetheless to
proceed with the Merger, a holder of Western Common Stock or SCB Common Stock,
as the case may be, who objects to the Merger (a "Dissenting Shareholder") will
be entitled to payment in cash of the fair market value as of April 28, 1997 of
their shares ("Dissenting Shares"); provided that (a) such shares were
outstanding immediately prior to the date for the determination of shareholders
entitled to vote on the Merger; (b) the Dissenting Shareholder voted his or her
shares against the approval of the principal terms of the Merger; (c) the
Dissenting Shareholder made a Demand; and (d) the Dissenting Shareholder has
submitted for endorsement certificates representing his or her Dissenting
Shares, in accordance with Section 1302 of the CGCL.
The Demand must (a) be a written demand to purchase the Dissenting Shares
and make payment to the Dissenting Shareholder in cash of their fair market
value as of April 28, 1997; (b) be received by the Company on or before the date
of the respective Special Meeting; (c) state the number and class of the shares
held of record by the Dissenting Shareholder which the Dissenting Shareholder
demands the Company to purchase; and (d) contain a statement of what the
Dissenting Shareholder claims to be the fair market value of his or her
Dissenting Shares as of April 28, 1997. Such statement of the fair market value
constitutes an offer by the Dissenting Shareholder to sell his or her Dissenting
Shares at such price. A Dissenting Shareholder who has made such a demand for
payment may not withdraw such Demand unless the Company consents thereto. A
proxy or vote against the approval of the principal terms of the Merger
Agreement does not in itself constitute a Demand.
The Dissenting Shareholder must submit the certificates representing the
Dissenting Shares for endorsement as Dissenting Shares to the Company at its
principal office or at the office of any transfer agent of the Company within 30
days after the date on which notice of approval of the Merger by the
Shareholders, was mailed to such Dissenting Shareholder.
If any Shareholder may have Dissenters' Rights, the Company will mail to
each such shareholder a notice of the approval of the Merger by the Shareholders
within ten days after the date of such approval, accompanied by (a) a copy of
Sections 1300, 1301, 1302, 1303 and 1304 of Chapter 13 of the CGCL; (b) a
statement of the price determined by the Company to represent the fair market
value as of April 28, 1997 of the Dissenting Shares; and (c) a brief description
of the procedure to be followed if the shareholder
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desires to exercise his or her Dissenters' Rights under such sections. The
statement of price constitutes an offer by the Company to purchase such
Dissenting Shares.
If the Company denies that shares submitted to it as Dissenting Shares are
Dissenting Shares, or if the Company and a Dissenting Shareholder fail to agree
on the fair market value of the Dissenting Shares, either such Dissenting
Shareholder or the Company may file a complaint in the Superior Court of the
proper county in California requesting that the court determine such issue. Such
complaint must be filed within six months after the date on which notice of the
approval of the Merger is mailed to the Dissenting Shareholders.
On trial of the action, the court will first determine if the shares are
Dissenting Shares, and if so determined, the court will either determine the
fair market value or appoint one or more impartial appraisers to do so. If both
the Company and the Dissenting Shareholder fail to file a complaint within six
months after the date on which notice of the approval of the Merger was mailed
to the Dissenting Shareholders, such Dissenting Shareholder will lose his or her
Dissenters' Rights. In addition, if the Dissenting Shareholder transfers such
Dissenting Shares prior to their submission for the required endorsement, such
shares will lose their status as Dissenting Shares.
Any demands, notices, certificates or other documents delivered to SCB prior
to the Merger may be sent to William C. Greenbeck, Secretary, SC Bancorp, 3800
La Palma Avenue, Anaheim, California 92817. Thereafter, they may be sent to
Arnold C. Hahn, Secretary, Western Bancorp, 4100 Newport Place, Suite 900,
Newport Beach, California 92660.
Any demands, notices, certificates or other documents delivered to Western
may be sent to Arnold C. Hahn, Secretary, Western Bancorp, 4100 Newport Place,
Suite 900, Newport Beach, California 92660.
FAILURE TO TAKE ANY NECESSARY STEP WILL RESULT IN A TERMINATION OR WAIVER OF
THE RIGHTS OF THE HOLDER UNDER CHAPTER 13 OF THE CGCL. A PERSON HAVING A
BENEFICIAL INTEREST IN WESTERN COMMON STOCK OR SCB COMMON STOCK THAT IS HELD OF
RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A TRUSTEE OR NOMINEE, MUST ACT
PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE REQUIREMENTS OF CHAPTER 13 OF
THE CGCL IN A TIMELY MANNER IF SUCH PERSON ELECTS TO DEMAND PAYMENT OF THE FAIR
MARKET VALUE OF SUCH SHARES.
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, it is currently expected
that the Merger will be accounted for as a pooling-of-interests in accordance
with generally accepted accounting principles, and confirmation by the
independent accountants for each of the Companies of the ability to use such
accounting treatment is one of the conditions to the consummation of the Merger.
See "The Merger Agreement--Conditions." Under this method of accounting, the
previously recorded assets and liabilities of Western and SCB would be carried
forward to the Surviving Corporation at their recorded amounts; income and
expenses of the Surviving Corporation would include income and expenses of the
Companies for the entire fiscal year in which the Merger occurs; and the
reported results of the separate corporations for prior periods would be
combined and restated as the results of the Surviving Corporation.
In the event that the Pooling Condition is not satisfied the Companies will
either terminate the Merger Agreement for failure of the Pooling Condition or
waive such condition and resolicit the vote of the Shareholders to approve the
principal terms of the Merger with the Merger being accounted for using the
purchase method of accounting.
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THE MERGER AGREEMENT
SET FORTH BELOW IS A DESCRIPTION OF CERTAIN OF THE TERMS AND CONDITIONS OF
THE MERGER AGREEMENT AND RELATED MATTERS. THIS SUMMARY OF THE TERMS AND
CONDITIONS OF THE MERGER AGREEMENT DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERGER AGREEMENT
AS SET FORTH IN APPENDIX A HERETO, AND THE TEXT THEREOF IS INCORPORATED BY
REFERENCE HEREIN.
THE MERGER
The Merger Agreement was entered into by and between the Companies on April
29, 1997. Pursuant to the Merger Agreement, at the Effective Time SCB will merge
with and into Western, and Western will be the Surviving Corporation in the
Merger. The separate corporate existence of SCB will then cease.
CONVERSION OF SCB COMMON STOCK
Under the terms of the Merger Agreement, each share of SCB Common Stock
issued and outstanding at the Effective Time (other than (a) shares which have
not been voted in favor of the principal terms of the Merger and with respect to
which Dissenters' Rights shall have been perfected in accordance with the CGCL
and (b) shares held directly or indirectly by Western, other than shares held in
a fiduciary capacity or in satisfaction of a debt previously contracted) will be
converted into the right to receive 0.4556 shares of Western Common Stock (the
Conversion Number), which is that number of shares of Western Common Stock equal
to the quotient obtained by dividing $14.25 by the Average Price. As used in the
Merger Agreement, the "Average Price" means the volume weighted average sales
price per share of Western Common Stock (as reported by the Nasdaq National
Market) for each of the twenty consecutive Trading Days immediately preceding
the date which is the later to occur of approval by (i) the Federal Reserve
Board pursuant to Section 3 of the BHCA, and (ii) the State Commissioner
pursuant to Section 700 et seq. of the California Financial Code; PROVIDED,
HOWEVER, that the Average Price so designated will be no less than $23.375 and
no greater than $31.875, (as adjusted after the Reverse Stock Split). The
determination period for the Average Price was the 20 Trading Days prior to July
29, 1997, and the Average Price was $31.28. If Western effects a stock dividend,
reclassification, recapitalization, stock split, combination, exchange of shares
or similar transaction subsequent to April 29, 1997 but prior to the Effective
Time, the Conversion Number described above shall be appropriately adjusted.
At the Effective Time, each SCB Option outstanding immediately prior to the
Effective Time shall be converted automatically into the right to receive, for
each share otherwise issuable upon exercise thereof, a number of shares of
Western Common Stock equal to the quotient obtained by dividing the Spread by
$31.28. The "Spread" shall equal the difference, if positive, obtained by
subtracting the exercise price of the Option from $14.25. For purposes of
determining the "volume weighted average," the aggregate of the Daily Sales for
each of the twenty consecutive Trading Days used in the determination of Average
Price shall be divided by the aggregate number of shares traded during such
twenty (20) consecutive Trading Days.
See "The Special Meetings--Matters To Be Considered At the Special
Meetings--SCB" for information concerning the number of shares of Western to be
outstanding upon consummation of the Merger and related matters.
EFFECTIVE TIME
The Merger will become effective upon the filing of an agreement of merger
with the California Secretary of State in accordance with the provisions of the
CGCL. At the Effective Time, SCB shall be merged with and into Western. SCB's
separate corporate existence will thereupon cease.
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EXCHANGE OF STOCK CERTIFICATES
As of the Effective Time, Western will deposit, or will cause to be
deposited, with a bank or trust company selected by Western (which may be a
subsidiary of Western) and reasonably acceptable to SCB (the "Exchange Agent"),
certificates representing the shares of Western Common Stock and cash in lieu of
fractional shares to be exchanged pursuant to the Merger Agreement for SCB
Common Stock (the "Merger Consideration").
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each SCB Shareholder who holds of record immediately prior to
the Effective Time shares of SCB Common Stock (excluding any shares canceled
pursuant to the Merger Agreement or Dissenting SCB Shares) a letter of
transmittal (the "Letter of Transmittal"), instructions for use in effecting the
surrender of the certificates representing shares of SCB Common Stock (a
"Certificate") in exchange for the Merger Consideration, and, in the case of
holders of more than five percent of SCB Common Stock at the Effective Time, a
letter relating to the ability of certain "Affiliates" (as such term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act) of SCB to sell
their shares.
Upon surrender of a Certificate or Certificates to the Exchange Agent,
together with a duly executed Letter of Transmittal, and such other documents
that Western or the Exchange Agent shall reasonably request, the holder of such
Certificate(s) will be entitled to receive in exchange therefor a certificate (a
"Western Certificate") representing that number of shares of Western Common
Stock into which the shares represented by the Certificate(s) surrendered have
been converted pursuant to the Merger Agreement and a check representing the
amount of cash in lieu of any fractional shares and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the Merger Agreement. After the
Effective Date and until surrendered, each Certificate will be deemed to
represent only the right to receive the Merger Consideration.
No dividends or other distributions declared after the Effective Time on
Western Common Stock will be paid with respect to any shares of SCB Common Stock
represented by a Certificate until such Certificate is surrendered. Following
surrender of any such Certificate, there will be paid to the holder of the
Western Certificates issued in exchange therefor, without interest, the amount
of dividends or other distributions with a record date after the Effective Time
payable with respect to whole shares of Western Common Stock and not paid, less
the amount of any withholding taxes which may be required, and, at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but before surrender and a payment date
after surrender payable with respect to whole shares of Western Common Stock,
less the amount of any withholding taxes which may be required.
CONDUCT OF THE BUSINESS OF SCB AND WESTERN PRIOR TO THE MERGER
Pursuant to the Merger Agreement, each of the Companies agreed that, during
the period from the date of the Merger Agreement until the Effective Time,
except as permitted by the Merger Agreement, it and each of its subsidiaries
will, among other things, (a) conduct its business in the usual, regular and
ordinary course, in the same manner as heretofore, consistent with prudent
banking practices, (b) take no action which would adversely affect or delay the
ability of the Companies to obtain any necessary approvals, consents or waivers
of any governmental authority required for the transactions contemplated in the
Merger Agreement or to perform its covenants and agreements on a timely basis
under the Merger Agreement, (c) promptly notify each other of any fact or event
that causes or could reasonably be expected to cause the SCB disclosure letter
or the Western disclosure letter to be incorrect in any material respect as of
the date of the Merger Agreement or as of the closing date, and (d) use
reasonable best efforts to obtain any requisite third party consent with respect
to any contract, agreement, lease, license, amendment, permit or release that is
material to the business of Western on a consolidated basis or that is
contemplated or required to be obtained by Western in connection with the
Merger.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties from
the Companies relating to, among other things, (a) corporate organization and
similar corporate matters; (b) capital structure; (c) subsidiary ownership; (d)
financial statements; (e) compliance with respect to filing requirements of
certain regulatory agencies; (f) authorization, execution, delivery, performance
and enforceability of the Merger Agreement and related matters; (g) insurance
policies; (h) title to assets; (i) absence of material litigation; (j) filing of
tax returns and payment of taxes; (k) compliance with applicable laws; (l)
absence of regulatory action; (m) performance of obligations under certain
contracts, leases, indentures, and other agreements; (n) certain contracts
relating to certain employment, consulting and benefit matters; (o) brokers and
finders fees; (p) absence of material changes or events since December 31, 1996;
(q) compliance with environmental laws; (r) retirement and other employee plans
and matters relating to the Employee Retirement Income Security Act of 1974, as
amended; (s) the accuracy of information supplied in connection with the
Registration Statement and this Joint Proxy Statement-Prospectus; (t) insider
loans; (u) compliance with the Community Reinvestment Act; (v) certain bank
regulatory matters; (w) adequacy of allowance for possible loan losses; (x)
trust administration; and (y) absence of certain derivative investments.
Western also has represented and warranted that the Western Common Stock
issuable to holders of SCB Common Stock upon consummation of the Merger will be
duly authorized, validly issued, fully paid and nonassessable at the Effective
Time and that no event has occurred or is reasonably foreseeable that would
prevent the Merger from being accounted for on a pooling-of-interest basis.
CERTAIN COVENANTS
FORBEARANCE
SCB. SCB has covenanted and agreed that, during the period from the date of
the Merger Agreement to the Effective Time, SCB will not without the prior
written consent of Western (which consent will not be unreasonably withheld) (a)
incur any indebtedness for borrowed money other than in the ordinary course of
business; (b) adjust, split, combine or reclassify any capital stock; (c) make,
declare or pay any dividend (other than regular quarterly cash dividends of
$0.05 per share of SCB Common Stock having record dates and payment dates
consistent with past practice) or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock; (d) other than in the ordinary course of business
and consistent with past practice, grant any stock appreciation rights or grant
any individual, corporation or other entity any right to acquire any shares of
its capital stock; (e) issue any additional shares of capital stock except as
required pursuant to stock options or warrants outstanding as of the date of the
Merger Agreement; (f) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets other than to a direct or indirect
wholly-owned subsidiary of SCB; (g) cancel, release or assign any material
indebtedness of any person or any claims held by any person, except pursuant to
contracts or agreements in force at the date of the Merger Agreement or in the
ordinary course of business and consistent with past practice; (h) except as
permitted by the Merger Agreement, make any investment either by purchase of
stock or securities, contributions to capital, property transfers, or purchase
of any property or assets of any other individual, corporation or other entity
other than a wholly-owned subsidiary of SCB; (i) other than in the ordinary
course of business with respect to contracts, agreements or leases involving
payment of not more than $50,000, enter into or terminate any material contract
or agreement, or make any material change in any of its material leases or
contracts; (j) other than in the ordinary course of business or as specifically
contemplated by the Merger Agreement, increase in any manner the compensation or
fringe benefits of any of its employees or retirees or pay any pension or
retirement allowance, make any contribution to any profit-sharing plan not
required by any existing plan or agreement to any such employees or retirees, or
become a party to, amend or commit itself to any pension, retirement, deferred
compensation, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee, or voluntarily accelerate the
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vesting of any stock options or other stock-based compensation or employee
benefits; (k) settle any material claim, action or proceeding involving any
liability of SCB or SC Bank for material money damages (or enter into a
settlement agreement containing other material obligations of SCB); (l) sell any
securities, except upon Western's approval; (m) amend its Articles of
Incorporation or its Bylaws, or change in any material way its policies and
procedures or make any material changes to its tax or financial accounting
policies (except as may be required by GAAP or by applicable law or
regulations); (n) purchase any securities other than obligations of the United
States of America or obligations of U.S. government agencies with a remaining
maturity of not more than three years from the date of purchase of such
security; (o) waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim, except in the
ordinary course of business and as permitted by the Merger Agreement; (p) make,
renegotiate, renew, increase, extend or purchase any loan, lease (credit
equivalent), advance, credit enhancement or other extension of credit, except as
permitted by the Merger Agreement; (q) make any capital expenditures, other than
capital expenditures in amounts not exceeding $25,000 individually or $100,000
in the aggregate; (r) promote any employee to the officer level or to a higher
officer level than such employee holds on the date of the Merger Agreement; or
(s) agree to, or make any commitment to, take any of the actions prohibited
above.
WESTERN. Western has covenanted and agreed that, during the period from the
date of the Merger Agreement to the Effective Time Western will not, without the
prior consent of SCB (which consent will not be unreasonably withheld), take any
action that would cause a material delay or have a Material Adverse Effect on
the ability of Western or SCB to obtain any necessary approvals, consents or
waivers of any governmental authority required for the transactions contemplated
by the Merger Agreement, or have a material adverse effect on its ability to
perform its covenants and agreements on a timely basis under the Merger
Agreement.
SHAREHOLDER MEETINGS
The Companies have agreed to take all action necessary in accordance with
applicable law and their respective articles of incorporation and bylaws to
convene a meeting of shareholders to consider and vote upon the Merger Agreement
and the transactions contemplated thereby. Except to the extent that to do so
would constitute a violation of their fiduciary duty, the boards of directors of
the Companies will recommend that their respective shareholders approve the
Merger Agreement and the transactions contemplated thereby and to use reasonable
best efforts to obtain the requisite vote of the shareholders to approve the
Merger Agreement and the transactions contemplated thereby.
COORDINATION OF DIVIDENDS
SCB will coordinate with Western the declaration of any dividends that may
be allowed under the Merger Agreement in respect of SCB and the record date and
payment dates relating thereto.
SHAREHOLDER AGREEMENTS
Certain directors of SCB, in their capacity as shareholders, executed and
delivered to Western shareholder agreements (the "Shareholder Agreements") which
commit such persons, among other things, to vote their shares of SCB Common
Stock in favor of the Merger Agreement at the SCB Special Meeting, in certain
cases not to compete with Western for a period of time, and to certain
representations concerning the ownership of SCB Common Stock and Western Common
Stock to be received in the Merger. See "The Shareholder Agreements."
ATTENDANCE AT CERTAIN MEETINGS
SCB has agreed to allow Western the right to have one representative present
at meetings of the Board of Directors of SCB or SC Bank and at all loan
committee meetings of SC Bank. However, if SCB reasonably determines that it
would be improper or imprudent to have a representative of Western present for
any portion of such meeting, then the representative shall be excused from that
portion of any such meeting.
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ACQUISITION PROPOSALS
SCB has agreed that none of it, SC Bank or any of their respective officers
or directors will, and that SCB shall direct and use its reasonable best efforts
to cause its employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer (including, without limitation, any proposal or offer to SCB
Shareholders) with respect to a merger, consolidation or similar transaction,
other than pursuant to the Merger Agreement, or involving any purchase of all or
any significant portion of the assets or any equity securities of SCB or SC Bank
(any such proposal or offer being an "Acquisition Proposal") or, except to the
extent legally required for the discharge by the SCB Board of its fiduciary
duties as advised by such Board's outside legal counsel, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Western has agreed that all rights to indemnification and exculpation now
existing in favor of the directors, officers, employees and agents of SCB or SC
Bank as provided for in their respective articles of incorporation, bylaws,
indemnification agreements or otherwise in effect as of the date of the Merger
Agreement, with respect to matters occurring prior to the Effective Time, will
survive the Merger and will continue in full force for six years following the
Effective Time; PROVIDED, HOWEVER, that in no event will Western be obligated to
expend, in order to maintain or provide insurance coverage pursuant to the
Merger Agreement, any amount per year for such six year period in excess of 200%
of the amount of the annual premiums paid for such insurance by SCB as of the
date of the Merger Agreement (the "Maximum Amount"). If the amount of premiums
exceeds the Maximum Amount, Western will use reasonable best efforts to maintain
the most advantageous policies of directors' and officers' insurance obtainable
for a premium equal to the Maximum Amount. During that six year period, to the
greatest extent permitted by applicable law, regulations and their respective
organizational documents or bylaws as in effect on the date of the Merger
Agreement, Western will indemnify, defend and hold harmless individuals who were
officers and directors of SCB or SC Bank as of the date of the Merger Agreement
or immediately prior to the Effective Time (collectively, the "Indemnified
Parties") for any claim or loss arising out of their actions while a director or
officer, including any acts relating to the Merger Agreement. Western also has
agreed to pay, as and when incurred, the expenses, including attorneys' fees, of
the Indemnified Parties in advance of the final resolution of any claim,
provided such individuals first execute an undertaking acceptable to Western to
return the advances in the event it is finally concluded such indemnification is
not allowed under applicable law.
Any Indemnified Party wishing to claim indemnification under the Merger
Agreement, upon learning of any such claim, action, suit, proceeding or
investigation, must promptly notify Western thereof, but the failure to so
notify shall not relieve Western of any liability it may have to such
Indemnified Party except to the extent that Western is materially prejudiced
thereby. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), Western
shall have the right to assume the defense thereof and Western shall not 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 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 such counsel for the
Indemnified Parties promptly as statements therefor are received to the extent
permitted under California law; PROVIDED, HOWEVER, that Western shall be
obligated to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction unless the use of one counsel for such Indemnified Parties would
present such counsel with a conflict of interest and the Indemnified Parties
shall cooperate in the defense of any such matter.
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COMBINED FINANCIAL RESULTS
If the closing has not occurred on or before November 30, 1997, Western has
agreed to use its best efforts to publish as soon as practicable following the
Effective Time financial results covering the first full month of at least 30
days (or such earlier period that covers at least 30 days) of post-Merger
combined operations.
CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS
Pursuant to the Merger Agreement, Western, SCB and SC Bank will (a) as soon
as practicable make any filings and applications required to be filed in order
to obtain all requisite approvals, consents and waivers of governmental agencies
or regulatory authorities necessary or appropriate for the consummation of the
transactions contemplated by the Merger Agreement, (b) cooperate with one
another (i) in promptly determining what filings are required to be made or
approvals, consents or waivers are required to be obtained under any relevant
federal, state or foreign law or regulation, (ii) in providing the other a
reasonable opportunity to review and comment upon the publicly available
portions of such filings, and (iii) in making promptly any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such approvals, consents or waivers, and (c) deliver to the other
copies of publicly available portions of all such filings and applications
promptly after they are filed.
ACCESS TO INFORMATION
Upon reasonable notice, each of the parties to the Merger Agreement has
agreed to afford to the other party and its representatives access during normal
business hours throughout the period prior to the Effective Time to the books,
records, properties, personnel and to such other information as any party may
reasonably request; PROVIDED, HOWEVER, that no investigation pursuant to such
access shall affect or be deemed to modify any representation or warranty made
in the Merger Agreement. Each party to the Merger Agreement has agreed not to
use any information obtained pursuant to such access for any purpose unrelated
to the consummation of the transactions contemplated by the Merger Agreement.
Subject to the requirements of law, each such party has agreed to keep
confidential, and has agreed to cause its representatives to keep confidential,
all information and documents obtained pursuant to such access in accordance
with the terms of the certain letter agreements, dated February 13, 1997, from
SCB to Western, and dated April 3, 1997, from Western to SCB, which shall remain
in full force and effect.
PRE-CLOSING ADJUSTMENTS
At or before the Effective Time, SCB has agreed to, in a manner mutually
satisfactory to the Companies, establish such additional accruals and reserves
as may be directed by Western to implement its plan to conduct SCB's business
following the Merger and otherwise to reflect Merger-related expenses and costs
incurred by SCB; PROVIDED, HOWEVER, that SCB shall not be required to take such
action (a) more than five days prior to the Effective Time, (b) unless Western
agrees in writing that all conditions to its closing set forth in the Merger
Agreement have been satisfied or waived, and (c) unless SCB shall have received
a written waiver by Western of its right to terminate the Merger Agreement, and
no accrual or reserve made by SCB or SC Bank, or any litigation or regulatory
proceeding arising out of any such accrual or reserve, shall constitute or be
deemed to be a breach, violation of or failure to satisfy any representation,
warranty, covenant, condition or other provision of the Merger Agreement or
otherwise be considered in determining whether any such breach, violation or
failure to satisfy shall have occurred.
DIRECTOR RESIGNATIONS
Immediately prior to the Effective Time, Western has agreed to elect to the
Western Board of Directors Harold A. Beisswenger, Larry D. Hartwig, William C.
Greenbeck and Donald E. Wood, each of
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whom currently serves as a director of SCB. SCB has agreed to deliver to Western
at the Closing the resignations of all of the directors of SCB and SC Bank, to
be effective at the Effective Time.
SECURITIES ACT
SCB has agreed to identify to Western, as soon as practicable after the date
of the SCB Special Meeting, all persons who SCB believes to be "affiliates" (as
that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act) of SCB (the "Affiliates"). SCB has agreed to use its reasonable best
efforts to obtain from each Affiliate a written agreement providing that each
such person will agree not to sell, pledge, transfer or otherwise dispose of the
shares of Western Common Stock to be received by such person in the Merger
except in compliance with the applicable provisions of the Securities Act and
until such time as financial results covering at least thirty days of combined
operations of the Companies shall have been published. Prior to the Effective
Time, each of SCB and Western has agreed to amend and supplement such letter and
use reasonable best efforts to cause each additional person who is identified as
an Affiliate to execute a written agreement as required under the Merger
Agreement. See "--COMBINED FINANCIAL RESULTS."
EMPLOYEE BENEFITS
The Companies have agreed that, unless otherwise mutually determined, the
SCB Employee Plans (as defined in the Merger Agreement) in effect at the date of
the Merger Agreement (except stock plans) will remain in effect through December
31, 1997 with respect to employees (including retirees) covered by such plans at
the Effective Time. Western, as appropriate, will take such steps as are
required so that the Continuing Employees (as defined in the Merger Agreement)
thereafter become participants in the Western Employee Plans (as defined in the
Merger Agreement). All of the Continuing Employees will be credited for
eligibility for participation and vesting purposes with all of their years of
past service with SCB or SC Bank as though they had been employees of Western
under all Western Employee Plans in which the Continuing Employees participate
following the Effective Time. Western has agreed to assume and honor in
accordance with their terms all accrued benefits and other obligations of SCB
under the SCB Employee Plans for the benefit of all current and former employees
of SCB and SC Bank. Western and SCB have also agreed that all Continuing
Employees shall be entitled to participate in stock plans, bonus plans and other
such incentive plans of Western and its subsidiaries on the same basis as other
similarly situated employees of such companies.
All continuing Employees shall be entitled to participate in stock plans,
bonus plans and other such incentive plans of Western and its subsidiaries on
the same basis as other similarly situated employees of such companies. As to
employees of SCB and SC Bank whose employment is terminated as a result of the
transactions contemplated in the Merger Agreement, Western has agreed to make
available the information regularly made available to its employees concerning
employment positions available with Western to enable such SCB and SC Bank
employees to apply for such positions. SCB or SC Bank has entered into Executive
Agreements (as defined in the Merger Agreement) with certain senior executives,
copies of which have been furnished to Western. SCB and SC Bank have also
established policies and procedures for termination and severance of the
employees' employment. These Severance Policies (as defined in the Merger
Agreement) shall be amended as soon as practicable following the date of the
Merger Agreement to exclude employees hired by Western under reasonably
comparable terms to those presently in effect. Western has agreed to assume and
honor all Executive Agreements and maintain all benefits described thereunder
without modification, offset or counterclaim; PROVIDED, HOWEVER, that executives
with Executive Agreements shall not be entitled to benefits under the Severance
Policies. Western has agreed to cause the Severance Policies to remain in effect
on the same basis as in effect at the Effective Time for the benefit of any
Continuing Employee whose employment is terminated by Western or any of its
subsidiaries on or prior to December 31, 1997. Until at least December 31, 1998,
Western has agreed to cause the Continuing Employees to be eligible for coverage
under severance plans or programs that are no less favorable to such
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employees than the Severance Policies, which plans or programs shall include
employer-provided out placement services that are appropriate to the employee's
position and experience. Western has agreed to honor in accordance with their
terms the obligations of SCB or SC Bank under all deferred compensation plans
and agreements for the benefit of all current and former employees of SCB and SC
Bank. Western has agreed to assume and honor in accordance with their terms all
bonus and incentive compensation arrangements for employees of SCB and SC Bank.
With respect to vacation pay, sick pay, leave of absence and similar payroll
practices of SCB or SC Bank, Western has agreed to honor as of the Effective
Time all existing obligations of SCB or SC Bank under policies of SCB or SC Bank
as currently in effect and, with respect to the Continuing Employees, has agreed
to recognize all service recognized by SCB or SC Bank under similar policies of
Western for purposes of eligibility and accrual of benefits after the Effective
Time.
REORGANIZATION TREATMENT; POOLING
Western and SCB have agreed not to take or cause to be taken any action,
whether before or after the Effective Time, which would disqualify the Merger as
a "reorganization" within the meaning of Section 368 of the Code or as a
pooling-of-interests for accounting purposes.
CONDITIONS
The obligation of the Companies to effect the Merger is subject to the
satisfaction or waiver prior to the Effective Time of certain conditions,
including (a) each of the representations, warranties and covenants of Western
and SCB, as the case may be, contained in the Merger Agreement being, in all
material respects, true at the Effective Time as if made on such date (or on the
date when made in the case of any representation or warranty which specifically
relates to an earlier date); (b) the performance, in all material respects, by
Western and SCB and SC Bank, as the case may be, of each of their respective
covenants and agreements contained in the Merger Agreement; (c) the approval of
the Merger Agreement and the transactions contemplated thereby by the requisite
vote of the Western Shareholders and SCB Shareholders, as the case may be, in
accordance with applicable law; (d) receipt of the approvals, consents and
waivers required by law in connection with the Merger Agreement and the
transactions contemplated thereby, including approval by the Federal Reserve
Board and the State Commissioner pursuant to federal and California law without
the inclusion of any condition or requirement that would be materially
burdensome on Western (on a combined basis giving effect to the transactions
described in the Merger Agreement), and all applicable statutory waiting periods
having expired; (e) the absence of any litigation or proceedings pending against
any party to the Merger Agreement or their subsidiaries brought by any
governmental agency seeking to prevent consummation of the transactions
contemplated by the Merger Agreement, the absence of any order, decree or
injunction being enacted, entered, promulgated or enforced by any governmental
authority which enjoins or prohibits the consummation of the Merger or the
transactions contemplated in the Merger Agreement and the absence of any
statute, rule, regulation, order, injunction or decree being in effect and
prohibiting or restricting or making illegal the consummation of the Merger or
any other transaction contemplated by the Merger Agreement; (f) the Registration
Statement having become effective and there having been issued no stop order
suspending such effectiveness and no proceedings for that purpose initiated or
threatened by the Commission; (g) receipt of an opinion of counsel by each of
SCB and Western no later than 30 days from the date of the Merger Agreement and
confirmed immediately prior to the Effective Time, substantially to the effect
that the Merger will be a "reorganization" within the meaning of Section 368(a)
of the Code, and that the Companies will be a party to that reorganization
within the meaning of Section 368(b) of the Code; (h) prior to the solicitation
of approval of the Merger Agreement by the Shareholders, and (i) receipt of
opinions confirming the fairness of the terms of the Merger to the Shareholders
from a financial point of view.
The obligation of Western to effect the Merger is also subject to the
satisfaction or waiver prior to the Effective Time of certain additional
conditions, including (a) Western and its directors and officers who
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signed the Registration Statement having received from Deloitte & Touche LLP
("D&T") "cold comfort" letters dated (i) the date of the mailing of this Joint
Proxy Statement-Prospectus to SCB Shareholders and (ii) shortly prior to the
Effective Time with respect to certain financial information regarding SCB; (b)
receipt by Western of all state securities laws and "Blue Sky" permits and other
authorizations necessary to consummate the transactions contemplated by the
Merger Agreement; (c) receipt of a letter from KPMG Peat Marwick LLP ("KPMG"),
dated the date hereof and confirmed in writing at the Effective Time, stating
KPMG's concurrence with Western's management as to the appropriateness of
pooling-of-interests accounting for the Merger under Accounting Principles Board
Opinion No. 16, if the Merger is consummated in accordance with the Merger
Agreement; (d) Western having received a Certificate of Satisfaction of the
Franchise Tax Board of the State of California that all taxes imposed by law on
SCB have been paid or secured; and (e) SCB Shareholders or Western Shareholders
voting against the approval of the Merger Agreement or giving notice in writing
to SCB or Western, as the case may be, at or before the applicable Special
Meeting that such shareholder dissent from the Merger Agreement in the aggregate
hold not more than five percent of the SCB Common Stock or the Western Common
Stock, as the case may be (the "Dissenters' Rights Condition").
As of the Western Record Date, FIP beneficially owned 342,797 shares of
Western Common Stock, constituting 4.85 percent of the outstanding Western
Common Stock, and as of the SCB Record Date, FIP beneficially owned 145,000
shares of SCB Common Stock, constituting 1.9 percent of the outstanding SCB
Common Stock. See "FIP Litigation."
The obligation of SCB to effect the Merger is also subject to the
satisfaction or waiver prior to the Effective Time of certain additional
conditions, including (a) receipt of an opinion from Sullivan & Cromwell,
special counsel to Western, to the effect that the shares of Western Common
Stock issued upon consummation of the Merger are duly authorized, validly
issued, fully paid and non-assessable and (b) receipt of a letter from D&T,
dated the date hereof and confirmed in writing at the Effective Time, stating
that D&T knows of nothing with respect to SCB that prohibits Western from
accounting for the Merger as a pooling-of-interests.
WAIVER AND AMENDMENT
Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party benefitted by the provision or by both parties, or amended
or modified at any time (including the structure of the transaction) by an
agreement in writing between the parties and approved by the Boards (or duly
authorized committee thereof). However, after the vote by the Shareholders, no
principal term of the Merger may be amended or revised without the approval of
the Shareholders.
TERMINATION
TERMINATION EVENTS
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Time, either before or after its approval by the Shareholders (a)
by the mutual consent of the Companies, if the board of directors, or duly
authorized committee thereof, of each so determines; (b) by the Companies, by
written notice to the other party if its board so determines by vote of a
majority of the entire board, in the event of (i) the failure of the SCB
Shareholders to approve the Merger Agreement at the SCB Special Meeting, (ii)
the failure of the Western Shareholders to approve the Merger Agreement at the
Western Special Meeting, or (iii) a material breach by the other party of any
representation, warranty, covenant or agreement contained in the Merger
Agreement which is not cured within thirty days after written notice of such
breach is given to the party committing such breach by the other party; (c) by
Western, if the SCB Board fails to recommend the approval of the Merger
Agreement at the SCB Special Meeting; (d) by Western or SCB, by written notice
to the other party, if its board of directors so determines by a vote of a
majority of its entire board in the event that either (i) any approval, consent
or waiver of a Governmental
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Authority (as defined in the Merger Agreement) required to permit consummation
of the transactions contemplated in the Merger Agreement shall have been denied
or (ii) any governmental authority of competent jurisdiction shall have issued a
final, unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by the Merger Agreement; (e) by Western or SCB, by
written notice to the other party if its board so determines by vote of a
majority of its entire board, in the event that the Merger is not consummated by
December 31, 1997, unless the failure to so consummate by such time is due to
the breach of any representation, warranty or covenant contained in the Merger
Agreement by the party seeking to terminate; (f) by SCB in the event that, with
respect to any Ten Day Period (as defined herein) both (i)(A) the Ten Day
Average Price (as defined herein) shall be less than $19.125 per share (as
adjusted for the Reverse Stock Split) or (B) both (1) the Ten Day Average Price
shall be less than $23.375 per share (as adjusted for the Reverse Stock Split)
and (2) the Western Common Stock Price Percentage (as defined herein) shall be
less than the BKX Index Percentage (as defined herein) and (ii) SCB has
delivered written notice to Western of its intention to terminate the Merger
Agreement within 48 hours following the date of such event (it being understood
that, if an event set forth in clause (i) shall have occurred and SCB fails to
timely deliver the notice referred to in this clause (ii), SCB shall have the
right to terminate if any such event subsequently occurs and SCB 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 of the Merger Agreement and prior to the
Effective Time, the provisions of this clause (f) will be appropriately
adjusted; (g) by SCB, by written notice to Western prior to the approval by the
SCB Shareholders of the Merger Agreement, if SCB receives an Acquisition
Proposal on terms and conditions which the SCB Board determines, after receiving
the advice of its outside counsel (i) that to proceed with the Merger will
violate the fiduciary duties of the SCB Board to the SCB Shareholders and (ii)
to accept such proposal; PROVIDED, HOWEVER, that SCB shall not be entitled to
terminate the Merger Agreement pursuant to this clause (g) unless it has
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. "Western Common Stock Price Percentage" means
the percentage determined by dividing the Ten Day Average Price by $23.375 (as
such amount may be adjusted pursuant to clause (f) above). "BKX Index
Percentage" means the percentage determined by dividing (i) the product of (A)
the Keefe Bank Index as of the date of determination times (B) 0.9 by (ii) the
Keefe Bank Index as of the date of the Merger Agreement. "Ten Day Average Price"
means the volume weighted average sales price per share of Western Common Stock
for a Ten Day Period, which volume weighted average shall be determined in a
manner consistent with the terms of the Merger Agreement. "Ten Day Period" means
any period of ten consecutive Trading Days occurring after the tenth Trading Day
following June 4, 1997.
EFFECT OF TERMINATION
In the event of the termination of the Merger Agreement by either Western or
SCB, as provided above, the Merger Agreement shall thereafter become void. There
shall be no liability on the part of any party to the Merger Agreement or their
respective officers or directors, except that any such termination shall be
without prejudice to the rights of any party to the Merger Agreement arising out
of the willful breach by any other party of any covenant or willful
misrepresentation contained in the Merger Agreement.
TERMINATION FEE
The Companies have agreed and acknowledged that it is impractical to
ascertain the precise amount of damage to the Companies as a result of a failure
to consummate the Merger and the transactions contemplated in the Merger
Agreement due to a termination of the Merger Agreement by SCB or Western, as the
case may be, pursuant to a material breach by the other party of any
representation, warranty, covenant or agreement contained in the Merger
Agreement, which is not cured within 30 days
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after written notice of such breach is given to such party by the non-breaching
party. Accordingly, in the event of such termination by SCB, Western has agreed
to pay to SCB $1.25 million plus all costs and expenses incurred by SCB in
connection with the Merger Agreement, up to $500,000. In the event of such
termination by Western, or a termination by SCB after receipt of an Acquisition
Proposal that is accepted by the SCB Board in accordance with the terms of the
Merger Agreement, SCB has agreed to pay to Western $1.25 million plus all costs
and expenses incurred by Western in connection with the Merger Agreement, up to
$500,000.
THE STOCK OPTION AGREEMENT
GENERAL
As an inducement and condition to Western entering into the Merger
Agreement, SCB entered into the Stock Option Agreement with Western. Pursuant to
the Stock Option Agreement, SCB granted to Western an unconditional, irrevocable
option, exercisable only under certain limited and specifically defined
circumstances, none of which, to the best of SCB's and Western's knowledge, has
occurred as of the date hereof, to purchase up to 1,491,050 authorized but
theretofore unissued shares of SCB Common Stock (or such lesser amount as shall
constitute 19.9 percent of the shares of SCB Common Stock outstanding on the
date of exercise), for a purchase price of $11.875 per share, subject to
adjustment in certain circumstances. The purchase of SCB Common Stock pursuant
to the Stock Option Agreement is subject to compliance with applicable law,
including receipt of any necessary approvals under the BHCA.
The Stock Option Agreement and the Option are intended to increase the
likelihood that the Merger will be consummated according to the terms set forth
in the Merger Agreement, and may be expected to discourage offers by third
parties to acquire SCB prior to the Merger.
THE STOCK OPTION
Western may exercise the Option, in whole or part, at any time and from time
to time following the occurrence of certain events (each a "Purchase Event"),
including (a) the acquisition by any person other than Western or any subsidiary
of Western (each a "Western Subsidiary") of beneficial ownership of shares of
SCB Common Stock, other than by exercise of existing options, warrants or other
rights or as a result of the execution and delivery of the Shareholder
Agreements, such that, upon the consummation of such acquisition, such person
would have beneficial ownership, in the aggregate, of 20 percent or more of the
then outstanding shares of SCB Common Stock if such person is a director or
officer of SCB, and 25 percent or more of the then outstanding shares of SCB
Common Stock if such person is not a director or officer of SCB; or (b) SCB or
any of its subsidiaries (each a "SCB Subsidiary"), without having received
Western's prior written consent, having entered into an agreement to engage in
an Acquisition Transaction (as defined herein), with any person other than
Western or any Western Subsidiary or the SCB Board having recommended that the
SCB Shareholders approve or accept any Acquisition Transaction with any person
other than Western or any Western Subsidiary.
"Acquisition Transaction" means (a) a merger or consolidation, or any
similar transaction, involving SCB or any of SCB's subsidiaries, (b) a purchase,
lease or other acquisition of all or substantially all of the assets of SCB or
any SCB Subsidiary or (c) a purchase or other acquisition of securities
representing, in the case of a Purchase Event, 20 percent or more, or, in the
case of a Preliminary Purchase Event (as defined herein), 10 percent or more, of
the voting power of SCB or any SCB Subsidiary, other than by exercise of
existing options, warrants or other rights.
The Stock Option Agreement also provides for certain adjustments intended to
protect Western against dilution of its rights to acquire SCB Common Stock. The
Stock Option Agreement grants certain registration rights ("Registration
Rights") to Western with respect to the shares issuable upon exercise of the
Option.
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TERMINATION
The Option will terminate and be of no further force and effect upon the
earliest to occur of (a) the time immediately prior to the Effective Time; (b)
12 months after the first occurrence of a Purchase Event; (c) 18 months after
the termination of the Merger Agreement following the occurrence of a
Preliminary Purchase Event (as defined below); (d) 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 under the certain circumstances referred to in the next clause
(e)); or (e) 18 months after the termination of the Merger Agreement upon the
happening of certain events, including a material breach of the Merger Agreement
by SCB and certain events relating to an Acquisition Proposal.
"Preliminary Purchase Event" means any of the following events or
transactions occurring after the date of the Stock Option Agreement:
(i) SCB or any SCB Subsidiary, without having received Western's prior
written consent, having entered into an agreement to engage in an
Acquisition Transaction, with any person other than Western or any Western
Subsidiary or the SCB Board having recommended that the SCB Shareholders
approve or accept any Acquisition Transaction with any person other than
Western or any Western Subsidiary;
(ii) Any person, other than Western or any Western Subsidiary, having
acquired beneficial ownership or the right to acquire beneficial ownership,
other than by exercise of existing options, warrants or other rights, or
shares of SCB Common Stock such that, upon the consummation of such
acquisition, such person would have beneficial ownership, in the aggregate,
of 10 percent or more of the then outstanding shares of SCB Common Stock if
such person is a director or officer of SCB, and 25 percent or more of the
then outstanding shares of SCB Common Stock if such person is not a director
or officer of SCB;
(iii) Any person, other than Western or any Western Subsidiary, having
made a BONA FIDE proposal to SCB or its shareholders, by public announcement
or written communication that is or becomes the subject of public
disclosure, to engage in an Acquisition Transaction;
(iv) After a proposal is made by a third party to SCB or its
shareholders to engage in an Acquisition Transaction, (A) SCB having
breached any covenant or obligation contained in the Merger Agreement which
breach would entitle Western to terminate the Merger Agreement or (B) the
holders of SCB Common Stock not approving the Merger Agreement at the SCB
Special Meeting, such meeting not having been held or having been canceled
prior to termination of the Merger Agreement or the SCB Board having
withdrawn or modified in a manner adverse to Western the recommendation of
the SCB Board with respect to the Merger Agreement;
(v) Any person other than Western or any of its subsidiaries, other than
in connection with a transaction to which Western has given its prior
written consent or in connection with the exercise of existing options,
warrants or other rights, having filed an application or notice with the
Federal Reserve Board or other governmental authority or regulatory or
administrative agency or commission for approval to engage in an Acquisition
Transaction; or
(vi) The SCB Board not recommending that the SCB Shareholders approve
the Merger Agreement.
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THE SHAREHOLDER AGREEMENTS
Western has entered into Shareholder Agreements with N. Keith Abbott, Robert
C. Ball, Harold A. Beisswenger, James E. Cunningham, William C. Greenbeck, Larry
D. Hartwig, Irving J. Pinsky, Peer A. Swan and Donald E. Wood (the "Party
Shareholders"), each an SCB Shareholder and a director of SCB. The Party
Shareholders, holding in the aggregate shares representing approximately six
percent of the total voting power of SCB Common Stock as of the SCB Record Date,
each agreed, in consideration of the substantial expenses incurred by Western in
connection with the Merger Agreement and as a condition to Western entering into
the Merger Agreement, to vote or to cause to be voted, or execute a written
consent with respect to, all of such Party Shareholder's shares of SCB Common
Stock (a) in favor of adoption and approval of the Merger Agreement and the
Merger at every meeting of SCB Shareholders 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; and (b) against any other
Acquisition Proposal at every meeting of the SCB Shareholders 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.
Each Shareholder Agreement also provides that the Party Shareholder will
not, and will not permit any entity under its control to, deposit any of such
Party Shareholder's shares of SCB Common Stock in a voting trust or subject any
such shares to any agreement, arrangement or understanding with respect to the
voting of such shares inconsistent with the Shareholder Agreement entered into
by that Party Shareholder. In addition, the Party Shareholders each agreed not
to sell, assign, transfer or dispose of any of his shares of SCB Common Stock
during the term of the relevant Shareholder Agreement.
Messrs. Abbott, Ball, Beisswenger, Cunningham, Greenbeck, Pinsky and Wood
also agreed in the Shareholder Agreements executed by them that at any time
within a one- or three-year period immediately following the Effective Time,
they will not engage in, be employed by, acquire an equity interest in or start,
or otherwise provide any assistance to, directly or indirectly, any business
which provides banking services in the counties of Los Angeles, Orange and San
Diego in the State of California so long as Western or its assigns remain
engaged in any banking business in such counties.
The Shareholder Agreements will terminate upon the earlier to occur of the
Effective Time and the date on which the Merger Agreement is terminated in
accordance with its terms.
The Shareholder Agreements bind the actions of the signatories thereto only
in their capacity as SCB Shareholders. Those directors of SCB who signed
Shareholder Agreements are not and could not be contractually bound to abrogate
their fiduciary duties as directors of SCB. Accordingly, while such
shareholders/directors are, under the Shareholder Agreements executed by them,
contractually bound to vote as a SCB Shareholder in favor of the Merger and
against other Acquisition Proposals (should one be presented), their fiduciary
duties as SCB Directors nevertheless required them to act in their capacity as
directors in the best interest of SCB when they decided to approve the Merger.
In addition, such shareholders/directors will continue to be bound by their
fiduciary duties as SCB Directors with respect to any decisions they may take in
connection with the Merger or otherwise.
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DESCRIPTION OF WESTERN CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS
DESCRIPTION OF WESTERN CAPITAL STOCK
The authorized capital stock of Western as of the Western Record Date
consists of 100,000,000 shares of Western Common Stock, of which 7,071,973
shares are issued and outstanding as of the Western Record Date and 5,000,000
shares of serial preferred stock, no par value, none of which are outstanding.
Holders of shares of Western Common Stock are entitled to one vote for each
share of record on all matters voted upon by Western Shareholders, except that
in connection with the election of directors, the shares, subject to notice, may
be voted cumulatively. Shares of Western Common Stock are not subject to
redemption, conversion or sinking fund provisions.
COMPARISON OF CORPORATE STRUCTURE
The Companies are California corporations and as such are governed by the
CGCL. Consequently, except as otherwise noted below, there is no material
difference between the rights of the holders of Western Common Stock and the
rights of the holders of SCB Common Stock with regard to electing members of the
board of directors, amending the articles of incorporation or bylaws, calling
special meetings of shareholders, acting by written consent of shareholders
without a meeting, and indemnifying directors.
Certain differences in the articles of incorporation and bylaws of Western
and SCB are discussed below.
VOTING RIGHTS
Both Western Shareholders and SCB Shareholders are entitled to one vote for
each share held of record on all matters voted upon by the respective
shareholders of each corporation, except that in connection with the election of
directors, shares of Western Common Stock may, under certain circumstances, be
voted cumulatively.
DIVIDENDS AND DIVIDEND POLICY
SCB
SCB Shareholders are entitled to receive dividends declared by the SCB Board
out of funds legally available therefor, under the laws of the State of
California. On January 23, 1997, SCB announced that the SCB Board had instituted
a policy of considering regular cash dividends on a quarterly basis and declared
a $0.05 per share cash dividend payable on February 20, 1997 to holders of SCB
Common Stock of record on February 6, 1997. Subsequently, the SCB Board declared
a dividend payable on May 20, 1997, to holders of SCB Common Stock of record on
May 2, 1997, and a dividend payable on August 20, 1997, to holders of SCB Common
Stock of record on August 4, 1997.
WESTERN
Holders of Western Common Stock are entitled to receive dividends declared
by the Western Board out of funds legally available therefor under the laws of
the State of California, subject to the rights of holders of any preferred stock
of Western that may be issued after the date hereof. Western has not paid any
dividends since its formation. On August 20, 1997, the Western Board approved
the institution of a quarterly dividend and thereafter declared a dividend of
$0.15 per common share payable on December 10, 1997 to shareholders of record on
November 11, 1997.
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NUMBER OF DIRECTORS
The SCB Bylaws provide that the authorized number of directors of SCB shall
be 9. The SCB Board is divided into three classes, each having three Directors.
Each class of Directors shall be elected to hold office for a term of three
years. At each annual meeting of SCB Shareholders, successors to the class of
Directors whose term shall then expire are identified as being of the same class
as the Directors they succeed.
The Western Bylaws currently provide that the authorized number of directors
of Western shall not be less than seven nor more than 13 and that any amendment
to the Western Bylaws affecting the authorized number of directors must be
approved by a majority of the Western Shareholders, provided that an amendment
to the Bylaws reducing the number of directors to a number less than five cannot
be adopted if the votes cast against its adoption are equal to more than 16 2/3
percent of the outstanding shares entitled to vote on such amendment.
At the Western Special Meeting, the Western Shareholders will be asked to
consider and vote upon an amendment to the Western Bylaws to change the
authorized number of directors from a minimum of seven and a maximum of up to 13
to a minimum of nine and a maximum of up to 16. Currently the actual number of
directors of Western is 10. The Amendment is necessary to allow Western to elect
Harold A. Beisswenger, Larry D. Hartwig, William C. Greenbeck and Donald E. Wood
to the Western Board as required by the Merger Agreement.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the CGCL authorizes a court to award, or a corporation's
Board of Directors to grant, indemnity to directors, officers and employees in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. Articles Five and Six of Western's Restated
Articles of Incorporation and Article VI of Western's Bylaws provide for
indemnification of its directors, officers, employees and other agents to the
fullest extent permitted by the CGCL. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of Western pursuant to the foregoing provisions, or
otherwise, Western has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
VALIDITY OF WESTERN COMMON STOCK
The validity of the shares of Western Common Stock to be issued in the
Merger has been passed upon by Sullivan & Cromwell, Los Angeles, California,
special counsel for Western.
EXPERTS
The consolidated financial statements of Western Bancorp and subsidiaries as
of and for the year ended December 31, 1996, the Western Bancorp combined
consolidated balance sheet as of December 31, 1995, and the combined related
statements of operations, changes in shareholders' equity and cash flows for
each of the years in the two-year period ended December 31, 1995, reflecting the
CCB Merger on a pooling-of-interests basis and appearing in Western Bancorp's
current report on Form 8-K, dated July 15, 1997, have been incorporated by
reference herein and in the registration statement in reliance on the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. Such report indicates that (i) the 1996 consolidated financial
statements of CCB, the 1995 and 1994 consolidated financial statements of
Western Bancorp (formerly Monarch Bancorp), and the 1995 and 1994 separate
consolidated financial statements of CCB were audited by other auditors and (ii)
the combination of the Western Bancorp consolidated balance sheet as of December
31, 1995, and the combination of the related statements of operations, changes
in shareholders' equity and cash flows for each of the years in the two-
93
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year period ended December 31, 1995, after restatement for the
pooling-of-interests, have been audited by KPMG Peat Marwick LLP.
The consolidated financial statements of Western Bancorp and subsidiaries as
of December 31, 1996, and for the year then ended appearing in the Western
Bancorp annual report, as amended, on Form 10-KSBA have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Western Bancorp as of December 31,
1995, and for the year then ended, have been incorporated by reference herein
and in the registration statement in reliance upon the report of Dayton &
Associates, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of SCB and subsidiaries as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996 incorporated by reference in this Joint Proxy Statement-Prospectus of
SCB's Annual Report on Form 10-K and, as amended, on Form 10-K/A for the year
ended December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of CCB and subsidiaries as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996 incorporated by reference in this Joint Proxy Statement-Prospectus of
CCB's Annual Report on Form 10-K and, as amended, on Form 10-K/A for the year
ended December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The financial statements of Santa Monica Bank for the year ended December
31, 1996, incorporated by reference in this Form S-4 Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The statement of condition of Santa Monica Bank as of December 31, 1995 and
the related statements of operations, changes in stockholders' equity and cash
flows for each of the two years in the period ended December 31, 1995
incorporated by reference in this Joint Proxy Statement-Prospectus of Western's
current report, dated August 28, 1997, on Form 8-K, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
MONARCH BANCORP
AND
SC BANCORP
DATED AS OF APRIL 29, 1997
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I THE MERGER............................................................................ A-5
1.1 The Merger............................................................................ A-5
1.2 Articles of Incorporation and Bylaws.................................................. A-5
1.3 Directors and Officers................................................................ A-5
ARTICLE II CONVERSION OF SHARES.................................................................. A-6
2.1 Conversion of SCB Common Stock........................................................ A-6
2.2 Exchange Procedures................................................................... A-7
2.3 Dividends, Etc........................................................................ A-7
2.4 Dissenting Shares..................................................................... A-8
ARTICLE III THE CLOSING........................................................................... A-8
3.1 Closing............................................................................... A-8
3.2 Documents to be Delivered............................................................. A-9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SCB................................................. A-9
4.1 Corporate Organization; Authority..................................................... A-9
4.2 Capitalization........................................................................ A-9
4.3 Subsidiaries.......................................................................... A-10
4.4 Financial Statements.................................................................. A-10
4.5 Reports; Regulatory Agencies.......................................................... A-10
4.6 Approvals; No Violations.............................................................. A-10
4.7 Insurance............................................................................. A-11
4.8 Title to Assets....................................................................... A-11
4.9 Absence of Pending Claims or Litigation............................................... A-11
4.10 Taxes................................................................................. A-11
4.11 Compliance with Laws.................................................................. A-12
4.12 Absence of Regulatory Actions......................................................... A-12
4.13 Performance of Obligations............................................................ A-12
4.14 Employees............................................................................. A-12
4.15 Brokers and Finders................................................................... A-13
4.16 Absence of Material Change............................................................ A-13
4.17 Environmental......................................................................... A-13
4.18 Employee Benefit Plans................................................................ A-15
4.19 Statements True and Correct........................................................... A-16
4.20 Insider Loans......................................................................... A-17
4.21 Community Reinvestment Act............................................................ A-17
4.22 Knowledge as to Conditions............................................................ A-17
4.23 Allowance for Possible Loan Losses.................................................... A-17
4.24 Trust Administration.................................................................. A-17
4.25 Derivatives........................................................................... A-17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR............................................ A-17
5.1 Corporate Organization; Authority..................................................... A-17
5.2 Capitalization........................................................................ A-18
5.3 Subsidiaries.......................................................................... A-18
5.4 Financial Statements.................................................................. A-18
5.5 Reports; Regulatory Agencies.......................................................... A-18
5.6 Approvals; No Violations.............................................................. A-18
5.7 Insurance............................................................................. A-19
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
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5.8 Title to Assets....................................................................... A-19
<C> <S> <C>
5.9 Absence of Pending Claims or Litigation............................................... A-20
5.10 Taxes................................................................................. A-20
5.11 Compliance with Laws.................................................................. A-20
5.12 Absence of Regulatory Actions......................................................... A-20
5.13 Performance of Obligations............................................................ A-20
5.14 Employees............................................................................. A-20
5.15 Brokers and Finders................................................................... A-21
5.16 Absence of Material Change............................................................ A-21
5.17 Environmental......................................................................... A-21
5.18 Employee Benefit Plans................................................................ A-22
5.19 Statements True and Correct........................................................... A-23
5.20 Insider Loans......................................................................... A-24
5.21 Community Reinvestment Act............................................................ A-24
5.22 Knowledge as to Conditions............................................................ A-24
5.23 Allowance for Possible Loan Losses.................................................... A-24
5.24 Trust Administration.................................................................. A-24
5.25 Derivatives........................................................................... A-25
5.26 Capital Stock......................................................................... A-25
5.27 Pooling............................................................................... A-25
ARTICLE VI COVENANTS OF SCB PENDING EFFECTIVE TIME OF THE MERGER................................. A-25
6.1 Forbearance by SCB.................................................................... A-25
6.2 Conduct of SCB's Business Prior to the Effective Time................................. A-26
6.3 SCB Shareholder's Meeting............................................................. A-27
6.4 Coordination of Dividends............................................................. A-27
6.5 Shareholder Agreements................................................................ A-27
6.6 Acquisition Proposals................................................................. A-27
6.7 Attendance at Certain Meetings........................................................ A-28
ARTICLE VII COVENANTS OF ACQUIROR PENDING EFFECTIVE TIME OF THE MERGER............................ A-28
7.1 Forbearance by Acquiror............................................................... A-28
7.2 Conduct of Acquiror's Business Prior to the Effective Time............................ A-28
7.3 Acquiror Shareholders' Meeting........................................................ A-29
7.4 Indemnification of Directors and Officers............................................. A-29
7.5 Combined Financial Results............................................................ A-29
7.6 Opportunities for SCB Employees to Obtain Information Concerning Employment
Positions............................................................................. A-30
ARTICLE VIII ADDITIONAL COVENANTS.................................................................. A-30
8.1 Registration Statement/Joint Proxy Statement.......................................... A-30
8.2 Certain Filings, Consents and Arrangements............................................ A-30
8.3 Access to Information................................................................. A-30
8.4 Notices; Reports...................................................................... A-30
8.5 Additional Agreements; Parties........................................................ A-31
8.6 Publicity............................................................................. A-31
8.7 Pre-Closing Adjustments............................................................... A-31
8.8 Director Resignations................................................................. A-31
8.9 Securities Act........................................................................ A-31
</TABLE>
A-3
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<TABLE>
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8.10 Stock Exchange Listing................................................................ A-31
<C> <S> <C>
8.11 Employee Benefits..................................................................... A-32
8.12 Tax-Free Reorganization Treatment; Pooling............................................ A-33
ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SCB........................................ A-33
9.1 Conditions to SCB's Obligations....................................................... A-33
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR....................................... A-34
10.1 Conditions to Acquiror's Obligations.................................................. A-34
ARTICLE XI TERMINATION........................................................................... A-36
11.1 Termination........................................................................... A-36
11.2 Effect of Termination................................................................. A-37
ARTICLE XII MISCELLANEOUS......................................................................... A-37
12.1 Interpretations....................................................................... A-37
12.2 Survival.............................................................................. A-37
12.3 Waiver................................................................................ A-38
12.4 Counterparts.......................................................................... A-38
12.5 Governing Law......................................................................... A-38
12.6 Expenses.............................................................................. A-38
12.7 Notice................................................................................ A-38
12.8 Entire Agreement; Etc................................................................. A-38
12.9 Assignment............................................................................ A-39
</TABLE>
A-4
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of April 29, 1997, by and between Monarch Bancorp, a California
corporation ("Acquiror"), and SC Bancorp, a California corporation ("SCB").
R E C I T A L S:
WHEREAS, Acquiror and SCB desire to effect a merger whereby SCB shall merge
with and into Acquiror (the "Merger") in accordance with the terms of this
Agreement;
WHEREAS, the respective Boards of Directors of Acquiror and SCB believe that
the proposed Merger, on the terms and conditions set forth herein, is in the
best interests of their respective corporations and shareholders;
WHEREAS, Acquiror and SCB desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement;
WHEREAS, it is the intention of the parties hereto that the Merger (i) for
federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code") and (ii) for accounting purposes shall qualify as a "pooling of
interests"; and
WHEREAS, concurrently herewith, SCB and Acquiror are entering into a Stock
Option Agreement, to be dated as of the date hereof, whereby SCB will grant to
Acquiror the option to purchase up to 19.9% of the outstanding SCB Common Stock
(as defined below) upon the occurrence of certain events;
NOW, THEREFORE, on the basis of the foregoing recitals and in consideration
of the mutual representations, warranties, covenants and agreements contained
herein, Acquiror and SCB hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. The Merger shall become effective (the "Effective Time")
upon the filing of an agreement of merger with the California Secretary of State
in accordance with the provisions of the California General Corporation Law (the
"CGCL"). At the Effective Time, SCB shall be merged with and into Acquiror with
Acquiror being the surviving corporation (the "Surviving Corporation"), pursuant
to the provisions of, and with the effect provided in, the CGCL. The separate
corporate existence of SCB shall thereupon cease.
1.2 ARTICLES OF INCORPORATION AND BYLAWS. (a) The articles of
incorporation of Acquiror as in effect immediately prior to the Effective Time
shall be the articles of incorporation of the Surviving Corporation immediately
after the Effective Time.
(b) The bylaws of Acquiror as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation immediately after the
Effective Time.
1.3 DIRECTORS AND OFFICERS. (a) The directors of Acquiror immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
as of the Effective Time and until their successors are duly appointed or
elected in accordance with applicable law.
(b) The officers of Acquiror immediately prior to the Effective Time shall
be the officers of the Surviving Corporation as of the Effective Time until
their successors are duly appointed or elected in accordance with applicable
law.
A-5
<PAGE>
ARTICLE II
CONVERSION OF SHARES
2.1 CONVERSION OF SCB COMMON STOCK. (a) At the Effective Time, each share
of common stock, no par value, of SCB (the "SCB Common Stock"), which is held in
the treasury of SCB and each share of SCB Common Stock owned by Acquiror or any
subsidiary of Acquiror immediately prior to the Effective Time (other than
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall, by virtue of the Merger, cease to be outstanding and shall be
canceled and retired without payment of any consideration therefor.
(b) Subject to Sections 2.1(a), 2.3 and 2.4, each issued and outstanding
share of SCB Common Stock shall, at the Effective Time, be converted into that
number of shares of common stock, no par value, of Acquiror ("Acquiror Common
Stock"), equal to the quotient obtained by dividing (i) $14.25 by (ii) the
Average Price. As used herein, "Average Price" shall mean the volume weighted
average sales price per share of Acquiror Common Stock for each of the twenty
(20) consecutive days (the "Determination Period") on which shares of Acquiror
Common Stock are actually traded (each, a "Trading Day") immediately preceding
the Regulatory Approval Date; PROVIDED, HOWEVER, that if the first Trading Day
of the Determination Period would occur on or prior to the tenth Trading Day
after the CCB Closing Date, then the Determination Period shall be the twenty
(20) consecutive Trading Days immediately following the tenth Trading Day after
the CCB Closing Date; PROVIDED, FURTHER, that if the Average Price as so
computed would be less than $2.75, then the Average Price shall be $2.75; and
PROVIDED FURTHER, that if the Average Price as so computed would be greater than
$3.75, then the Average Price shall be $3.75.
If Acquiror 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
2.1(b) shall be appropriately adjusted. The shares of Acquiror Common Stock into
which SCB Common Stock shall be converted pursuant to this Section 2.1(b),
together with the cash in lieu of fractional shares to be paid pursuant to
Section 2.1(e), are collectively sometimes referred to herein as the "Merger
Consideration". For purposes of determining the "volume weighted average", the
aggregate of the Daily Sales for each of the twenty (20) consecutive Trading
Days used in the determination of Average Price shall be divided by the
aggregate number of shares traded during such twenty (20) consecutive Trading
Days.
As used herein, "CCB Closing Date" means the date on which the merger of
California Commercial Bankshares with and into Acquiror shall have become
effective under the CGCL, "Daily Sales" means the reported sales prices of
Acquiror Common Stock traded on the Nasdaq National Market on a particular
Trading Day and "Regulatory Approval Date" means the date which is the later to
occur of approval by (i) the Board of Governors of The Federal Reserve System
pursuant to Section 3 of the Bank Holding Company Act of 1956, as amended, and
(ii) the California Superintendent of Banks pursuant to Section 700 et seq. of
the California Financial Code.
(c) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of SCB Common Stock shall cease
to be outstanding and shall be canceled and retired and shall cease to exist,
and each holder of shares of SCB Common Stock shall thereafter cease to have any
rights with respect to such shares of SCB Common Stock, except the right to
receive, without interest, such holder's pro rata portion of the Merger
Consideration upon the surrender of a certificate representing such shares of
SCB Common Stock (a "Certificate").
(d) At the Effective Time, each option or right to purchase shares of SCB
Common Stock (an "Option") outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any further action on the part of SCB
or the holder of any such Option, in settlement thereof, be converted into the
right to receive for each share otherwise issuable upon exercise thereof a
number of shares of Acquiror Common Stock equal to the quotient obtained by
dividing the Spread by the Average Price. As
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used herein, "Spread" means the difference, if positive, obtained by subtracting
the exercise price of such Option from $14.25.
(e) No fractional shares of Acquiror Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Acquiror Common Stock
pursuant to Section 2.1(b) hereof, cash adjustments will be paid to holders in
respect of any fractional share of Acquiror Common Stock that would otherwise be
issuable. The amount of such cash adjustment shall be equal to such fractional
proportion of the Average Price.
2.2 EXCHANGE PROCEDURES. (a) As of the Effective Time, Acquiror shall
deposit, or shall cause to be deposited, with such bank or trust company as
Acquiror shall elect (which may be a subsidiary of Acquiror) and is reasonably
acceptable to SCB (the "Exchange Agent"), for the benefit of the holders of SCB
Common Stock for exchange in accordance with this Article II, certificates
("Acquiror Certificates") representing the shares of Acquiror's Common Stock and
cash in lieu of fractional shares to be exchanged pursuant to this Article II
for outstanding shares of SCB Common Stock.
(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of SCB Common Stock immediately prior
to the Effective Time (excluding any shares of SCB Common Stock which will be
canceled pursuant to Section 2.1(a) or Dissenting Shares) (A) a letter of
transmittal (the "Letter of Transmittal") (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of such Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Acquiror shall specify), (B)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration with respect to the shares of SCB Common Stock
formerly represented thereby, and (C) in the case of holders of more than five
percent of SCB Common Stock at the Effective Time, the letter referred to in
Section 8.9(b) hereof.
(c) Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with the Letter of Transmittal, duly executed, and such other documents
as Acquiror or the Exchange Agent shall reasonably request, the holder of such
Certificate shall be entitled to receive promptly in exchange therefor (A) an
Acquiror Certificate representing that number of shares of Acquiror Common Stock
which such holder has the right to receive pursuant to this Article II, and (B)
a check representing the amount of cash in lieu of any fractional shares and
unpaid dividends and distributions, if any, which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions
hereof, and the Certificate so surrendered shall forthwith be canceled. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration with respect to the shares of SCB Common Stock
formerly represented thereby.
(d) Acquiror shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing the issuance and delivery of Acquiror
Certificates into which shares of SCB Common Stock are converted in the Merger.
2.3 DIVIDENDS, ETC. (a) Notwithstanding any other provisions of this
Agreement, no dividends or other distributions declared after the Effective Time
on Acquiror Common Stock shall be paid with respect to any shares of SCB Common
Stock represented by a Certificate until such Certificate is surrendered for
exchange as provided herein. Following surrender of any such Certificate, there
shall be paid to the holder of the Acquiror Certificates issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Acquiror Common Stock
and not paid, less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Acquiror Common Stock, less the amount of any withholding
taxes which may be required thereon.
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(b) At or after the Effective Time, there shall be no transfers on the stock
transfer books of SCB of the shares of SCB Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing any such shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for Certificates for the
consideration, if any, deliverable in respect thereof pursuant to this Agreement
in accordance with the procedures set forth in this Article II. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(the "Securities Act"), shall not be exchanged until the Acquiror has received a
written agreement from such person pursuant to Section 8.9 hereof.
(c) Any portion of the aggregate Merger Consideration (including the
proceeds of any investments thereof and any shares of Acquiror Common Stock)
that remains unclaimed by the former shareholders of the Acquiror and SCB six
months after the Effective Time shall be delivered to the Acquiror. Any former
shareholders of SCB who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration, cash in lieu of fractional shares and unpaid dividends and
distributions on the Acquiror Common Stock deliverable in respect of each share
of SCB Common Stock such shareholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
(d) None of SCB, Acquiror, the Surviving Corporation, the Exchange Agent or
any other person shall be liable to any former holder of shares of SCB Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(e) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Acquiror,
the posting by such person of a bond in such reasonable amount as Acquiror may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration, cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Acquiror
Common Stock as provided in Section 2.3(a), deliverable in respect thereof
pursuant to this Agreement.
2.4 DISSENTING SHARES. Notwithstanding anything in Section 2.1 to the
contrary, shares of SCB Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders who
have not voted such shares in favor of the Merger and who shall have properly
perfected their dissenters' rights ("Dissenters' Rights") in the manner provided
by Chapter 13 of CGCL (the "Dissenting Shares") shall not be converted into or
be exchangeable for the right to receive the Merger Consideration, unless and
until such holder shall have failed to perfect or shall have effectively
withdrawn or lost his/her Dissenters' Rights. If such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right,
his/her shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon.
ARTICLE III
THE CLOSING
3.1 CLOSING. The closing of the Merger (the "Closing") shall take place on
the last business day of the calendar month that occurs after the last to occur
of the expiration of all applicable waiting periods in connection with approvals
of governmental authorities, the receipt of all approvals of governmental
authorities and the satisfaction of each of the conditions set forth in Articles
IX and X (the "Closing Date"). The Closing will be conducted at 333 South Hope
Street, 30th Floor, Los Angeles, California 90071 or such other location as the
parties may agree.
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3.2 DOCUMENTS TO BE DELIVERED. At the Closing, the parties hereto shall
deliver, or cause to be delivered, such documents or certificates as may be
necessary, in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement. From and after the
Effective Time, each of the parties hereto hereby covenants and agrees, without
the necessity of any further consideration whatsoever, to execute, acknowledge
and deliver any and all other documents and instruments and take any and all
such other action as may be reasonably necessary or desirable to effectuate the
transactions set forth herein or contemplated hereby, and the officers and
directors of the parties hereto shall execute and deliver, or cause to be
executed and delivered, all such documents as may reasonably be required to
effectuate such transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCB
As of the date hereof and on the Closing Date, SCB represents and warrants
to Acquiror, except as to the matters disclosed in a letter of SCB delivered to
Acquiror on or prior to the date hereof (the "SCB Disclosure Letter") or in the
SCB Reports (as defined in Section 4.4) on or prior to the date hereof, as
follows:
4.1 CORPORATE ORGANIZATION; AUTHORITY. SCB is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Southern California Bank ("SC
Bank") is a California state-chartered bank duly organized, validly existing and
in good standing under the laws of the State of California. SC Bank is a member
of the Bank Insurance Fund of the Federal Deposit Insurance Corporation. Each of
SCB and SC Bank has the power and authority, and is duly qualified in all
jurisdictions where such qualification is required (except for such
qualifications the absence of which, individually or in the aggregate, would not
have a material adverse effect upon the business, financial condition or results
of operations of SCB and SC Bank, taken as a whole (a "Material Adverse
Effect")) to carry on its business as it is now being conducted and to own all
of its material properties and assets. SCB and SC Bank have all federal, state,
local and foreign governmental authorizations, permits, licenses approvals and
orders necessary for each to own or lease its properties and assets and to carry
on its business as it is now being conducted (all of which are in full force and
effect), except where the absence of which, either individually or in the
aggregate, would not have a Material Adverse Effect.
4.2 CAPITALIZATION. (a) As of the date hereof, SCB is authorized to issue
20,000,000 shares of SCB Common Stock, and 10,000,000 shares of preferred stock,
no par value ("SCB Preferred Stock"), and is not authorized to issue any other
class or series of capital stock, or any other securities giving the holder
thereof the right to vote on any matters on which shareholders of SCB can vote.
As of the date hereof, 7,492,715 shares of SCB Common Stock are issued and
outstanding and no shares of SCB Preferred Stock are issued and outstanding. All
outstanding shares of capital stock of SCB are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights. There are
no outstanding options, warrants or other rights in or with respect to the
unissued shares of SCB Common Stock or any other securities convertible into
such stock, and SCB is not obligated to issue any additional shares of its
common stock or any options, warrants or other rights in or with respect to the
unissued shares of its common stock or any other securities convertible into
such stock.
(b) As of the date hereof, SC Bank is authorized to issue 1,028,286 shares
of common stock, par value $10.00 per share ("SC Bank Common Stock"), of which
493,759 shares are outstanding and all of which SCB owns of record and
beneficially. All the outstanding shares of SC Bank Common Stock are duly
authorized, validly issued, fully paid and nonassessable (except for assessments
that may be made by order of the State Superintendent of Banks pursuant to
Section 662 of the California Financial Code) and are not subject to preemptive
rights. There are no outstanding options, warrants or other rights in or with
respect to the unissued shares of SC Bank Common Stock or any other securities
convertible into such
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stock, and SC Bank is not obligated to issue any additional shares of its common
stock or any options, warrants or other rights in or with respect to the
unissued shares of its common stock or any other securities convertible into
such stock.
4.3 SUBSIDIARIES. SC Bank is SCB's only subsidiary, and is wholly owned by
SCB. SCB does not own, directly or indirectly, any equity portion or voting
interest in any other corporation, partnership or other entity, except as
received in satisfaction of a debt previously contracted in good faith.
4.4 FINANCIAL STATEMENTS. As of their respective dates, neither SCB's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "SCB
1996 10-K"), nor any other document filed or to be filed prior to the Effective
Time subsequent to December 31, 1996 under Section 13(a), 13(d), 14 or 15(d) of
the Exchange Act, each in the form (including exhibits) filed with the
Securities and Exchange Commission (the "Commission") and as amended
(collectively, including any related notes and schedules, the "SCB Reports"),
contained or will contain at the time of filing any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. Each of the balance sheets or
statements of condition contained or incorporated by reference in the SCB
Reports fairly presents the results of operations, retained earnings and cash
flows, as the case may be, of the entity or entities to which it relates for the
periods set forth therein (subject, in the case of unaudited interim statements,
to normal year-end audit adjustments that are not material in amount or effect),
in each case in accordance with the published rules and regulations of the
Commission and generally accepted accounting principles ("GAAP"), consistently
applied and applicable to banks during the periods involved, except as may be
noted therein. The books and records of SCB and SC Bank have been, and are
being, maintained in all material respects in accordance with GAAP.
4.5 REPORTS; REGULATORY AGENCIES. Each of SCB and SC Bank has timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
January 1, 1992 with (i) any state regulatory authority, (ii) the Commission,
(iii) the Federal Reserve, (iv) the Federal Deposit Insurance Corporation and
(v) any self-regulatory organization (collectively, "Governmental Authorities")
and has paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Governmental Authority in the
regular course of the business of SCB, no Governmental Authority has initiated
any proceeding or, to the best knowledge of SCB, investigation, into the
business or operations of SCB since January 1, 1992.
4.6 APPROVALS; NO VIOLATIONS. (a) The execution by SCB of this Agreement
has been authorized by all necessary corporate action, including, but not
limited to, a vote by its board of directors (which approval includes a
resolution recommending that this Agreement and the Merger be approved by the
shareholders of SCB) subject to adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of SCB. Subject to
shareholder approval and to receipt of required approvals, consents or waivers
of Governmental Authorities referred to in Sections 9.1(c) and 10.1(c) hereof,
this Agreement, so long as a valid and binding agreement of Acquiror, is a valid
and binding agreement of SCB, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights (including those of federally insured financial institutions)
and general equitable principles, regardless of whether such enforcement is
considered in a proceeding in equity or at law.
(b) The affirmative vote of a majority of the outstanding shares of SCB
Common Stock entitled to vote on this Agreement is the only shareholder vote
required by SCB for approval of the Agreement and consummation of the Merger and
the other transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement by SCB do not,
and the consummation of the transactions contemplated hereby by SCB will not,
(i) constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license to
which SCB or SC Bank (or any of their respective properties) is subject, or
enable any person to enjoin
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the Merger or the other transactions contemplated hereby, (ii) constitute a
breach or violation of, or a default under, the articles of incorporation or
bylaws of SCB or SC Bank or (iii) constitute a breach or violation of, or a
default under (or an event which with due notice or lapse of time or both would
constitute a default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the properties or assets of
SCB or SC Bank under, any of the terms, conditions or provisions of any note,
bond, indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which SCB or SC Bank is a party, or to which any of their
respective properties or assets may be bound or affected; PROVIDED, HOWEVER,
that this clause (iii) shall not apply to any breach, violation or default of
any such agreement, instrument or obligation which involves payments to or by
SCB or SC Bank of an amount not exceeding $25,000 per year; and the consummation
of the transactions contemplated hereby will not require any approval, consent
or waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (i) the
required approvals, consents and waivers of Governmental Authorities referred to
in Sections 9.1(c) and 10.1(c), (ii) any such approval, consent or waiver that
already has been obtained, and (iii) any other approvals consents or waivers the
absence of which, individually or in the aggregate, would not result in a
Material Adverse Effect or enable any person to enjoin the Merger.
4.7 INSURANCE. SCB and SC Bank have in effect policies of insurance with
respect to their assets and business against such casualties and contingencies
and in such types and forms as in the judgment of its management are appropriate
for its business, operations, properties and assets. SCB has made available to
Acquiror copies of all policies of insurance and bonds carried and owned by SCB
or SC Bank as of the date hereof, which copies are complete and accurate in all
material respects. Neither SCB nor SC Bank is in default under any such policy
of insurance or bond such that it is reasonably likely to be canceled. No notice
of cancellation or material amendments has been received with respect to
existing material policies and no coverage thereunder with respect to any
material claims is being disputed.
4.8 TITLE TO ASSETS. SCB and SC Bank each has good and marketable title to
all of its material properties and assets (other than (i) property as to which
it is lessee and (ii) real estate owned as a result of foreclosure, transfer in
lieu of foreclosure or other transfer in satisfaction of a debtor's obligation
previously contracted), including, without limitation, all personal and
intangible properties reflected in the audited financial statements included in
the SCB 1996 10-K, or acquired subsequently thereto, subject to no liens,
mortgages, security interests, encumbrances or charges of any kind except (1) as
noted in the audited financial statements included in the SCB 1996 10-K, (2)
statutory liens not yet delinquent which are being contested in good faith by
appropriate proceedings, and liens for taxes not yet due, (3) pledges of assets
in the ordinary course of business to secure public deposits, (4) for those
assets and properties disposed of for fair value in the ordinary course of
business since the date of the SCB 1996 10-K, (5) defect and irregularities of
title and encumbrances that do not materially impair the use thereof for the
purpose for which they are held, and (6) any other liens, mortgages, security
interests, encumbrances or charges of any kind, which individually do not exceed
$100,000 in amount. Without limiting the above, SCB and SC Bank own or possess
valid and binding licenses or other rights to use without material payment all
material copyrights, trade secrets, trade names, service marks, logos and
trademarks used in their respective business, and has not received any notice of
conflicts with respect thereto that asserts the rights of others.
4.9 ABSENCE OF PENDING CLAIMS OR LITIGATION. No legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature are pending or, to SCB's knowledge, threatened,
against SCB which are reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect or materially to hinder or delay consummation of
the Merger. SCB is not in default with respect to any material judgment, order,
writ, injunction, decree, regulatory restriction or award of any court,
arbitrator or governmental agency, authority or instrumentality.
4.10 TAXES. SCB and all of its current or former subsidiaries and their
predecessors have or will have, timely filed all Tax Returns required to have
been filed by them at or prior to the Effective Time
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(taking into account valid extensions), and all such returns and reports are
correct and complete in all material respects. As used herein, "Tax Returns"
shall mean any return, declaration, report, claim for refund, or information
return or statement relating to or required to be filed in connection with any
Taxes (as such term is defined below), including any schedule or attachment
thereto, and including any amendment thereof. SCB has delivered or made
available to Acquiror true and complete copies of all such Tax Returns for 1994,
1995 and 1996. All federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, business, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, workers' compensation, disability,
Pension Guarantee Benefit Corporation premium, real property, personal property,
ad valorem, sales, use, transfer, conveyance, registration, value added,
alternative or add-on minimum, estimated, or other taxes, or assessments in the
nature of taxes, of any kind whatsoever and however denominated, including any
interest, penalty, or addition thereto, whether disputed or not ("Taxes"), due,
or required to be withheld and paid over as of the date hereof as shown on such
returns have been paid or accrued. SCB has not requested any extension of time
within which to file a return or report that has not since been timely filed. No
material deficiency in any Taxes, assessments or governmental charges has been
proposed, asserted or assessed against SCB that has not been settled and paid.
No extension of the time within which any tax may be assessed is in effect or
pending. SCB has no liability for taxes, including employment taxes, of any
other person under Treasury Regulation Section 1.1502-6, as a transferee or
successor, or otherwise. SCB has not made, nor is it obligated to make, nor is
it a party to any agreement that could reasonably be expected to obligate it to
make, any payments that are not deductible pursuant to Code Section 280G.
4.11 COMPLIANCE WITH LAWS. Neither SCB nor SC Bank is in violation in
respect of any federal, state or local laws, rules, regulations or orders
applicable to it or by which its properties may be bound, except such violations
as would not have a Material Adverse Effect.
4.12 ABSENCE OF REGULATORY ACTIONS. Neither SCB nor SC Bank is a party to
any cease and desist order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at the request of,
federal or state Governmental Authorities charged with the supervision or
regulation of depository institutions or depository institution holding
companies or engaged in the insurance of bank and/or savings and loan deposits
("Government Regulators"), nor has it been advised by any Government Regulator
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
4.13 PERFORMANCE OF OBLIGATIONS. Each of SCB and SC Bank has performed in
all material respects all of the obligations required to be performed by it to
date, and is not in material default under, or in material breach of, any term
or provision of any contract, lease, indenture or any other agreement to which
it is a party, is subject or is otherwise bound and no event has occurred that,
with the giving of notice or the passage of time, or both, would constitute such
default or breach.
4.14 EMPLOYEES. (a) Neither SCB nor SC Bank is party to, or is bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor organization, nor is any of them the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel it to bargain with any labor organization as to wages and conditions
of employment, nor is there any strike or labor dispute involving SCB or SC
Bank.
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(b) SCB is not a party to an oral or written (i) consultant agreement, not
terminable on 90 days' or less notice and involving the payment of more than
$50,000 per annum, (ii) agreement with any executive officer or other key
employee, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving it of the
nature contemplated by this Agreement, (iii) agreement with or with respect to
any executive officer providing any term of employment or compensation guarantee
extending for a period longer than six months, (iv) agreement or plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of the Merger or the value of any of the
benefits of which will be calculated on the basis of the Merger, or (v)
agreement containing covenants that limit the ability of SCB or SC Bank to
compete in any line of business or with any person or that involve any
restriction on the geographic area in which or method by which SCB (including
any successor thereof) or SC Bank (including any successor thereof) may carry on
its business (other than as may be required by law or any regulatory agency).
4.15 BROKERS AND FINDERS. Except for financial advisory services performed
for SCB by Credit Suisse First Boston pursuant to an agreement dated February
25, 1997, a copy of which has been furnished to Acquiror, neither SCB nor SC
Bank nor any of its or their officers, directors, employees or agents, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees in connection with
this Agreement or the transactions contemplated hereby.
4.16 ABSENCE OF MATERIAL CHANGE. Since December 31, 1996, the businesses
of SCB and SC Bank have been conducted only in the ordinary course,
substantially in the same manner as theretofore conducted and there has not
occurred: (i) any event that has had or may reasonably be expected to have a
Material Adverse Effect; (ii) any amendment to the articles of incorporation or
bylaws of SCB or SC Bank; (iii) any declaration, setting aside or payment of any
dividend or any other distribution in respect of the capital stock of SCB other
than regular quarterly dividends; or (iv) any change by SCB or SC Bank in
accounting principles or methods or tax methods, except as required or permitted
by the Financial Accounting Standards Board or by any governmental agencies or
regulatory authorities having jurisdiction over SCB or SC Bank.
4.17 ENVIRONMENTAL. (a) All of the properties and operations of SCB and SC
Bank are in compliance in all material respects with all material Environmental
Laws (as defined below) applicable to such properties and operations.
(b) Each of SCB and SC Bank has obtained all material permits, licenses, and
authorizations which are required for SCB's operations under Environmental Laws.
(c) To SCB's knowledge, no Hazardous Substances (as defined below) exist on,
about, or within, or have been used, generated, stored, transported, disposed of
on, or released from, any of the properties of SCB or SC Bank except in
accordance in all material respects with Environmental Laws. Neither SCB nor SC
Bank has any knowledge that any prior owners, occupants or operators of any such
property or any other property in which it has a security interest, ever
deposited, disposed of, or allowed to be deposited or disposed of, in, on, or
under or handled or processed on, or released, emitted or discharged from, such
properties any Hazardous Materials except in accordance in all material respects
with Environmental Laws, or that any prior or present owners, occupants or
operators of any properties in which it holds a security interest, mortgage or
other lien or interest, deposited or disposed of, in, on or under or handled
and/or processed on, or released, emitted or discharged from, such properties
any Hazardous Material except in accordance in all material respects with
Environmental Laws. The use which each of SCB and SC Bank has made, makes and
intends to make of its properties will not result in the use, generation,
storage, transportation, accumulation, disposal or release of any Hazardous
Substance on, in, or from any of such properties except in accordance in all
material respects with applicable Environmental Laws.
(d) There is no action, suit, proceeding, investigation, or inquiry before
any court, administrative agency or other Governmental Authority pending, or, to
the knowledge of SCB or SC Bank, threatened against SCB or SC Bank relating in
any way to any violation of any applicable Environmental Law. To the
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knowledge of SCB, neither SCB nor SC Bank has any material liability for
remedial action with respect to a violation of an Environmental Law. Neither SCB
nor SC Bank has received any written requests for information relating to any
material violations of any Environmental Law from any Governmental Authority
with respect to the condition, use, or operation of any of its properties nor
has any of them received any notice from any Governmental Authority or any
written notice from any other person with respect to any material violation of
or material liability for any remedial action under any Environmental Law.
(e) As used herein, the term "Environmental Law" means any and all federal,
state and local laws, regulations, and requirements pertaining to health, safety
and the environment, including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. Section
9601, ET SEQ. ("CERCLA"), the Resource Conservation and Recovery Act of 1975, 42
U.S.C. Section 6901, ET SEQ. ("RCRA"), the Occupational Safety and Health Act,
29 U.S.C. Section 651, ET SEQ. (as it relates to the use of, or exposure to,
Hazardous Substances), the Clean Air Act, 42 U.S.C. Section 7401, ET SEQ., the
Clean Water Act, 33 U.S.C. Section 1251, ET SEQ., the Toxic Substance Control
Act, 15 U.S.C. Section 2601, ET SEQ., the Carpenter-Presley-Tanner Hazardous
Substance Account Act, as amended, Chapter 6.8 of the California Health and
Safety Code, Section 25300, ET SEQ. and the Hazardous Waste Control Law, Chapter
6.5 of the California Health and Safety Code, Section 25100, ET SEQ. (the latter
two statutes being referred to herein as the "State Acts"), and any and all
regulations promulgated thereunder, and all similar laws, regulations, and
requirements of any Governmental Authority, agency having jurisdiction over the
environmental activities of SCB or SC Bank, or of its or their properties, on
the one hand, or of Acquiror, or of its properties, on the other hand, as such
laws, regulations, and requirements may be in effect on the date hereof.
(f) As used in this Section, the term "Properties" shall include: all real
estate property now or previously owned or leased by SCB and SC Bank, property
as to which SCB or SC Bank holds any security interest, deed of trust, mortgage
or other lien, and any property to which SCB or SC Bank could be deemed an
"owner" or "operator" under any applicable Environmental Law.
(g) As used herein, the term "Hazardous Substance" shall mean (A) any
"hazardous waste" as defined by CERCLA and the State Acts, as such acts are in
effect on the date hereof, any and all regulations promulgated thereunder; (B)
any "hazardous substance" as such term is defined by CERCLA; (C) any "regulated
substance" as defined by the State Acts; (D) asbestos requiring abatement,
removal or encapsulation pursuant to the requirements of Governmental
Authorities; (E) polychlorinated byphenyls; (F) petroleum products; (G)
"hazardous chemicals" or "extremely hazardous substances" in quantities
sufficient to require reporting, registration, notification and/or optional
treatment or handling under the Emergency Planning and Community Right to Know
Act of 1986, as amended; (H) any "hazardous chemical" in levels that would
result in exposure greater than is allowed by permissible exposure limits
established pursuant to the Occupational Safety and Health Act of 1970; (I) any
substance that requires reporting, registration, notification, removal,
abatement and/or special treatment, storage, handling or disposal, under
Sections 6, 7 and 8 of the Toxic Substance Control Act (15 U.S.C. Section 2601);
(j) any toxic or hazardous chemical described in 29 C.F.R. 1910.1000-1047 in
levels that would result in exposure greater than those allowed by the
permissible exposure limits pursuant to such regulations; and (K) any (1)
"hazardous waste," (2) "solid waste" capable of causing a "release or threatened
release" that present an "imminent and substantial endangerment" to the public
health and safety of the environment, (3) "solid waste" that is capable of
causing a "hazardous substance incident," (4) "solid waste" with respect to
which special requirements are imposed by applicable Governmental Authorities
upon the generation, transportation thereof as such terms are defined and used
within the meaning of the State Acts or (E) any "pollutant" or "toxic pollutant"
as such term is defined in the Federal Clean Water Act, 33 U.S.C. Sections
1251-1376, as amended, by Public Law 100-4, February 4, 1987, and the
regulations promulgated thereunder, including 40 C.F.R. Sections 122.1 and
122.26.
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4.18 EMPLOYEE BENEFIT PLANS. (a) A list of all SCB Employee Plans (as
hereinafter defined) is set forth in the SCB Disclosure Letter. SCB has
delivered or made available to Acquiror true and complete copies of the
following documents, as they may have been amended to the date hereof, embodying
or relating to SCB Employee Plans: Each of the SCB Employee Plans, including all
amendments thereto, any related trust agreements, insurance policies or any
funding agreements; the most recent determination letter from the IRS with
respect to each of the SCB Employee Plans; the actuarial evaluation, if any, for
the most recent plan year prepared for each of the SCB Employee Plans; and the
most recent annual return/report on IRS Forms 5500, 5500-C or 5500-R for each of
the SCB Employee Plans for which such report was prepared.
(b)(i) Each of the SCB Employee Plans has been administered in substantial
compliance with any applicable requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code. There is no
material pending or, to the knowledge of SCB, threatened litigation relating
to the SCB Employee Plans.
(ii) Each of the SCB Employee Plans for which SCB has claimed a
deduction under Code Section 404, as if such SCB Employee Plan were
qualified under Code Section 401(a), has received a favorable determination
letter from the IRS as to the tax qualification of such SCB Employee Plan
with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and to
the knowledge of SCB such favorable determination has not been modified,
revoked or limited by failure to satisfy any condition thereof or by a
subsequent amendment to, or failure to amend, such SCB Employee Plan.
(iii) To SCB's knowledge, neither SCB nor SC Bank, nor any other
"disqualified person" or "party in interest" (as defined in Code Section
4975 and Section 3(14) of ERISA, respectively) with respect to an SCB
Employee Plan has engaged in any "prohibited transaction" (as defined in
Code Section 4975 or Sections 406 or 407 of ERISA) that could reasonably be
expected to subject SCB or SC Bank to any material tax, penalty or liability
under Code Section 4975 or Title I of ERISA.
(iv) No SCB Employee Plan is a "multiple employer plan" within the
meaning of Code Section 413 or a "multiemployer plan" within the meaning of
Section 3(37) of ERISA and neither SCB nor SC Bank has contributed to a
multiemployer plan at any time on or after September 26, 1980.
(v) No liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by SCB or SC Bank that has not been satisfied
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 either of them, or the single-employer plan maintained by any
entity which is considered one employer with SCB under Section 4001 of ERISA
or Section 414 of the Code (an "ERISA Affiliate") during the period of such
affiliation, other than with respect to PBGC premiums substantially all of
which have been paid when due. 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 SCB Employee 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.
(vi) All contributions required to be made under the terms of any SCB
Employee Plan have been timely made or have been reflected on the balance
sheets or statements of condition contained or incorporated by reference in
the SCB Reports, to the extent required by GAAP. Neither any SCB Employee
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 SCB nor SC Bank has provided, or is
required to provide, security to any SCB Employee Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Code.
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(vii) Under each SCB Employee Plan which is a single-employer plan (as
defined above), 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.
(viii) Continuation health care coverage requirements and notice
requirements under Code Section 4980B and Sections 601 through 608 of ERISA
have been satisfied in all material respects with respect to all current or
prior employees of SCB and SC Bank and any "qualified beneficiary" of any
such employees (within the meaning of Code Section 4980B(g)).
(ix) No SCB Employee Plan provides for retiree medical benefits.
(x) Except as is specifically contemplated by this Agreement, the
consummation of the transactions contemplated by this Agreement will not (x)
entitle any Employees of SCB or SC Bank 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 Acquiror Employee Plans or (z) result in
any breach or violation of, or a default under, any of the SCB Employee
Plans.
(c) For purposes hereof, the term "SCB Employee Plan" means any "employee
benefit plan" (as defined in Section 3(3) of ERISA) as well as any other written
or formal plan or contract involving direct or indirect compensation under which
SCB or SC Bank has any present or future obligations or liability on behalf of
its employees or former employees or their dependents or beneficiaries,
including, but not limited to, each retirement, employee stock ownership, cash
or deferred, each other deferred or incentive compensation, bonus, stock
options, employee stock purchase, "phantom" stock or stock appreciation rights
plan, each other program providing payment or reimbursement for or of medical,
dental or visual care, counselling, or vacation, sick, disability or severance
pay and each other "fringe benefit" plan or arrangement.
4.19 STATEMENTS TRUE AND CORRECT. None of the information supplied or to
be supplied by or on behalf of SCB or SC Bank for inclusion in the registration
statement on Form S-4 or other appropriate form, or any amendments or
supplements thereto, to be filed with the Commission by Acquiror in connection
with the transactions contemplated by this Agreement (the "Registration
Statement") or the proxy statement to be used by SCB and Acquiror to solicit the
approval of their respective shareholders as contemplated by this Agreement (the
"Proxy Statement") or any other document to be filed with any governmental
agency or regulatory authority in connection with the transactions contemplated
hereby will, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the date it is mailed to shareholders of SCB and Acquiror
and at the time of the SCB shareholders' meeting described in Section 6.3 hereof
(the "SCB Shareholders' Meeting") and at the time of the Acquiror shareholders'
meeting described in Section 7.3 hereof (the "Acquiror Shareholders' Meeting"),
contain any untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Registration Statement, when it becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading. SCB represents, warrants and agrees that through the Effective Time
of the Merger, each of the reports, registrations, statements, applications and
other filings filed by it or SC Bank with the Commission, the Federal Reserve
Board (the "FRB") or any other governmental agency or regulatory authority will
be filed on a timely basis, will comply in all material respects with all of the
applicable statutes, rules and regulations enforced or promulgated by the
governmental agency or regulatory authority with which it will be filed and that
the information contained therein will be true and correct in all material
respects (and in the case of such filings with the Commission will not contain
any
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untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they will be made, not misleading). The
representations and warranties made by SCB or SC Bank hereby contain no
statements of material fact which are untrue or misleading, or omit to state any
material fact which is necessary under the circumstances to prevent the
statements contained herein from being misleading.
4.20 INSIDER LOANS. SCB has previously provided Acquiror with a listing,
current as of March 31, 1997, of all extensions of credit made to SCB's and SC
Bank's executive officers and directors and their related interests (all as
defined under FRB Regulation "O"), all of which have been made in compliance
with Regulation O, which listing is true, correct and complete in all material
respects.
4.21 COMMUNITY REINVESTMENT ACT. SC Bank received a rating of
"satisfactory" or better in its most recent examination or interim review with
respect to the Community Reinvestment Act. SC Bank has not been advised of any
supervisory concerns regarding SC Bank's compliance with the Community
Reinvestment Act.
4.22 KNOWLEDGE AS TO CONDITIONS. Each of SCB and SC Bank knows of no
reason why the approvals, consents and waivers of Governmental Authorities
referred to in Sections 9.1(c) and 10.1(c) should not be obtained without the
imposition of any condition of the type referred to in the provisos thereto.
4.23 ALLOWANCE FOR POSSIBLE LOAN LOSSES. To the best of SCB's and SC
Bank's knowledge, SC Bank's allowance for loan and lease losses is and will be
as of the Closing Date adequate and in accordance with GAAP in all material
respects and in accordance with all applicable regulatory requirements.
4.24 TRUST ADMINISTRATION. Neither SCB nor SC Bank presently exercises
trust powers, including, but not limited to, trust administration, and has not
exercised such trust powers for a period of at least seven years prior to the
date hereof. The term "trusts" as used in this Section 4.24 includes (i) any and
all common law or other trusts between an individual, corporation or other
entities and SCB or SC Bank, as trustee or co-trustee, including, without
limitation, pension or other qualified or nonqualified employee benefit plans,
compensation, testamentary, inter vivos, and charitable trust indentures; (ii)
any and all decedents' estates where SCB or SC Bank is serving or has served as
a co-executor or sole executor, personal representative or administrator,
administrator de bonis non, administrator de bonis non with will annexed, or in
any similar fiduciary capacity; (iii) any and all guardianships,
conservatorships or similar positions where SCB or SC Bank is serving or has
served as a co-grantor or a sole grantor or a conservator or a co-conservator of
the estate, or any similar fiduciary capacity; and (iv) any and all agency
and/or custodial accounts and/or similar arrangements, including plan
administrator for employee benefit accounts, under which SCB or SC Bank is
serving or has served as an agent or custodian for the owner or other party
establishing the account with or without investment authority.
4.25 DERIVATIVES. Neither SCB nor SC Bank is currently a party to any
interest rate swap, cap, floor, option agreement, other interest rate risk
management arrangement or agreement or derivative-type security or derivative
arrangement or agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
As of the date hereof and on the Closing Date, Acquiror represents and
warrants to SCB, except as to the matters disclosed in a letter of Acquiror
delivered to SCB on or prior to the date hereof (the "Acquiror Disclosure
Letter") or the Acquiror Reports (as defined in Section 5.4 hereof), as follows:
5.1 CORPORATE ORGANIZATION; AUTHORITY. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and is a registered bank holding company under the BHC Act. Acquiror
has the power and authority, and is duly qualified in all jurisdictions where
such qualification is required (except for such qualifications the absence of
which, individually or in the
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aggregate, would not have a Material Adverse Effect on Acquiror), to carry on
its business as it is now being conducted and to own all of its material
properties and assets. Acquiror has all federal, state, local and foreign
governmental authorizations, permits, licenses, approvals and orders necessary
for it to own or lease its properties and assets and to carry on its business as
it is now being conducted (all of which are in full force and effect), except
where the absence of which, either individually or in the aggregate, would not
have a Material Adverse Effect on Acquiror.
5.2 CAPITALIZATION. As of the date hereof, Acquiror is authorized to issue
100,000,000 shares of Acquiror Common Stock, and 5,000,000 shares of preferred
stock share ("Acquiror Preferred Stock"), and is not authorized to issue any
other class or series of capital stock, or any other securities giving the
holder thereof the right to vote on any matters on which shareholders of
Acquiror can vote. As of the date hereof, 34,373,021 shares of Acquiror Common
Stock are issued and outstanding and no shares of Acquiror Preferred Stock are
issued and outstanding. All outstanding shares of capital stock of Acquiror are
duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights. There are no outstanding options, warrants or
other rights in or with respect to the unissued shares of Acquiror Common Stock
or any other securities convertible into such stock, and Acquiror is not
obligated to issue any additional shares of its common stock or any options,
warrants or other rights in or with respect to the unissued shares of its common
stock or any other securities convertible into such stock.
5.3 SUBSIDIARIES. All of Acquiror's subsidiaries are set forth in Section
5.3 of the Acquiror Disclosure Letter. Acquiror does not own, directly or
indirectly, any equity portion or voting interest in any other corporation,
partnership or other entity, except as received in satisfaction of a debt
previously contracted in good faith.
5.4 FINANCIAL STATEMENTS. As of their respective dates, neither Acquiror's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996 (the
"Acquiror 1996 10-KSB") nor any other document filed or to be filed prior to the
Effective Time subsequent to December 31, 1996 under Section 13(a), 13(d), 14 or
15(d) of the Exchange Act, each in the form (including exhibits) filed with the
Commission and as amended (collectively, including any related notes and
schedules, the "Acquiror Reports"), contained or will contain at the time of
filing any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the balance sheets or statements of condition contained or
incorporated by reference in the Acquiror Reports fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of the entity
or entities to which it relates for the periods set forth therein (subject, in
the case of unaudited interim statements, to normal year-end audit adjustments
that are not material in amount or effect), in each case in accordance with the
published rules and regulations of the Commission and GAAP, consistently applied
and applicable to banks during the periods involved, except as may be noted
therein. The books and records of Acquiror have been, and are being, maintained
in all material respects in accordance with GAAP.
5.5 REPORTS; REGULATORY AGENCIES. Each of Acquiror and each of its
subsidiaries has timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file since January 1, 1992 with any
Governmental Authority and have paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Governmental
Authority in the regular course of the business of Acquiror, no Governmental
Authority has initiated any proceeding or, to the best knowledge of Acquiror,
investigation, into the business or operations of Acquiror or any of its
subsidiaries since January 1, 1992.
5.6 APPROVALS; NO VIOLATIONS. (a) The execution by Acquiror of this
Agreement has been authorized by all necessary corporate action, including, but
not limited to, a vote by its board of directors (which approval includes a
resolution recommending that this Agreement and the Merger be approved by the
shareholders of Acquiror) subject to adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Acquiror. Subject to shareholder approval and to receipt of required
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approvals, consents or waivers of Governmental Authorities referred to in
Sections 9.1(c) and 10.1(c) hereof, this Agreement, so long as a valid and
binding agreement of SCB, is a valid and binding agreement of Acquiror,
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights (including
those of federally insured financial institutions) and general equitable
principles, regardless of whether such enforcement is considered in a proceeding
in equity or at law.
(b) The affirmative vote of a majority of the outstanding shares of Acquiror
Common Stock entitled to vote on this Agreement is the only shareholder vote
required by Acquiror for approval of this Agreement and consummation of the
Merger and the other transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement by Acquiror do
not, and the consummation of the transactions contemplated hereby by Acquiror
will not, (i) constitute a breach or violation of, or a default under, any law,
rule or regulation or any judgment, decree, order, governmental permit or
license to which Acquiror or any of its subsidiaries (or any of their respective
properties) is subject, or enable any person to enjoin the Merger or the other
transactions contemplated hereby, (ii) constitute a breach or violation of, or a
default under, the articles of incorporation or bylaws of Acquiror or any of its
subsidiaries or (iii) constitute a breach or violation of, or a default under
(or an event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of Acquiror or
any of its subsidiaries under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which Acquiror or any of its subsidiaries is a
party, or to which any of their respective properties or assets may be bound or
affected; PROVIDED, HOWEVER, that this clause (iii) shall not apply to any
breach, violation or default of any such agreement, instrument or obligation
which involves payments to or by Acquiror or any of its subsidiaries of an
amount not exceeding $25,000 per year; and the consummation of the transactions
contemplated hereby will not require any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, indenture or instrument, other than (i) the required approvals,
consents and waivers of Governmental Authorities referred to in Sections 9.1(c)
and 10.1(c), (ii) any such approval, consent or waiver that already has been
obtained, and (iii) any other approvals consents or waivers the absence of
which, individually or in the aggregate, would not result in a Material Adverse
Effect on Acquiror or enable any person to enjoin the Merger.
5.7 INSURANCE. Acquiror has in effect policies of insurance with respect
to its assets and business against such casualties and contingencies and in such
types and forms as in the judgment of its management are appropriate for its
business, operations, properties and assets. Acquiror has made available to SCB
copies of all policies of insurance and bonds carried and owned by Acquiror as
of the date hereof, which copies are complete and accurate in all material
respects. Acquiror is not in default under any such policy of insurance or bond
such that it is reasonably likely to be canceled. No notice of cancellation or
material amendments has been received with respect to existing material policies
and no coverage thereunder with respect to any material claims is being
disputed.
5.8 TITLE TO ASSETS. Acquiror has good and marketable title to all of its
material properties and assets (other than (i) property as to which it is lessee
and (ii) real estate owned as a result of foreclosure, transfer in lieu of
foreclosure or other transfer in satisfaction of a debtor's obligation
previously contracted), including, without limitation, all personal and
intangible properties reflected in the audited financial statements included in
the Acquiror 1996 10-KSB, or acquired subsequently thereto, subject to no liens,
mortgages, security interests, encumbrances or charges of any kind except (1) as
noted in the audited financial statements included in the Acquiror 1996 10-KSB,
(2) statutory liens not yet delinquent which are being contested in good faith
by appropriate proceedings, and liens for taxes not yet due, (3) pledges of
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assets in the ordinary course of business to secure public deposits, (4) for
those assets and properties disposed of for fair value in the ordinary course of
business since the date of the Acquiror 1996 10-KSB, (5) defect and
irregularities of title and encumbrances that do not materially impair the use
thereof for the purpose for which they are held, and (6) any other liens,
mortgages, security interests, encumbrances or charges of any kind, which
individually do not exceed $100,000 in amount. Without limiting the above,
Acquiror owns or possesses valid and binding licenses and other rights to use
without payment all material copyrights, trade secrets, trade names, service
marks, logos and trademarks used in its business, and has not received any
notice of conflicts with respect thereto that asserts the rights of others.
5.9 ABSENCE OF PENDING CLAIMS OR LITIGATION. No legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature are pending or, to Acquiror's knowledge,
threatened, against Acquiror which are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Acquiror or materially to hinder
or delay consummation of the Merger. Acquiror is not in default with respect to
any material judgment, order, writ, injunction, decree, regulatory restriction
or award of any court, arbitrator or governmental agency, authority or
instrumentality.
5.10 TAXES. Acquiror and all of its current or former subsidiaries and
their predecessors have, or will have, timely filed all Tax Returns required to
have been filed by them at or prior to the Effective Time (taking into account
valid extensions), and all such returns and reports are correct and complete in
all material respects. Acquiror has delivered or made available to SCB true and
complete copies of all such Tax Returns for 1994, 1995 and 1996. All Taxes due
or required to be withheld and paid over as of the date hereof as shown on such
returns have been paid or accrued. Acquiror has not requested any extension of
time within which to file a return or report that has not since been timely
filed. No material deficiency in any Taxes, assessments or governmental charges
has been proposed, asserted or assessed against Acquiror that has not been
settled and paid. No extension of the time within which any tax may be assessed
is in effect or pending. Acquiror has no liability for Taxes of any other person
under Treasury Regulation Section 1.1502-6, as a transferee or successor, or
otherwise. Acquiror has not made, nor is it obligated to make, nor is it a party
to any agreement that could reasonably be expected to obligate it to make, any
payments that are not deductible pursuant to Code Section 280G.
5.11 COMPLIANCE WITH LAWS. Acquiror is not in violation in respect of any
federal, state or local laws, rules, regulations or orders applicable to it or
by which its properties may be bound, except such violations as would not have a
Material Adverse Effect on Acquiror.
5.12 ABSENCE OF REGULATORY ACTIONS. Neither Acquiror nor any of its
subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of, any Government Regulators, nor has it been advised by any
Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
5.13 PERFORMANCE OF OBLIGATIONS. Acquiror has performed in all material
respects all of the obligations required to be performed by it to date, and is
not in material default under, or in material breach of, any term or provision
of any contract, lease, indenture or any other agreement to which it is a party,
is subject or is otherwise bound and no event has occurred that, with the giving
of notice or the passage of time, or both, would constitute such default or
breach.
5.14 EMPLOYEES. (a) Acquiror is not party to, nor is Acquiror bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor organization, nor is Acquiror the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel it to
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bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or labor dispute involving Acquiror.
(b) Acquiror is not a party to an oral or written (i) consultant agreement,
not terminable on 90 days' or less notice and involving the payment of more than
$50,000 per annum, (ii) agreement with any executive officer or other key
employee, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving it of the
nature contemplated by this Agreement, (iii) agreement with or with respect to
any executive officer providing any term of employment or compensation guarantee
extending for a period longer than six months, or (iv) agreement or plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of the Merger or the value of any of the
benefits of which will be calculated on the basis of the Merger.
5.15 BROKERS AND FINDERS. Except for financial advisory services performed
for Acquiror by Belle Plaine Partners, Inc. pursuant to an agreement dated May
17, 1995, a copy of which has been furnished to SCB, neither Acquiror nor any of
its officers, directors, employees or agents, has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees in connection with this Agreement or the
transactions contemplated hereby.
5.16 ABSENCE OF MATERIAL CHANGE. Since December 31, 1996, the business of
Acquiror has been conducted only in the ordinary course, substantially in the
same manner as theretofore conducted and there has not occurred: (i) any event
that has had or may reasonably be expected to have a Material Adverse Effect on
Acquiror and its subsidiaries taken as a whole; (ii) any amendment to the
articles of incorporation or bylaws of Acquiror; (iii) any declaration, setting
aside or payment of any dividend or any other distribution in respect of the
capital stock of Acquiror other than regular quarterly dividends; or (iv) any
change by Acquiror in accounting principles or methods or tax methods, except as
required or permitted by the Financial Accounting Standards Board or by any
governmental agencies or regulatory authorities having jurisdiction over
Acquiror.
5.17 ENVIRONMENTAL. (a) To Acquiror's knowledge, all of the properties and
operations of Acquiror and its subsidiaries are in compliance in all material
respects with all material Environmental Laws applicable to such properties and
operations.
(b) To Acquiror's knowledge, Acquiror and its subsidiaries have obtained all
material permits, licenses, and authorizations which are required for Acquiror's
and Acquiror's subsidiaries' operations under Environmental Laws.
(c) To Acquiror's knowledge, no Hazardous Substances exist on, about, or
within, or have been used, generated, stored, transported, disposed of on, or
released from, any of the properties of Acquiror or any of its subsidiaries
except in accordance in all material respects with Environmental Laws. Neither
Acquiror nor any of its subsidiaries has any knowledge that any prior owners,
occupants or operators of any such property or any other property in which it
has a security interest, ever deposited, disposed of, or allowed to be deposited
or disposed of, in, on, or under or handled or processed on, or released,
emitted or discharged from, such properties any Hazardous Materials except in
accordance in all material respects with Environmental Laws, or that any prior
or present owners, occupants or operators of any properties in which it holds a
security interest, mortgage or other lien or interest, deposited or disposed of,
in, on or under or handled and/or processed on, or released, emitted or
discharged from, such properties any Hazardous Material except in accordance in
all material respects with Environmental Laws. The use which each of Acquiror
and any of its subsidiaries has made, makes and intends to make of its
properties will not result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Substance on, in, or from any
of such properties except in accordance in all material respects with applicable
Environmental Laws.
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(d) There is no action, suit, proceeding, investigation, or inquiry before
any court, administrative agency or other Governmental Authority pending, or, to
the knowledge of Acquiror, threatened against Acquiror or any of its
subsidiaries relating in any way to any violation of any applicable
Environmental Law. To the knowledge of Acquiror, neither Acquiror nor any of its
subsidiaries has any material liability for remedial action with respect to a
violation of an Environmental Law, nor has it received any written requests for
information relating to any material violations of any Environmental Law from
any Governmental Authority with respect to the condition, use, or operation of
any of its properties nor has any of them received any notice from any
Governmental Authority or any written notice from any other person with respect
to any material violation of or material liability for any remedial action under
any Environmental Law.
(e) As used in this Section, the term "Properties" shall include: all real
estate property now or previously owned or leased by Acquiror or any of its
subsidiaries, property as to which Acquiror or any of its subsidiaries holds any
security interest, deed of trust, mortgage or other lien, and any property to
which Acquiror or any of its subsidiaries could be deemed an "owner" or
"operator" under any applicable Environmental Law.
5.18 EMPLOYEE BENEFIT PLANS. (a) A list of all Acquiror Employee Plans (as
hereinafter defined) is set forth in the Acquiror Disclosure Letter. Acquiror
has delivered or made available to SCB true and complete copies of the following
documents, as they may have been amended to the date hereof, embodying or
relating to Acquiror Employee Plans: Each of the Acquiror Employee Plans,
including all amendments thereto, any related trust agreements, insurance
policies or any funding agreements; the most recent determination letter from
the IRS with respect to each of the Acquiror Employee Plans; the actuarial
evaluation, if any, for the most recent plan year prepared for each of the
Acquiror Employee Plans; and the most recent annual return/report on IRS Forms
5500, 5500-C or 5500-R for each of the Acquiror Employee Plans for which such
report was prepared.
(b)(i) Each of the Acquiror Employee Plans has been administered in
substantial compliance with any applicable requirements of ERISA and the
Code. There is no material pending or, to the knowledge of Acquiror,
threatened litigation relating to the Acquiror Employee Plans.
(ii) Each of the Acquiror Employee Plans for which Acquiror has claimed
a deduction under Code Section 404, as if such Acquiror Employee Plan were
qualified under Code Section 401(a), has received a favorable determination
letter from the IRS as to the tax qualification of such Acquiror Employee
Plan with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39),
and to the knowledge of Acquiror such favorable determination has not been
modified, revoked or limited by failure to satisfy any condition thereof or
by a subsequent amendment to, or failure to amend, such Acquiror Employee
Plan.
(iii) To Acquiror's knowledge, neither Acquiror nor any of its
subsidiaries, nor any other "disqualified person" or "party in interest" (as
defined in Code Section 4975 and Section 3(14) of ERISA, respectively) with
respect to an Acquiror Employee Plan has engaged in any "prohibited
transaction" (as defined in Code Section 4975 or Sections 406 or 407 of
ERISA) that could reasonably be expected to subject Acquiror to any material
tax, penalty or liability under Code Section 4975 or Title I of ERISA.
(iv) No Acquiror Employee Plan is a "multiple employer plan" within the
meaning of Code Section 413 or a "multiemployer plan" within the meaning of
Section 3(37) of ERISA and neither Acquiror nor any of its subsidiaries has
contributed to a multiemployer plan at any time on or after September 26,
1980.
(v) No liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by Acquiror or any of its subsidiaries that has
not been satisfied with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a) (15) of ERISA,
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currently or formerly maintained by either of them, or the single-employer
plan maintained by any entity which is considered one employer with Acquiror
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate") during the period of such affiliation, other than with respect
to PBGC premiums substantially all of which have been paid when due. 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 Acquiror Employee 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.
(vi) All contributions required to be made under the terms of any
Acquiror Employee Plan have been timely made or have been reflected on the
balance sheets or statements of conditions contained or incorporated by
reference in the Acquiror Reports, to the extent required by GAAP. Neither
any Acquiror Employee 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 Acquiror nor any
of its subsidiaries has provided, or is required to provide, security to any
Acquiror Employee Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(vii) Under each Acquiror Employee Plan which is a single-employer plan
(as defined above), 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.
(viii) Continuation health care coverage requirements and notice
requirements under Code Section 4980B and Sections 601 through 608 of ERISA
have been satisfied in all material respects with respect to all current or
prior employees of Acquiror and its subsidiaries and any "qualified
beneficiary" of any such employees (within the meaning of Code Section
4980B(g)).
(ix) No Acquiror Employee Plan provides for retiree medical benefits.
(x) Except as is specifically contemplated by this Agreement, the
consummation of the transactions contemplated by this Agreement will not (x)
entitle any Employees of Acquiror or any of it 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 Acquiror Employee Plans or
(z) result in any breach or violation of, or a default under, any of the
Acquiror Employee Plans.
(b) For purposes hereof, the term "ACQUIROR EMPLOYEE PLAN" means any
"employee benefit plan" (as defined in Section 3(3) of ERISA) as well as any
other written or formal plan or contract involving direct or indirect
compensation under which Acquiror or any of its subsidiaries has any present or
future obligations or liability on behalf of its employees or former employees
or their dependents or beneficiaries, including, but not limited to, each
retirement, employee stock ownership, cash or deferred, each other deferred or
incentive compensation, bonus, stock options, employee stock purchase, "phantom"
stock or stock appreciation rights plan, each other program providing payment or
reimbursement for or of medical, dental or visual care, counselling, or
vacation, sick, disability or severance pay and each other "fringe benefit" plan
or arrangement.
5.19 STATEMENTS TRUE AND CORRECT. None of the information supplied or to
be supplied by or on behalf of Acquiror for inclusion in the Registration
Statement or the Proxy Statement or any other document to be filed with any
governmental agency or regulatory authority in connection with the transactions
contemplated hereby will, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the date it is mailed to shareholders of SCB
and Acquiror and at the time of the
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SCB Shareholders' Meeting and the Acquiror Shareholders' Meeting, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Registration Statement, when it becomes effective, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading. Acquiror
represents, warrants and agrees that through the Effective Time of the Merger,
each of the reports, registrations, statements, applications and other filings
filed by it or any of its subsidiaries with the Commission, the FRB or any other
governmental agency or regulatory authority will be filed on a timely basis,
will comply in all material respects with all of the applicable statutes, rules
and regulations enforced or promulgated by the governmental agency or regulatory
authority with which it will be filed and that the information contained therein
will be true and correct in all material respects (and in the case of such
filings with the Commission will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
will be made, not misleading). The representations and warranties made by
Acquiror hereby contain no statements of material fact which are untrue or
misleading, or omit to state any material fact which is necessary under the
circumstances to prevent the statements contained herein from being misleading.
5.20 INSIDER LOANS. Acquiror has previously provided SCB with a listing,
current as of March 31, 1997, of all extensions of credit made to Acquiror's
executive officers and directors and their related interests (all as defined
under FRB Regulation "O"), all of which have been made in compliance with
Regulation O, which listing is true, correct and complete in all material
respects.
5.21 COMMUNITY REINVESTMENT ACT. Each of Western Bank, Monarch Bank and
National Bank of Southern California received ratings of "satisfactory" or
better in its most recent examination or interim review with respect to the
Community Reinvestment Act. Acquiror has not been advised of any supervisory
concerns regarding Acquiror's compliance with the Community Reinvestment Act.
5.22 KNOWLEDGE AS TO CONDITIONS. Acquiror knows of no reason why the
approvals, consents and waivers of Governmental Authorities referred to in
Sections 9.1(c) and 10.1(c) should not be obtained without the imposition of any
condition of the type referred to in the provisos thereto.
5.23 ALLOWANCE FOR POSSIBLE LOAN LOSSES. To the best of Acquiror's
knowledge, Acquiror's allowance for loan and lease losses is and will be as of
the Closing Date adequate and in accordance with GAAP and in all material
respects and in accordance with all applicable regulatory requirements.
5.24 TRUST ADMINISTRATION. Neither Acquiror nor any of its subsidiaries
presently exercises trust powers, including, but not limited to, trust
administration, and has not exercised such trust powers for a period of at least
seven years prior to the date hereof. The term "trusts" as used in this Section
5.24 includes (i) any and all common law or other trusts between an individual,
corporation or other entities and Acquiror or any of its subsidiaries, as
trustee or co-trustee, including, without limitation, pension or other qualified
or nonqualified employee benefit plans, compensation, testamentary, inter vivos,
and charitable trust indentures; (ii) any and all decedents' estates where
Acquiror or any of its subsidiaries is serving or has served as a co-executor or
sole executor, personal representative or administrator, administrator de bonis
non, administrator de bonis non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar positions
where Acquiror or any of its subsidiaries is serving or has served as a
co-grantor or a sole grantor or a conservator or a co-conservator of the estate,
or any similar fiduciary capacity; and (iv) any and all agency and/or custodial
accounts and/or similar arrangements, including plan administrator for employee
benefit accounts, under which Acquiror or any of its subsidiaries is serving or
has served as an agent or custodian for the owner or other party establishing
the account with or without investment authority.
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5.25 DERIVATIVES. Neither Acquiror nor any of its subsidiaries is
currently a party to any interest rate swap, cap, floor, option agreement, other
interest rate risk management arrangement or agreement or derivative-type
security or derivative arrangement or agreement.
5.26 CAPITAL STOCK. The Acquiror Common Stock issuable to holders of SCB
Common Stock upon consummation of the Merger will be duly authorized, validly
issued, fully paid and nonassessable at the Effective Time.
5.27 POOLING. It is intended that the Merger will be accounted for on a
pooling of interests basis, and no event has occurred or is reasonably
foreseeable (including any transaction contemplated by this Agreement) that
could alter such treatment.
ARTICLE VI
COVENANTS OF SCB
PENDING EFFECTIVE TIME OF THE MERGER
SCB covenants and agrees with Acquiror as follows:
6.1 FORBEARANCE BY SCB. During the period from the date of this Agreement
to the Effective Time, SCB and SC Bank shall not, without the prior written
consent of Acquiror (which consent will not be unreasonably withheld):
(a) other than in the ordinary course of business, incur any indebtedness
for borrowed money, assume guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation or
other entity (other than short-term borrowings from correspondent banks or the
Federal Reserve Bank of San Francisco in amounts no greater than $25,000,000
made at prevailing market rates and terms);
(b) adjust, split, combine or reclassify any capital stock; make, declare or
pay any dividend (other than regular quarterly cash dividends of $0.05 per share
of SCB Common Stock having record dates and payment dates consistent with past
practice) or make any other distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or any securities
or obligations convertible into or exchangeable for any shares of its capital
stock, or, except in the ordinary course of business consistent with past
practice, grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock; or issue any additional shares of capital stock except pursuant to the
exercise in accordance with their terms of stock options or warrants outstanding
as of the date hereof;
(c)(i) sell, transfer, mortgage, encumber or otherwise dispose of any of its
material properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned subsidiary of SCB, or (ii) cancel,
release or assign any material indebtedness of any such person or any claims
held by any such person, except (x) pursuant to contracts or agreements in force
at the date of this Agreement, or (y) in the ordinary course of business
consistent with past practice; PROVIDED, with respect to this clause (y), no
such action or series of related actions resulted (or would result) in a pre-tax
loss, net of the reserves established therefor, of more than $100,000;
(d) except as permitted under paragraphs (j) or (l) of this Section 6.1, and
except in amounts not exceeding $25,000 individually or $100,000 in the
aggregate, make any investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity other than a wholly
owned subsidiary of SCB;
(e) other than in the ordinary course of business with respect to contracts,
agreements or leases involving payment of not more than $50,000, enter into or
terminate any material contract or agreement, or make any material change in any
of its material leases or contracts;
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(f) other than in the ordinary course of business or as specifically
contemplated by this Agreement, increase in any manner the compensation
(including but not limited to bonuses) or fringe benefits of any of its
employees or retirees or pay any pension or retirement allowance, make any
contribution to any profit-sharing plan not required by any existing plan or
agreement to any such employees or retirees, or become a party to, amend or
commit itself to any pension, retirement, deferred compensation, profit-sharing
or welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee, or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits;
(g) settle any material claim, action or proceeding involving any liability
of SCB or SC Bank for material money damages (or enter into a settlement
agreement containing other material obligations of SCB or SC Bank);
(h) sell any securities; PROVIDED, HOWEVER, that SCB or SC Bank may sell any
securities if, within one business day after it requests of Acquiror in writing
(which request shall describe in reasonable detail the securities to be sold and
the estimated price therefor), Acquiror has approved such request in writing or
has not responded in writing to such request;
(i) amend its articles of incorporation or its bylaws, or change in any
material way its policies and procedures or make any material changes to its tax
or financial accounting policies (except, as to changes to its tax and financial
accounting practices, as may be required by GAAP or by applicable law or
regulations);
(j) purchase any securities other than obligations of the United States of
America or obligations of U.S. government agencies with a remaining maturity of
not more than three years from the date of purchase of such security;
(k) waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim, except in the
ordinary course of business and (i) in amounts less than $100,000 or (ii) where
such action resulted or would result in a pre-tax loss, net of reserves
established therefore, of no more than $100,000;
(l) make, renegotiate, renew, increase, extend or purchase any loan, lease
(credit equivalent), advance, credit enhancement or other extension of credit,
except (i) any loans or advances as to which SCB or SC Bank has a legally
binding obligation to make such loan or advance as of the date hereof and a
description of which has been provided in writing to Acquiror prior to the
execution of this Agreement, (ii) renewals in the ordinary course of business
consistent with past practice, (iii) in individual amounts not to exceed $2
million, or (iv) any such action if, within one business day after SCB or SC
Bank requests of Acquiror in writing (which request shall include information
and analyses reasonably sufficient for Acquiror to assess the proposed action),
Acquiror has approved such request in writing or has not responded in writing to
such request;
(m) make any capital expenditures, other than capital expenditures in
amounts not exceeding $25,000 individually or $100,000 in the aggregate;
(n) promote any employee to the officer level or to a higher officer level
than such employee holds on the date hereof; or
(o) agree to, or make any commitment to, take any of the actions prohibited
by this Section 6.1.
6.2 CONDUCT OF SCB'S BUSINESS PRIOR TO THE EFFECTIVE TIME. Except as
expressly provided otherwise in this Agreement, during the period from the date
of this Agreement to the Effective Time, SCB shall, and shall cause SC Bank to,
(i) conduct its business in the usual, regular and ordinary course, in the same
manner as heretofore, consistent with prudent banking practices, (ii) use its
reasonable efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the services of its
officers and key employees, (iii) maintain and keep its material properties in
as
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good repair and condition as at present, except for obsolete properties and for
deterioration due to ordinary wear and tear and damage due to casualty, (iv)
maintain in full force and effect insurance substantially comparable in amount
and in scope of coverage to that now maintained by it and submit all potential
claims existing prior to the Effective Time to its insurance carrier on or
before the Effective Time, (v) perform all of its obligations under contracts,
leases and documents relating to or affecting its assets, properties and
business except such obligations as it may in good faith reasonably dispute, and
except for such obligations which the failure to perform, in the aggregate, is
not reasonably likely to result in a Material Adverse Effect, (vi) substantially
comply with and perform all obligations and duties imposed upon it by all
material federal and state laws, and all material rules, regulations and orders
imposed by federal, state or local governmental authorities, (vii) take no
action which would adversely affect or delay the ability of SCB or Acquiror to
obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements on a timely basis under this Agreement, (viii) promptly
notify Acquiror of any fact or event that does or could reasonably be expected
to cause the SCB Disclosure Letter to be incorrect in any material respect as of
the date of this Agreement or as of the Closing Date; and (ix) use reasonable
best efforts to obtain any requisite third party consent with respect to any
contract, agreement, lease, license, amendment, permit or release that is
material to the business of Acquiror on a consolidated basis or that is
contemplated or required to be obtained by Acquiror in connection with the
Merger.
6.3 SCB SHAREHOLDER'S MEETING. SCB will take all action necessary in
accordance with applicable law and its articles of incorporation and bylaws to
convene a meeting of its shareholders to consider and vote upon this Agreement
and the transactions contemplated hereby. Except to the extent that to do so
could constitute a violation of its fiduciary duties, the board of directors of
SCB shall recommend that SCB's shareholders approve this Agreement and the
transactions contemplated hereby, and, except to the extent that to do so could
constitute a violation of its fiduciary duties, use its reasonable best efforts
to obtain the requisite vote of the holders of SCB Common Stock to approve this
Agreement and the transactions contemplated hereby.
6.4 COORDINATION OF DIVIDENDS. SCB shall coordinate with Acquiror the
declaration of any dividends that may be allowed hereunder in respect of SCB and
the record date and payment dates relating thereto, it being the intention of
the parties that holders of SCB Common Stock shall not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their shares of SCB Common Stock and any shares of Acquiror Common Stock any
such holder will receive in exchange therefor in the Merger.
6.5 SHAREHOLDER AGREEMENTS. Certain directors of SCB, in their capacities
as shareholders, in exchange for good and valuable consideration, have executed
and delivered to Acquiror shareholder agreements substantially in the form of
SCHEDULE 6.5 hereto (the "Shareholder Agreements"), committing such person,
among other things, (a) to vote their shares of SCB Common Stock in favor of
this Agreement at the SCB Shareholders' Meeting, (b) not to compete with
Acquiror for a period of time, and (c) to certain representations concerning the
ownership of SCB Common Stock and Acquiror Common Stock to be received in the
Merger.
6.6 ACQUISITION PROPOSALS. SCB agrees that neither it nor SC Bank nor any
of their respective officers or directors shall, and SCB shall direct and use
its reasonable best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or SC Bank) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of SCB) with respect
to a merger, consolidation or similar transaction, other than pursuant to this
Agreement, or involving any purchase of all or any significant portion of the
assets or any equity securities of SCB or SC Bank (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or, except to the
extent legally required for the discharge by the board of directors of its
fiduciary duties as advised by such board's outside legal counsel, engage in any
negotiations concerning, or provide any
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confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. SCB will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing and
shall make all reasonable efforts to enforce any confidentiality agreements to
which it or SC Bank is a party. SCB will take the necessary steps to inform the
appropriate individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 6.6. SCB will notify Acquiror
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with SCB or SC Bank.
6.7 ATTENDANCE AT CERTAIN MEETINGS. SCB agrees that Acquiror shall have
the right to have a single representative present at all meetings of the board
of directors of SCB or SC Bank and at all loan committee meetings of SC Bank;
PROVIDED, HOWEVER, that if SCB reasonably determines that it would be improper
or imprudent to have a representative of Acquiror present for any portion of
such meeting, then
Acquiror's representative shall be excused from any such portion thereof.
ARTICLE VII
COVENANTS OF ACQUIROR
PENDING EFFECTIVE TIME OF THE MERGER
Acquiror covenants and agrees with SCB as follows:
7.1 FORBEARANCE BY ACQUIROR. During the period from the date of this
Agreement to the Effective Time, without the prior written consent of SCB (which
consent will not be unreasonably withheld), Acquiror will not take any action
that would (a) cause a material delay or have a Material Adverse Effect on the
ability of Acquiror or SCB to obtain any necessary approvals, consents or
waivers of any governmental authority required for the transactions contemplated
hereby or (b) have a Material Adverse Effect on its ability to perform its
covenants and agreements on a timely basis under this Agreement.
7.2 CONDUCT OF ACQUIROR'S BUSINESS PRIOR TO THE EFFECTIVE TIME. Except as
expressly provided otherwise in this Agreement, during the period from the date
of this Agreement to the Effective Time, Acquiror shall, and shall cause its
subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course, in the same manner as heretofore, consistent with prudent banking
practices, (ii) use its reasonable efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees, (iii) maintain and keep
its material properties in as good repair and condition as at present, except
for obsolete properties and for deterioration due to ordinary wear and tear and
damage due to casualty, (iv) maintain in full force and effect insurance
substantially comparable in amount and in scope of coverage to that now
maintained by it, (v) perform all of its obligations under contracts, leases and
documents relating to or affecting its assets, properties and business except
such obligations as it may in good faith reasonably dispute, and except for such
obligations which the failure to perform, in the aggregate, is not reasonably
likely to result in a Material Adverse Effect on Acquiror, (vi) substantially
comply with and perform all obligations and duties imposed upon it by all
material federal and state laws, and all material rules, regulations and orders
imposed by federal, state or local governmental authorities, (vii) take no
action which would materially adversely affect its ability to perform its
covenants and agreements on a timely basis under this Agreement, (viii) promptly
notify Acquiror of any fact or event that does or could reasonably be expected
to cause the Acquiror Disclosure Letter to be incorrect in any material respect
as of the date of this Agreement or as of the Closing Date; and (ix) use
reasonable best efforts to obtain any requisite third party consent with respect
to any contract, agreement, lease, license, amendment, permit or release that is
material to the business of Acquiror on a consolidated basis or that is
contemplated or required to be obtained by Acquiror in connection with the
Merger.
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7.3 ACQUIROR SHAREHOLDERS' MEETING. Acquiror will take all action
necessary in accordance with applicable law and its articles of incorporation
and bylaws to convene a meeting of its shareholders to consider and vote upon
this Agreement and the transactions contemplated hereby. Except to the extent
that to do so could constitute a violation of its fiduciary duties, the board of
directors of Acquiror shall recommend that Acquiror's shareholders approve this
Agreement and the transactions contemplated hereby, and, except to the extent
that to do so could constitute a violation of its fiduciary duties, use its
reasonable best efforts to obtain the requisite vote of the holders of Acquiror
Common Stock to approve this Agreement and the transactions contemplated hereby.
7.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) Acquiror agrees that
all rights to indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of SCB or SC Bank as provided in their
respective articles of incorporation, bylaws, indemnification agreements or
otherwise in effect as of the date hereof with respect to matters occurring
prior to the Effective Time, shall survive the Merger and shall continue in full
force and effect for a period of six years following the Effective Time;
PROVIDED, HOWEVER, that in no event shall Acquiror be obligated to expend, in
order to maintain or provide insurance coverage pursuant to this Subsection
7.4(a), any amount for such six year period in excess of 200% of the amount of
the annual premiums paid as of the date hereof by SCB for such insurance (the
"Maximum Amount"). If the amount of the premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Acquiror shall use
reasonable best efforts to maintain the most advantageous policies of directors'
and officers' insurance obtainable for a premium equal to the Maximum Amount.
Acquiror further agrees that, during such six year period, to the greatest
extent permitted by applicable law, regulations and their respective
organizational documents or bylaws as in effect of the date hereof, they shall
indemnify, defend and hold harmless individuals who were officers and directors
of SCB or SC Bank as of the date hereof or immediately prior to the Effective
Time (collectively, the "Indemnified Parties") for any claim or loss arising out
of their actions while a director or officer, including any acts relating to
this Agreement, and shall pay, as and when incurred, the expenses, including
attorneys' fees, of such individuals in advance of the final resolution of any
claim, provided such individuals shall first execute an undertaking acceptable
to Acquiror to return such advances in the event it is finally concluded such
indemnification is not allowed under applicable law.
(b) Any Indemnified Party wishing to claim indemnification under Section
7.4(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Acquiror thereof, but the failure to so
notify shall not relieve the Acquiror of any liability it may have to such
Indemnified Party except to the extent that Acquiror is materially prejudiced
thereby. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Acquiror
shall have the right to assume the defense thereof and Acquiror shall not 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 Acquiror elects not to
assume such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between Acquiror and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and Acquiror shall pay the reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received to the
extent permitted under California law; PROVIDED, HOWEVER, that Acquiror shall be
obligated pursuant to this paragraph (b) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction unless the use of one counsel for
such Indemnified Parties would present such counsel with a conflict of interest
and (ii) the Indemnified Parties shall cooperate in the defense of any such
matter.
7.5 COMBINED FINANCIAL RESULTS. If the Closing shall not have occurred on
or before November 30, 1997, Acquiror shall use its best efforts to publish as
soon as practicable following the Effective Time financial results (within the
meaning of ASR No. 135) covering the first full month of at least 30 days (or
such earlier period that covers at least 30 days) of post-Merger combined
operations.
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7.6 OPPORTUNITIES FOR SCB EMPLOYEES TO OBTAIN INFORMATION CONCERNING
EMPLOYMENT POSITIONS. SCB may, not less than 30 days prior to the Effective
Time, submit a list of SCB and SC Bank employees who are interested in pursuing
continued employment with the Surviving Corporation. The Acquiror undertakes to
make available to such SCB and SC Bank employees the information regularly
available to employees of Acquiror or its subsidiaries concerning employment
positions available with Acquiror or its subsidiaries to enable such SCB and SC
Bank employees to apply for such positions.
ARTICLE VIII
ADDITIONAL COVENANTS
8.1 REGISTRATION STATEMENT/JOINT PROXY STATEMENT. As soon as reasonably
practicable after the date hereof, SCB and Acquiror shall jointly prepare the
Registration Statement, including a joint Proxy Statement in respect of the SCB
Shareholders' Meeting and the Acquiror Shareholders' Meeting, for the purpose of
registering the Acquiror Common Stock to be issued pursuant hereto, file the
Registration Statement with the Commission, respond to comments of the staff of
the Commission and promptly thereafter mail the joint proxy statement/prospectus
included therein to all holders of record (as of the applicable record date) of
shares of SCB Common Stock and Acquiror Common Stock.
8.2 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Acquiror, SCB and SC Bank
shall (a) as soon as practicable make any filings and applications required to
be filed in order to obtain all requisite approvals, consents and waivers of
governmental agencies or regulatory authorities necessary or appropriate for the
consummation of the transactions contemplated hereby, (b) cooperate with one
another (i) in promptly determining what filings are required to be made or
approvals, consents or waivers are required to be obtained under any relevant
federal, state or foreign law or regulation, (ii) in providing the other a
reasonable opportunity to review and comment upon the publicly available
portions of such filings, and (iii) in promptly making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such approvals, consents or waivers and (c) deliver to the other
copies of publicly available portions of all such filings and applications
promptly after they are filed.
8.3 ACCESS TO INFORMATION. (a) Upon reasonable notice, each of the parties
shall (and shall cause each of the parties' subsidiaries to) afford to the other
party and its representatives (including, without limitation, directors,
officers and employees of the parties and their affiliates, and counsel,
accountants and other professionals retained) 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 any party may
reasonably request; PROVIDED, HOWEVER, that no investigation pursuant to this
Section 8.3(a) shall affect or be deemed to modify any representation or
warranty made herein.
(b) Each party shall not, and shall cause its representatives not to, use
any information obtained pursuant to this Section 8.3 for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of law, each party shall keep confidential, and shall cause
its representatives to keep confidential, all information and documents obtained
pursuant to this Section 8.3 in accordance with the terms of the Confidentiality
Agreements, which shall remain in full force and effect. As used herein,
"Confidentiality Agreements" means that certain letter agreement, dated February
13, 1997, from SC Bancorp to Monarch Bancorp and that certain letter agreement,
dated April 3, 1997 from Monarch Bancorp to SC Bancorp.
8.4 NOTICES; REPORTS. Each party shall give prompt notice to the others
of: (a) any material change in its business, operations or prospects, (b) any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Governmental Authorities, (c) the institution
or the threat of material litigation involving such party, (d) any event or
condition that constitutes a breach of this Agreement, or that might be
reasonably expected to cause any of SCB representations or warranties set
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forth herein not to be true and correct in all material respects as of the
Effective Time, or (e) any event or condition that causes such party to
determine that it is or is likely to become unable to fulfill any of the
conditions to the performance of the other party's obligations hereunder, as set
forth in Articles IX and X.
8.5 ADDITIONAL AGREEMENTS; PARTIES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable best
efforts to take promptly, or cause to be taken promptly, all actions and to do
promptly or cause to be done promptly, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable,
including using reasonable best efforts to obtain all necessary actions or
non-actions, extensions, waivers, consents and approvals from all applicable
Governmental Authorities, effecting all necessary registrations, applications
and filings (including, without limitation, filings under any applicable state
securities laws) and obtaining any required contractual consents and regulatory
approvals, and cooperating on all matters involving employees of Acquiror, its
subsidiaries, SCB and SC Bank and communications with such persons.
8.6 PUBLICITY. The initial press release announcing this Agreement shall
be a joint press release and thereafter SCB and Acquiror shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any governmental entity or with any national securities exchange with respect
thereto.
8.7 PRE-CLOSING ADJUSTMENTS. At or before the Effective Time, SCB shall,
in a manner mutually satisfactory to the parties, establish such additional
accruals and reserves as may be directed by Acquiror to implement its plan to
conduct SCB's business following the Merger and otherwise to reflect Merger-
related expenses and costs incurred by SCB; PROVIDED, HOWEVER, that SCB shall
not be required to take such action (a) more than five (5) days prior to the
Effective Time, (b) unless Acquiror agrees in writing that all conditions to
closing set forth in Article X have been satisfied or waived, and (c) unless SCB
shall have received a written waiver by Acquiror of its right to terminate this
Agreement, and no accrual or reserve made by SCB or SC Bank pursuant to this
Section 8.7, or any litigation or regulatory proceeding arising out of any such
accrual or reserve, shall constitute or be deemed to be a breach, violation of
or failure to satisfy any representation, warranty, covenant, condition or other
provision of this Agreement or otherwise be considered in determining whether
any such breach, violation or failure to satisfy shall have occurred.
8.8 DIRECTOR RESIGNATIONS. Immediately prior to the Effective Time,
Acquiror shall elect to its board of directors Harold A. Beisswenger, Larry D.
Hartwig and two other current directors of SCB to be mutually agreed upon prior
to the date of the initial filing of any application with a Regulatory
Authority. SCB shall deliver to Acquiror at the Closing the resignations of all
of the directors of SCB and SC Bank, to be effective at the Effective Time.
8.9 SECURITIES ACT. (a) As soon as practicable after the date of the SCB
Shareholders' Meeting, SCB shall identify to Acquiror all persons who SCB
believes to be "affiliates" of SCB as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act (the "Affiliates").
(b) SCB shall use its reasonable best efforts to obtain a written agreement
from each person who is identified as an Affiliate pursuant to Subsection 8.9(a)
above providing that each such person will agree not to sell, pledge, transfer
or otherwise dispose of the shares of Acquiror Common Stock to be received by
such person in the Merger except in compliance with the applicable provisions of
the Securities Act and until such time as financial results covering at least
thirty (30) days of combined operations of Acquiror and SCB shall have been
published. Prior to the Effective Time, each of SCB and Acquiror shall amend and
supplement such letter and use its reasonable best efforts to cause each
additional person who is identified as an Affiliate to execute a written
agreement as set forth in this Section 8.9.
8.10 STOCK EXCHANGE LISTING. Acquiror shall use its reasonable best
efforts to list on the Nasdaq National Market, upon official notice of issuance,
the Acquiror Common Stock to be issued in the Merger.
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8.11 EMPLOYEE BENEFITS. (a) Acquiror and SCB agree that, unless otherwise
mutually determined, the SCB Employee Plans in effect at the date of this
Agreement (except stock plans) will remain in effect through December 31, 1997
with respect to employees (including retirees) covered by such plans at the
Effective Time. Acquiror, as appropriate, will take such steps as are required
so that all employees of SCB and SC Bank who become or remain as employees of
the Acquiror or any of its subsidiaries (the "Continuing Employees") thereafter
become participants in Acquirors Employee Plans. All of the Continuing Employees
will be credited for eligibility for participation and vesting purposes (but not
for purposes of calculating accrued benefits, except as provided below) with all
of their years of past service with SCB or SC Bank (or any of their predecessors
to the extent SCB is obligated to credit past service under acquisition
agreements) as though they had been employees of the Acquiror under all Acquiror
Employee Plans in which the Continuing Employees participate following the
Effective Time. Acquiror agrees to assume and honor in accordance with their
terms all accrued benefits and other obligations of SCB under the SCB Employee
Plans for the benefit of all current and former employees of SCB and SC Bank.
(b) All Continuing Employees shall be entitled to participate in stock
plans, bonus plans and other such incentive plans of Acquiror and subsidiaries
on the same basis as other similarly situated employees of such companies. As to
employees of SCB and SC Bank whose employment is terminated as a result of the
transactions contemplated hereby, Acquiror undertakes to make available the
information regularly made available to its employees concerning employment
positions available with Acquiror to enable such SCB and SC Bank employees to
apply for such positions.
(c) SCB or SC Bank has entered into employment and severance agreements with
certain senior executives, copies of which have been furnished to Acquiror (the
"Executive Agreements"). SCB and SC Bank also have established policies and
procedures for termination and severance of employees' employment. These
policies ("Severance Policies") shall be amended as soon as practicable
following the date hereof to exclude employees hired by Acquiror under
reasonably comparable terms to those presently in effect. Acquiror shall assume
and honor all Executive Agreements and maintain all benefits described
thereunder without modification, offset or counterclaim; PROVIDED, HOWEVER, that
executives with Executive Agreements shall not be entitled to benefits under the
Severance Policies. Acquiror shall cause the Severance Policies to remain in
effect on the same basis as in effect at the Effective Time for the benefit of
any Continuing Employee whose employment is terminated by Acquiror or any of its
subsidiaries on or prior to December 31, 1997. Until at least December 31, 1998,
Acquiror shall cause the Continuing Employees to be eligible for coverage under
severance plans or programs that are no less favorable to such employees than
the Severance Policies, which plans or programs shall include employer-provided
outplacement services that are appropriate to the employee's position and
experience.
(d) Acquiror agrees to honor in accordance with their terms the obligations
of SCB or SC Bank under all deferred compensation plans and agreements for the
benefit of all current and former employees of SCB and SC Bank, including all
funding arrangements with respect to such obligations and all amendments to such
plans, agreements and arrangements through the date hereof. Acquiror agrees to
assume and honor in accordance with their terms all bonus and incentive
compensation arrangements for employees of SCB and SC Bank, it being
acknowledged that with the prior consent of Acquiror (not to be unreasonably
withheld) SCB or SC Bank may make adjustments to such arrangements as are
necessary or appropriate to reflect the impact of the transactions contemplated
by this Agreement (but without providing any material increase in benefits).
(e) With respect to vacation pay, sick pay, leave of absence and similar
payroll practices of SCB or SC Bank, Acquiror agrees to honor as of the
Effective Time all existing obligations of SCB or SC Bank under policies of SCB
or SC Bank as currently in effect and, with respect to the Continuing Employees,
agrees to recognize all service recognized by SCB or SC Bank under similar
policies of Acquiror for purposes of eligibility and accrual of benefits after
the Effective Time.
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(f) SCB shall cause the "401(k) Plan" which is part of the Southern
California Bank Employee Retirement Plan to be terminated immediately prior to
the Effective Time.
8.12 TAX-FREE REORGANIZATION TREATMENT; POOLING. Neither Acquiror nor SCB
shall take or cause to be taken any action, whether before or after the
Effective Time, which would disqualify the Merger (a) as a "reorganization"
within the meaning of Section 368 of the Code or (b) as a "pooling of interests"
for accounting purposes.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SCB
9.1 CONDITIONS TO SCB'S OBLIGATIONS. The obligation of SCB to effect the
Merger shall be subject to the satisfaction or waiver prior to the Effective
Time of the conditions set forth in this Article IX.
(a) TRUTHFULNESS OF ACQUIROR'S STATEMENTS; PERFORMANCE OF ACQUIROR'S
OBLIGATIONS. Each of the representations, warranties and covenants of Acquiror
contained in this Agreement shall, in all material respects, be true at the
Effective Time as if made on such date (or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date);
Acquiror shall have performed, in all material respects, each of its covenants
and agreements contained in this Agreement; and SCB shall have received
certificates signed by the Chief Executive Officer and the Chief Financial
Officer of Acquiror at the Effective Time, to the foregoing effect.
(b) SHAREHOLDER APPROVAL. The Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the shareholders of SCB
in accordance with applicable law.
(c) CONSENTS; APPROVALS; SATISFACTION OF LEGAL REQUIREMENTS. Acquiror shall
have procured, as necessary, the required approval, consent or waiver with
respect to this Agreement and the transactions contemplated hereby (i) by the
FRB, and (ii) by the State Superintendent of Banks pursuant to California law,
and all applicable statutory waiting periods shall have expired; and the parties
shall have procured all other regulatory approvals, consents or waivers of
governmental authorities or other persons that are necessary or appropriate to
the consummation of the transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that no approval, consent or waiver referred to in this Section 9.1(c)
shall be deemed to have been received if it shall include any condition or
requirement that would be materially burdensome on Acquiror (on a combined basis
giving effect to the transactions contemplated by this Agreement). All other
requirements prescribed by law which are necessary to the consummation of the
transactions contemplated by this Agreement shall have been satisfied.
(d) ABSENCE OF LITIGATION, INJUNCTION OR OTHER RESTRICTIONS. No litigation
or proceeding shall be pending against any party hereto or any of their
Subsidiaries brought by any governmental agency seeking to prevent consummation
of the transactions contemplated hereby. No party hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger or any transactions
contemplated by this Agreement. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes illegal consummation
of the Merger or any other transaction contemplated by this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement shall have become
effective 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 Commission.
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(f) TAX OPINIONS. SCB shall have received an opinion of Dewey Ballantine,
no later than thirty (30) days from the date hereof, and confirmed immediately
prior to the Effective Time, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, the Merger
will be a "reorganization" within the meaning of Section 368(a) of the Code and
that each of Acquiror and SCB will be a party to that reorganization within the
meaning of Section 368(b) of the Code.
In rendering its opinion, Dewey Ballantine may require and rely upon
representations contained in letters from Acquiror, SCB, SC Bank and others.
(g) LEGAL OPINION. SCB shall have received the opinion of Sullivan &
Cromwell, special counsel to Acquiror, in form and substance reasonably
satisfactory to SCB, to the effect that the shares of Acquiror Common Stock
issued upon consummation of the Merger are duly authorized, validly issued,
fully paid and nonassessable.
(h) POOLING TREATMENT. SCB shall have received a letter from Deloitte &
Touche LLP, dated the date of the Proxy Statement and confirmed in writing at
the Effective Time, stating that it knows of nothing with respect to SCB that
prohibits Acquiror from accounting for the Merger as a pooling of interests.
(i) FAIRNESS OPINION. Prior to the solicitation of approval this Agreement
by SCB's shareholders, SCB shall have received an opinion confirming the
fairness of the terms of the Merger to its shareholders from a financial point
of view.
(j) PENDING ACQUIROR TRANSACTION. Acquiror's pending acquisition of
California Commercial Bankshares shall have closed and the terms thereof shall
not be materially less favorable to Acquiror than those described in the
Preliminary Proxy Statement on Schedule 14A of Acquiror as filed with the
Commission on or about March 1, 1997 in connection with the issuance of Acquiror
Common Stock pursuant to such acquisition.
(k) NASDAQ LISTING. The outstanding shares of Acquiror Common Stock shall
have been listed on the Nasdaq National Market not later than the first trading
day of the period during which the Average Closing Price is calculated pursuant
to Section 2.1(b) hereof. The shares of Acquiror Common Stock to be issued in
the Merger shall have been approved for listing on the Nasdaq National Market.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR
10.1 CONDITIONS TO ACQUIROR'S OBLIGATIONS. The obligations of Acquiror to
effect the Merger shall be subject to the satisfaction or waiver prior to the
Effective Time of the conditions set forth in this Article X.
(a) TRUTHFULNESS OF SCB'S STATEMENTS; PERFORMANCE OF SCB'S
OBLIGATIONS. Each of the representations, warranties and covenants of SCB and
SC Bank contained in this Agreement shall, in all material respects, be true at
the Effective Time as if made on such date (or on the date when made in the case
of any representation or warranty which specifically relates to an earlier
date); SCB and SC Bank shall have performed, in all material respects, each of
its covenants and agreements contained in this Agreement; and Acquiror shall
have received certificates signed by the Chief Executive Officer and the Chief
Financial Officer of SCB and SC Bank at the Effective Time, to the foregoing
effect.
(b) SHAREHOLDER APPROVAL. This Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the shareholders of
Acquiror in accordance with applicable law.
(c) CONSENTS; APPROVALS; SATISFACTION OF LEGAL REQUIREMENTS. Acquiror
shall have procured, as necessary, the required approval, consent or waiver with
respect to this Agreement and the transactions contemplated hereby (i) by the
FRB, and (ii) by the State Superintendent of Banks pursuant to California law,
and all applicable statutory waiting periods shall have expired; and the parties
shall have procured all other regulatory approvals, consents or waivers of
governmental authorities or other persons that are
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necessary or appropriate to the consummation of the transactions contemplated by
this Agreement; PROVIDED, HOWEVER, that no approval, consent or waiver referred
to in this Section 10.1(c) shall be deemed to have been received if it shall
include any condition or requirement that would be materially burdensome on
Acquiror (on a combined basis giving effect to the transactions contemplated by
this Agreement). All other requirements prescribed by law which are necessary to
the consummation of the transactions contemplated by this Agreement shall have
been satisfied.
(d) ABSENCE OF LITIGATION, INJUNCTION OR OTHER RESTRICTIONS. No litigation
or proceeding shall be pending against any party hereto or any of their
Subsidiaries brought by any governmental agency seeking to prevent consummation
of the transactions contemplated hereby. No party hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger or any transactions
contemplated by this Agreement. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes illegal consummation
of the Merger or any other transaction contemplated by this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement shall have become
effective 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 Commission.
(f) TAX OPINIONS. Acquiror shall have received an opinion of Sullivan &
Cromwell, no later than thirty (30) days from the date hereof, and confirmed
immediately prior to the Effective Time, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion,
the Merger will be a "reorganization" within the meaning of Section 368(a) of
the Code and that each of Acquiror and SCB will be a party to that
reorganization within the meaning of Section 368(b) of the Code.
In rendering its opinion, Sullivan & Cromwell may require and rely upon
representations contained in letters from Acquiror, SCB, SC Bank and others.
(g) "COLD COMFORT" LETTERS. Acquiror and its directors and officers who
sign the Registration Statement shall have received from SCB's independent
certified public accountants "cold comfort" letters dated (i) the date of the
mailing of the Proxy Statement/Prospectus to SCB's shareholders and (ii) shortly
prior to the Effective Time, with respect to certain financial information
regarding SCB, in each case in the form customarily issued by such accountants
at such times in transactions of this type.
(h) "BLUE SKY" AUTHORIZATIONS. Acquiror shall have received all state
securities laws and "Blue Sky" permits and other authorizations necessary to
consummate the transactions contemplated hereby.
(i) POOLING TREATMENT. Acquiror shall have received a letter from KPMG
Peat Marwick LLP, dated the date of the Proxy Statement and confirmed in writing
at the Effective Time, regarding KPMG Peat Marwick LLP's concurrence with
Acquiror's management as to the appropriateness of pooling of interests
accounting for the Merger under Accounting Principles Board Opinion No. 16, if
the Merger is consummated in accordance with this Agreement.
(j) FAIRNESS OPINION. Prior to the solicitation of approval this Agreement
by Acquiror's shareholders, Acquiror shall have received an opinion confirming
the fairness of the terms of the Merger to its shareholders from a financial
point of view.
(k) DISSENTERS. SCB or Acquiror shareholders voting against this Agreement
or giving notice in writing to SCB or Acquiror, as the case may be, at or before
the applicable Meeting that such shareholder dissents from this Agreement, in
the aggregate, shall not hold more than five percent of the SCB Common Stock or
the Acquiror Common Stock, as the case may be.
(l) TAX CERTIFICATE. Acquiror shall have received a conformed copy of the
certificate of satisfaction of the Franchise Tax Board of the State of
California that all taxes imposed by law on SCB have been paid
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or secured, as filed with the Secretary of State for the State of California
pursuant to Section 1103 of the California Corporations Code.
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, either before or after its approval by
the shareholders of SCB and Acquiror:
(a) by the mutual consent of Acquiror and SCB, if the board of directors, or
duly authorized committee thereof, of each so determines;
(b) by Acquiror or SCB, by written notice to the other party if its board so
determines by vote of a majority of the members of its entire board, in the
event of (i) the failure of the shareholders of SCB to approve this Agreement at
the SCB Shareholders' Meeting, (ii) the failure of the shareholders of Acquiror
to approve the Agreement at the Acquiror Shareholders' Meeting, or (iii) a
material breach by the other party hereto of any representation, warranty,
covenant or agreement contained herein, which is not cured within thirty (30)
days after written notice of such breach is given to the party committing such
breach by the other party;
(c) by Acquiror, if SCB's board of directors fails to recommend the approval
of this Agreement at a SCB Shareholders' Meeting as contemplated by Section 6.3
hereof;
(d) by Acquiror or SCB by written notice to the other party if its board of
directors determines by a vote of a majority of the members of its entire board,
in the event that either (i) any approval, consent or waiver of a Governmental
Authority required to permit consummation of the transactions contemplated
hereby shall have been denied or (ii) any Governmental Authority of competent
jurisdiction shall have issued a final, unappealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated by this
Agreement;
(e) by Acquiror or SCB, by written notice to the other party if its board so
determines by vote of a majority of the members of its entire board, in the
event that the Merger is not consummated by December 31, 1997, unless the
failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Agreement by the party
seeking to terminate;
(f) by SCB in the event that, with respect to any Ten Day Period (as defined
below) both (i)(A) the Ten Day Average Price (as defined below) shall be less
than $2.25 per share or (B) both (1) the Ten Day Average Price shall be less
than $2.75 per share and (2) the Acquiror Common Stock Price Percentage (as
defined below) shall be less than the BKX Index Percentage (as defined below)
and (ii) SCB has delivered written notice to Acquiror 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 SCB fails to timely deliver the notice referred to in this
clause (ii), SCB shall have the right to terminate if any such event
subsequently occurs and SCB timely delivers such notice); PROVIDED, HOWEVER,
that, if Acquiror 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
11.1(f) shall be appropriately adjusted;
(g) by SCB, by written notice to Acquiror prior to the approval by the
shareholders of SCB of this Agreement, if SCB receives an Acquisition Proposal
on terms and conditions which the board of directors determines, after receiving
the advice of its outside counsel (i) that to proceed with the Merger will
violate the fiduciary duties of the board of directors to SCB's shareholders and
(ii) to accept such proposal; PROVIDED, HOWEVER, that SCB shall not be entitled
to terminate this Agreement pursuant to this clause (g) unless it shall have
provided Acquiror with written notice of such a possible determination (which
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written notice will inform Acquiror 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.
As used in this Section 11.1, (w) "Acquiror Common Stock Price Percentage"
means the percentage determined by dividing the Ten Day Average Price by $2.75
(as such amount may be adjusted pursuant to clause (f) above); (x) "BKX Index
Percentage" means the percentage determined by dividing (i) the product of (A)
the Keefe Bank Index as of the date of determination times (B) 0.9 by (ii) the
Keefe Bank Index as of the date hereof; (y) "Ten Day Average Price" means the
volume weighted average sales price per share of Acquiror Common Stock for a Ten
Day Period, which volume weighted average shall be determined in a manner
consistent with Section 2.1(b) hereof; and (z) "Ten Day Period" means any period
of ten (10) consecutive Trading Days occurring after the tenth Trading Day
following the CCB Closing Date.
11.2 EFFECT OF TERMINATION. (a) In the event of the termination of this
Agreement by either Acquiror or SCB, as provided above, this Agreement shall
thereafter become void and, subject to the provisions of Section 8.3(b) hereof,
there shall be no liability on the part of any party hereto or their respective
officers or directors, except that any such termination shall be without
prejudice to the rights of any party hereto arising out of the willful breach by
any other party of any covenant or willful misrepresentation contained in this
Agreement.
(b) The parties agree and acknowledge that it is impractical to ascertain
the precise amount of damage to SCB as a result of a failure to consummate the
Merger and the other transactions contemplated hereby due to a termination of
this Agreement by SCB pursuant to clause (iii) of Section 11.1(b) hereof.
Accordingly, in the event of such termination, Acquiror shall pay to SCB $1.25
million plus all costs and expenses incurred by SCB in connection with this
Agreement, up to $500,000, the parties agreeing that such amount will represent
a reasonable estimate of the minimum damage to SCB and not a penalty. The fee
payable pursuant to the foregoing sentence shall be payable by Acquiror to SCB
by wire transfer to an account designated by SCB in writing on or before the
seventh day after it becomes due. Payment of such amount shall be in full
satisfaction of damages to SCB arising from any breach by Acquiror of any of its
representations, warranties, covenants or agreements contained herein.
(c) The parties agree and acknowledge that it is impractical to ascertain
the precise amount of damage to Acquiror as a result of a failure to consummate
the Merger and the other transactions contemplated hereby due to a termination
of this Agreement by Acquiror pursuant to clause (iii) of Section 11.1(b) hereof
or Section 11.1(g). Accordingly, in the event of such termination, SCB shall pay
to Acquiror $1.25 million plus all costs and expenses incurred by Acquiror in
connection with this Agreement, up to $500,000, the parties agreeing that such
amount will represent a reasonable estimate of the minimum damage to Acquiror
and not a penalty. The fee payable pursuant to the foregoing sentence shall be
payable by SCB to Acquiror by wire transfer to an account designated by Acquiror
in writing on or before the seventh day after it becomes due. Payment of such
amount shall be in full satisfaction of damages to Acquiror arising from any
breach by SCB of any of its representations, warranties, covenants or agreements
contained herein.
ARTICLE XII
MISCELLANEOUS
12.1 INTERPRETATIONS. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include", "includes", or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular.
12.2 SURVIVAL. Only those agreements and covenants of the parties which
are expressly made applicable in whole or in part after the Effective Time shall
survive the Effective Time. All other
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representations, warranties, agreements and covenants shall be deemed to be
conditions of this Agreement and shall not survive the Effective Time. If this
Agreement shall be terminated, the agreements of the parties contained in
Section 8.3(b) shall survive such termination.
12.3 WAIVER. Prior to the Effective Time, any provision of this Agreement
may be (i) waived by the party benefitted by the provision or by both parties
(ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto approved by
their respective Boards of Directors (or duly authorized committee thereof),
except that, after the vote by the shareholders of SCB or Acquiror, no principal
term of the Merger may be amended or revised without the approval of the
shareholders of SCB or Acquiror, as the case may be.
12.4 COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument.
12.5 GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of California without regard to the
rules of conflicts of law thereof.
12.6 EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby.
12.7 NOTICE. Any notice required or permitted to be served hereunder shall
be given as follows:
<TABLE>
<S> <C>
To SCB: SC Bancorp
3800 East La Palma Avenue
Anaheim, California 92807
Attention: Larry D. Hartwig
Facsimile Number: (714) 630-4564
With a copy Dewey Ballantine
to: 333 South Hope Street, 30th Floor
Los Angeles, California 90071
Attention: Robert M. Smith
Facsimile Number: (213) 625-0562
To Acquiror: Monarch Bancorp
1251 Westwood Boulevard
Los Angeles, California 90024
Attention: Matthew P. Wagner
Facsimile Number: (310) 477-8611
With a copy Sullivan & Cromwell
to: 444 South Flower Street
Los Angeles, California 90071
Attention: Stanley F. Farrar
Facsimile Number: (213) 683-0458
</TABLE>
Any such notice, request, instruction or other document shall be deemed
received on the date delivered personally or sent by facsimile transmission, or
on the fourth business day after it was sent by registered or certified mail,
postage prepaid. Any of the persons shown above may change its address for
purposes of this Section 12.7 by giving notice in accordance herewith.
12.8 ENTIRE AGREEMENT; ETC. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Nothing in
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this Agreement is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
for Sections 7.4 and 8.11 hereof.
12.9 ASSIGNMENT. This Agreement may not be assigned by any party hereto
without the written consent of the other party.
* * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date first written
above.
SC BANCORP
By: /s/ HAROLD A. BEISSWENGER
-----------------------------------------
Name: Harold A. Beisswenger
TITLE: CHAIRMAN OF THE BOARD
By: /s/ LARRY D. HARTWIG
-----------------------------------------
Name: Larry D. Hartwig
TITLE: CHAIRMAN OF THE BOARD
MONARCH BANCORP
By: /s/ MATTHEW P. WAGNER
-----------------------------------------
Name: Matthew P. Wagner
TITLE: PRESIDENT
A-39
<PAGE>
APPENDIX B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT FIRST CREDIT SUISSE FIRST BOSTON CORPORATION
SUISSE BOSTON 333 South Grand Avenue Telephone 213 253-2000
Los Angeles, CA 90071-1526
</TABLE>
September 9, 1997
Board of Directors
SC Bancorp
3800 East La Palma Avenue
Anaheim, CA 92807-1798
Members of the Board:
In connection with the Registration Statement (including the
Joint Proxy Statement-Prospectus to be sent to stockholders of the
Company in connection with the Merger (as hereinafter defined)) (the
"Registration Statement") you have asked us to advise you with
respect to the fairness to the stockholders of SC Bancorp (the
"Company") from a financial point of view of the consideration to be
received by such stockholders pursuant to the terms of the Merger
Agreement and Plan of Reorganization, dated as of April 29, 1997 and
the Registration Statement (the "Merger Agreement"), by and between
the Company and Western Bancorp, formerly known as Monarch Bancorp
("Western" or the "Acquiror"). The Merger Agreement provides for the
merger (the "Merger") of the Company with and into the Acquiror
pursuant to which the Acquiror will be the surviving corporation and
each outstanding share of common stock, no par value, of the Company
will be converted into the right to receive 0.4556 shares of common
stock of the Acquiror, no par value, ("Western Common Stock"),
subject to the terms and conditions set forth in the Merger
Agreement.
In arriving at our opinion, we have reviewed certain publicly
available business and financial information relating to the
Company, the Acquiror and Santa Monica Bank (including information
relating to the Acquiror's pending acquisition of Santa Monica Bank
("SMO")), as well as the Merger Agreement and the Registration
Statement. We have also reviewed certain other information,
including the SMO Merger Agreement and financial forecasts, provided
to us by the Company and the Acquiror, and have met with the
Company's and the Acquiror's managements to discuss the business and
prospects of the Company and the Acquiror.
We have also considered certain financial and stock market data
of the Company, the Acquiror, and SMO, and we have compared those
data with similar data for other publicly held companies in
businesses similar to the Company and the Acquiror, and we have
considered the financial terms of certain other business
combinations and other transactions which have recently been
effected. We also considered such other information, financial
studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the foregoing
information and have relied on its being complete and accurate in
all material respects. With respect to the financial forecasts, we
have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of
the Company's and the Acquiror's managements as to the future
financial performance of the Company,
B-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT FIRST
SUISSE BOSTON
</TABLE>
the Acquiror and SMO. We have also assumed the Acquiror successfully
closes the pending acquisition of SMO in a manner contemplated by
the SMO Merger Agreement. In addition, we have not been requested to
make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company,
the Acquiror or SMO, nor have we been furnished with any
comprehensive evaluations or appraisals of the Company or the
Acquiror. Our opinion is necessarily based upon financial, economic,
market and other conditions as they exist and can be evaluated on
the date hereof. We are not expressing any opinion as to the actual
value of the Western Common Stock when issued to the Company's
stockholders pursuant to the Merger or the prices at which such
Western Common Stock will trade subsequent to the Merger. In
connection with our engagement, we approached certain third parties
to solicit indications of interest in a possible acquisition of the
Company and held preliminary discussions with certain of these
parties prior to the date of the Merger Agreement.
We have acted as financial advisor to the Company in connection
with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of
the Merger.
In the ordinary course of our business, Credit Suisse First
Boston and its affiliates may actively trade the debt and equity
securities of both the Company and the Acquiror for their own
accounts and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
It is understood that this letter is for the information of the
Board of Directors in connection with its consideration of the
Merger, does not constitute a recommendation to any stockholder as
to how such stockholder should vote on the proposed Merger and is
not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the consideration to be received by the
stockholders of the Company in the Merger is fair to such
stockholders from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
B-2
<PAGE>
APPENDIX C
[LOGO]
Piper Jaffray Inc.
222 South Ninth Street
Minneapolis, MN 55402-3804
612 342-6000
July 14, 1997
Board of Directors
Western Bancorp
4100 Newport Place, Suite 900
Newport Beach, CA 92660
Members of the Board:
This letter relates to the transaction (the "Transaction") pursuant to that
certain Agreement and Plan of Reorganization (the "Agreement") dated April 29,
1997, by and between Western Bancorp ("Western" or the "Buyer"), a California
corporation formerly known as Monarch Bancorp, and SC Bancorp ("SCB"), a
California corporation, pursuant to which SCB will be merged with and into
Western with Western being the surviving corporation in the Transaction.
Pursuant to the Transaction, as more fully described in the Agreement, if the
Average Price (as defined in the Agreement) of Western's Common Stock is less
than or equal to $31,875 and greater than or equal to $23.375, then shares of
common stock, no par value, of SCB ("SCB Common Stock") will be converted into
the right to receive common stock, no par value, of Western ("Western Common
Stock") at the rate per share of $14.25 divided by the Average Price. The
Agreement further provides that if the Average Price would be less than $23.375,
then the Average Price shall be $23.375; and provided further, that if the
Average Price would be greater than $31.875, then the Average Price shall be
$31.875. All such prices have been adjusted to reflect a 1.0 for 8.5 reverse
stock split effective June 3, 1997. In each case, cash will be provided in lieu
of fractional shares. You have requested our opinion as to the fairness, from a
financial point of view, to Western stockholders, of the consideration to be
paid in the Transaction (the "Merger Consideration").
Piper Jaffray Inc. ("Piper Jaffray"), as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, underwritings and secondary
distributions of securities, private placements, and valuations for estate,
corporate and other purposes. Piper Jaffray has neither acted as a manager of
underwritings of Western nor provided other investment banking services for
Western in the past. For our services in rendering this opinion, Western will
pay us a fee and indemnify us against certain liabilities.
In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have:
1. Reviewed the Agreement.
2. Reviewed the Reports on Form 10-KSB, as amended, for Western and its
predecessors for the years ended December 31, 1996, December 31, 1995,
December 31, 1994, and December 31, 1993.
3. Reviewed the Reports on Form 10-K, as amended, for California Commercial
Bankshares ("CCB") for the years ended December 31, 1996, December 31, 1995,
December 31, 1994, and December 31, 1993.
C-1
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Western Bancorp
July 14, 1997
Page 2
4. Reviewed the Reports on Form 10-QSB for Western and its predecessors for the
quarters ended March 31, 1997, September 30, 1996, June 30, 1996 and March
31, 1996.
5. Reviewed the Reports on Form 10-Q for CCB for the quarters ended March 31,
1997, September 30, 1996, June 30, 1996, and March 31, 1996.
6. Reviewed Reports on Form 10-K for SCB for the years ended December 31, 1996,
December 31, 1995, December 31, 1994 and December 31, 1993.
7. Reviewed the Reports on Form 10-Q for SCB for the quarters ended March 31,
1997, September 30, 1996, June 30, 1996 and March 31, 1996.
8. Reviewed financial forecasts for Western for the periods ending December 31,
1997 through 2001 furnished by Western management.
9. Reviewed financial forecasts for SCB for the periods ending December 31, 1997
through 2001 furnished by SCB management and revised by Western management.
10. Visited the headquarters of Western and conducted discussions with certain
members of its management. Topics discussed included, but were not limited
to, the background and rationale of the proposed Transaction, the financial
condition, operating performance, and the balance sheet characteristics of
Western and SCB and the prospects for the combined company after
consummation of the proposed Transaction.
11. Visited the headquarters of SCB and conducted discussions with certain
members of its management. Topics discussed included, but were not limited
to, the background and rationale for the Transaction, the financial
condition, operating performance, balance sheet characteristics and
prospects for SCB.
12. Reviewed the financial terms, to the extent publicly available, of certain
comparable mergers and acquisitions which we deemed relevant.
13. Performed a discounted implied dividend analysis on the financial forecasts
for SCB.
14. Considered the projected pro forma effect of the Transaction on Western's
earnings per share and book value per share for the three years ending
December 31, 1999.
15. Considered the projected relative contribution of SCB to the combined
company for 1996 and the four years ending December 31, 2000.
16. Compared certain financial data of Western and SCB with certain financial
data of companies deemed similar to Western and SCB or within the business
sector in which Western or SCB operates.
17. Reviewed such other financial data, performed such other analyses and
considered such other information as we deemed necessary and appropriate
under the circumstances.
We have relied upon and assumed the accuracy and completeness of the
financial statements and other information provided by Western and SCB or
otherwise made available to us and have not assumed responsibility independently
to verify such information. We have further relied upon the assurances of
Western's and SCB's management that the information provided pertaining to
Western and SCB has been prepared on a reasonable basis and, with respect to
financial planning data, reflects the best currently available estimates and
that they are not aware of any information or facts that would make the
information provided to us incomplete or misleading. Without limiting the
generality of the foregoing, we have assumed that neither Western nor SCB is a
party to any pending transaction, including external financing,
recapitalizations, acquisitions or merger discussions, other than the
Transaction or in the ordinary course of business.
C-2
<PAGE>
Western Bancorp
July 14, 1997
Page 3
In arriving at our opinion, we have not performed nor been furnished any
appraisals or valuations of the specific assets or liabilities of SCB being
conveyed in the Transaction. We express no opinion regarding the liquidation
value of SCB. We have undertaken no independent analysis of any pending or
threatened litigation, possible unasserted claims or other contingent
liabilities, to which either Western, SCB or their affiliates is a party or may
be subject and, at Western's direction and with its consent, our opinion makes
no assumption concerning and therefore does not consider, the possible assertion
of claims, outcomes or damages arising out of any such matters.
Our opinion is necessarily based upon information available to us, facts and
circumstances and economic, market and other conditions as they exist and are
subject to evaluation on the date hereof; events occurring after the date hereof
could materially affect the assumptions used in preparing this opinion. We have
not undertaken to reaffirm or revise this opinion or otherwise comment upon any
events occurring after the date hereof. We express no opinion herein as to the
prices at which shares of Western common stock may trade at any future time.
This opinion is directed to the Board of Directors of Western and does not
constitute a recommendation to any stockholder of Western as to how such
stockholder should vote at the stockholders' meeting to be held in connection
with the Transaction. This opinion shall not be published or otherwise used, nor
shall any public references to Piper Jaffray be made except in accordance with
our engagement letter.
Based upon and subject to the foregoing and based upon such other factors as
we consider relevant, it is our opinion that the Merger Consideration is fair,
from a financial point of view, to Western stockholders, as of the date hereof.
Sincerely,
PIPER JAFFRAY INC.
/s/ PIPER JAFFRAY INC.
C-3
<PAGE>
APPENDIX D
CORPORATIONS CODE
TITLE 1. CORPORATIONS
DIVISION 1. GENERAL CORPORATION LAW
CHAPTER 13. DISSENTERS' RIGHTS
Section 1300. Reorganization or short-form merger; dissenting shares;
corporate purchase at fair market value.
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to vote
on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split, or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this Section and Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described
in subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
Section 1301. Notice to holders of dissenting shares in reorganizations;
demand for purchase; contents of demand
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
D-1
<PAGE>
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
Section 1302. Submission of share certificates for endorsement;
uncertificated securities
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
Section 1303. Payment of agreed price with interest; agreement fixing fair
market value; filing; time of payment
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
D-2
<PAGE>
Section 1304. Action to determine whether shares are dissenting shares or
fair market value limitation; joinder; consolidation; determination of issues;
appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
Section 1305. Report of appraisers; confirmation; determination by court;
judgment payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
Section 1306. Prevention of immediate payment; status as creditors; interest
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
D-3
<PAGE>
Section 1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
Section 1308. Rights of dissenting shareholders pending valuation;
withdrawal of demand for payment
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
Section 1309. Termination of dissenting share and shareholder status
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
Section 1310. Suspension of right to compensation or valuation proceedings;
litigation of shareholders' approval
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
Section 1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
Section 1312. Right of dissenting shareholders to attach, set aside or
rescind merger or reorganization; restraining order or injunction; conditions
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal
D-4
<PAGE>
terms of the reorganization are approved pursuant to subdivision (b) of Section
1202, is entitled to payment in accordance with the terms and provisions of the
approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
D-5
<PAGE>
PROXY
SC BANCORP
3800 East La Palma Avenue
Anaheim, California 92817
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR SPECIAL MEETING OF
SHAREHOLDERS OCTOBER 10, 1997
The undersigned hereby constitutes and appoints H.A. Beisswenger, D.E. Wood
and Larry D. Hartwig, or the majority of them, with full power of substitution,
attorneys and proxies of the undersigned, to represent the undersigned and vote
all shares of the common stock of SC Bancorp ("SCB") which the undersigned would
be entitled to vote if personally present at SCB's Special Meeting of
Shareholders to be held at the Embassy Suites, 3100 East Frontera St., Anaheim,
CA 92806 on October 10, 1997 at 10:00 a.m. and at any postponement or
adjournment thereof, in the following manner:
<TABLE>
<S> <C> <C> <C> <C>
1. APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER / / FOR / / AGAINST / / ABSTAIN
</TABLE>
________________________________________
(CONTINUED ON REVERSE SIDE)
<PAGE>
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT REPRESENTS
WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE CHOICE SPECIFIED ABOVE. IF
NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSAL ONE AND IN
ACCORDANCE WITH THE BEST JUDGMENT OF THE DESIGNATED INDIVIDUALS WITH RESPECT TO
MATTERS INCIDENT TO THE CONDUCT OF THE MEETING AND ANY OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THE MEETING.
Please date and sign exactly as your name or names appear hereon. If more
than one owner, all should sign. When signing as attorney, executor,
administrator, trustee or guardian, give your full title as such. If the
signatory is a corporation or partnership, sign the full corporate or
partnership name by a duly authorized officer or partner.
Dated: _________________, 1997
______________________________
Signature
______________________________
Signature
______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE
<PAGE>
PROXY
WESTERN BANCORP
4100 Newport Place, Suite 900
Newport Beach, California 92660
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR SPECIAL MEETING OF
SHAREHOLDERS OCTOBER 10, 1997
The undersigned hereby constitutes and appoints Hugh S. Smith, Jr. and
Arnold C. Hahn, or either of them, with full power of substitution, attorneys
and proxies of the undersigned, to represent the undersigned and vote all shares
of the common stock of Western Bancorp ("Western") which the undersigned would
be entitled to vote if personally present at Western's Special Meeting of
Shareholders to be held at 4100 Newport Place, Third Floor, Newport Beach,
California 92660 on October 10, 1997 at 10:30 a.m. and at any postponement or
adjournment thereof, in the following manner:
1. APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER
/ / FOR / / AGAINST / / ABSTAIN
2. APPROVAL OF AN AMENDMENT TO WESTERN'S BYLAWS TO CHANGE THE AUTHORIZED NUMBER
OF DIRECTORS
/ / FOR / / AGAINST / / ABSTAIN
________________________________________
(CONTINUED ON REVERSE SIDE)
<PAGE>
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT REPRESENTS
WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE CHOICES SPECIFIED ABOVE. IF
NO CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS ONE AND TWO AND
IN ACCORDANCE WITH THE BEST JUDGMENT OF THE DESIGNATED INDIVIDUALS WITH RESPECT
TO MATTERS INCIDENT TO THE CONDUCT OF THE MEETING AND ANY OTHER MATTERS WHICH
MAY PROPERLY COME BEFORE THE MEETING.
Please date and sign exactly as your name or names appear hereon. If more
than one owner, all should sign. When signing as attorney, executor,
administrator, trustee or guardian, give your full title as such. If the
signatory is a corporation or partnership, sign the full corporate or
partnership name by a duly authorized officer or partner.
Dated: _________________, 1997
______________________________
Signature
______________________________
Signature
______________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the CGCL authorizes a court to award, or a corporation's
Board of Directors to grant, indemnity to directors, officers and employees in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. Articles Five and Six of Western's Restated
Articles of Incorporation (Exhibit 3.1) and Article VI of Western's Restated
Bylaws (Exhibit 3.2) provide for indemnification of its directors, officers,
employees, and other agents to the fullest extent permitted by the CGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of April 29, 1997, between Western and SCB (Appendix
A to this Registration Statement on Form S-4 incorporated by reference)
3.1 Restated Articles of Incorporation of Western (Exhibit 3.6 of Registration Statement No. 333-26915
incorporated by reference)
3.2 Form of Restated Bylaws of Western
4.1 Form of Certificate representing shares of Western Common Stock (Exhibit 3.1 of June 19, 1997
Current Report on Form 8-K incorporated by reference)
5.1 Opinion of Sullivan & Cromwell
8.1 Tax Opinion of Sullivan & Cromwell
8.2 Tax Opinion of Dewey Ballantine
23.1 Consent of KMPG Peat Marwick LLP
23.2 Consent of Deloitte & Touche LLP (SC Bancorp)
23.3 Consent of Deloitte & Touche LLP (California Commercial Bankshares)
23.4 Consent of Sullivan & Cromwell (included in opinion filed as Exhibit 5.1 hereto)
23.5 Consent of Dewey Ballantine for Tax Opinion filed as Exhibit 8.2 hereto (included therein)
23.6 Consent of Vavrinek, Trine, Day & Co.
23.7 Consent of Sullivan & Cromwell for Tax Opinion filed as Exhibit 8.1 hereto
23.8 Consent of Piper Jaffray
23.9 Consent of Credit Suisse First Boston Corporation
23.10 Consent of Deloitte & Touche LLP (Santa Monica Bank)
23.11 Consent of Arthur Andersen LLP (Santa Monica Bank)
24.1 Power of Attorney (included after signature page)
99.1 Consent of Harold A. Beisswenger
99.2 Consent of Larry D. Hartwig
99.3 Consent of William C. Greenbeck
99.4 Consent of Donald E. Wood
</TABLE>
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(b) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Newport Beach, State of
California on September 8, 1997.
WESTERN BANCORP
By: /s/ HUGH S. SMITH, JR.
-----------------------------------------
Name: Hugh S. Smith, Jr.
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Hugh S. Smith, Jr. and Arnold C. Hahn, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capabilities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and power of attorney have been signed by the following
persons in the capacities indicated and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- ----------------------
<S> <C> <C>
/s/ HUGH S. SMITH, JR.
- ------------------------------ Chairman, Chief Executive September 8, 1997
Hugh S. Smith, Jr. Officer and Director
/s/ ARNOLD C. HAHN Executive Vice President
- ------------------------------ and September 8, 1997
Arnold C. Hahn Chief Financial Officer
/s/ MATTHEW P. WAGNER
- ------------------------------ President and Director September 8, 1997
Matthew P. Wagner
/s/ RICE E. BROWN
- ------------------------------ Director September 8, 1997
Rice E. Brown
/s/ JOSEPH J. DIGANGE
- ------------------------------ Director September 8, 1997
Joseph J. Digange
/s/ JOHN M. EGGEMEYER
- ------------------------------ Director September 9, 1997
John M. Eggemeyer
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- ----------------------
<S> <C> <C>
/s/ WILLIAM H. JACOBY
- ------------------------------ Director September 8, 1997
William H. Jacoby
/s/ ROBERT L. MCKAY
- ------------------------------ Director September 9, 1997
Robert L. McKay
/s/ JOHN W. ROSE
- ------------------------------ Director September 8, 1997
John W. Rose
/s/ MARK H. STUENKEL
- ------------------------------ Director September 8, 1997
Mark H. Stuenkel
/s/ DALE E. WALTER
- ------------------------------ Director September 8, 1997
Dale E. Walter
</TABLE>
II-4
<PAGE>
EXHIBIT 3.2
FORM OF
RESTATED BYLAWS
OF
MONARCH BANCORP
(a California corporation)
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The board of directors shall fix
the location of the principal executive office of the corporation at any
place within or outside the State of California. If the principal executive
office is located outside this state, and the corporation has one or more
business offices in this state, the board of directors shall fix and
designate a principal business office in the State of California.
Section 2. OTHER OFFICES. The board of directors may establish
other business offices at any place or places where the corporation is
qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1. PLACE OF MEETING. Meetings of shareholders shall be
held at any place within or outside the State of California designated by the
board of directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meetings of shareholders
shall be held on the second Wednesday of May at 3:00 P.M., local time;
provided, however, that should said day fall upon a legal holiday, then any
such annual meeting of shareholders shall be held at the same time and place
on the next day thereafter ensuing which is a full business day; provided
further, that the board of directors may, by resolution adopted prior to the
date fixed herein for annual meetings, change the time and date for any
annual meeting of the shareholders to any day which is not a legal holiday
and is not more than fifteen (15) months or less than nine (9) months after
the date of the preceding annual meeting of shareholders. At each annual
meeting directors shall be elected, and any other proper business may be
transacted.
<PAGE>
Section 3. SPECIAL MEETING. A special meeting of the
shareholders may be called at any time by the board of directors, or by the
chairman of the board, or by the president, or by one or more shareholders
holding shares in the aggregate entitled to cast not less than 10% of the
votes at the meeting.
If a special meeting is called by any person or persons other than
the board of directors, the request shall be in writing, specifying the time
of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or
by telegraphic or other facsimile transmission to the chairman of the board,
the president, any vice president, or the secretary of the corporation. The
officer receiving the request shall cause notice to be promptly given to the
shareholders entitled to vote, in accordance with the provisions of Sections
4 and 5 of this Article II, that a meeting will be held at the time requested
by the person or persons calling the meeting, not less than thirty-five (35)
nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after receipt of the request, the
person or persons requesting the meeting may give the notice. Nothing
construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the board of directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of
meetings of shareholders shall be sent or otherwise given in accordance with
Section 5 of this Article II not less than ten (10) nor more than sixty (60)
days before the date of the meeting. The notice shall specify the place, date
and hour of the meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, or (ii) in the case of the annual
meeting, those matters which the board of directors, at the time of giving the
notice, intends to present for action by the shareholders. The notice of any
meeting at which directors are to be elected shall include the name of any
nominee or nominees whom, at the time of the notice, management intends to
present for election.
If action is proposed to be taken at any meeting for approval of (i)
a contract or transaction in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the Corporations Code of
California, (ii) an amendment of the articles of incorporation, pursuant to
Section 902 of that Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of that Code, (iv) a voluntary dissolution of the
corporation, pursuant to Section 1900 of that Code, or (v) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of that Code, the notice shall also state
the general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice
of any meeting of shareholders shall be given either personally or by
first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears
-2-
<PAGE>
on the corporation's books or is given, notice shall be deemed to have been
given if sent to that shareholder by first-class mail or telegraphic or other
written communication to the corporation's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
shareholder at that address, all future notices or reports shall be deemed to
have been duly given without further mailing if these shall be available to
the shareholder on written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the date of
the giving of that notice.
An affidavit of the mailing or other means of giving any notice of
any shareholders' meeting shall be executed by the secretary, assistant
secretary, or any transfer agent of the corporation giving the notice, and
shall be filed and maintained in the minute book of the corporation.
Section 6. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be
adjourned from time to time by the vote of a majority of the shares
represented at that meeting, either in person or by proxy, but in the absence
of a quorum, no other business may be transacted at that meeting, except as
provided in Section 6 of this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from
the date set for the original meeting, in which case the board of directors
shall set a new record date. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Sections 4 and 5 of this Article II. At
any adjourned
-3-
<PAGE>
meeting the corporation may transact any business which might have been
transacted at the original meeting.
Section 8. VOTING. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the provisions
of Section 11 of this Article II, subject to the provisions of Sections 702
to 704, inclusive, of the Corporations Code of California (relating to voting
shares held by a fiduciary, in the name of a corporation, or in joint
ownership). The shareholders' vote may be by voice vote or by ballot;
provided, however, that any election for directors must be by ballot if
demanded by any shareholder before the voting has begun. On any matter other
than elections of directors, any shareholder may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote
them against the proposal, but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect
to all shares that the shareholder is entitled to vote. If a quorum is
present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on any matter (other than the election of
directors) shall be the act of the shareholders, unless the vote of a greater
number of voting by classes is required by California General Corporation Law
or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or
more candidates a number of votes greater than the number of the
shareholder's shares) unless the candidates' names have been placed in
nomination prior to commencement of the voting and a shareholder has given
notice prior to commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
and give one candidate a number of votes equal to the number of directors to
be elected multiplied by the number of votes to which that shareholder's
shares are entitled, or distribute the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit.
The candidates receiving the highest number of votes, up to the number of
directors to be elected, shall be elected.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though
had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting, or an approval of the minutes. The waiver of notice or consent need
not specify either the business to be transacted or the purpose of any annual
or special meeting of shareholders, except that if action is taken or
proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 4 of this Article II, the waiver of notice or
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consent shall state the general nature of the proposal. All such waivers,
consents or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver
of notice of that meeting, except when the person objects, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT
MEETING. Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted. In the case
of election of directors, such a consent shall be effective only if signed by
the holders of all outstanding shares entitled to vote for the election of
directors; provided, however, that a director may be elected at any time to
fill a vacancy on the board of directors, except for a vacancy created by the
removal of a director, that has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. A vacancy in the board of
directors created by the removal of a director may only be filled by the vote
of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the unanimous written consent of
the holders of the outstanding shares. All such consents shall be filed with
the secretary of the corporation and shall be maintained in the corporate
records. Any shareholder giving a written consent, or the shareholder's
proxy holders, or a transferee of the shares or a personal representative of
the shareholder of their respective proxy holders, may revoke the consent by
a writing received by the secretary of the corporation before written
consents of the number of shares required to authorize the proposed action
have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a
meeting. This notice shall be given in the manner specified in Section 5 of
this Article II. In the case of approval of (i) contracts or transactions in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Corporations Code of California, (ii) indemnification of
agents of the corporation, pursuant to Section 317 of the Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of that Code, and
(iv) a distribution in dissolution other than in accordance with the rights
of outstanding preferred shares, pursuant to Section 2007 of that Code, the
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notice shall be given at least ten (10) days before the consummation of any
action authorized by that approval.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND
GIVING CONSENTS. For purposes of determining the shareholders entitled to
notice of any meeting or to vote or entitled to give consent to corporate
action without a meeting, the board of directors may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of any such meeting nor more than sixty (60) days
before any such action without a meeting, and in this event only shareholders
of record on the date so fixed are entitled to notice and to vote or give
consents, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date, except as otherwise
provided in the California General Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on
the business day next preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting,
(i) when no prior action by the board has been taken, shall be the day
on which the first written consent is given, or (ii) when prior action
of the board has been taken, shall be at the close of business on the
day on which the board adopts the resolution relating to that action,
or the sixtieth (60th) day before the date of such other action,
whichever is later.
Section 12. PROXIES. Every person entitled to vote for directors
or on any other matter shall have the right to do so either in person or by
one or more agents authorized by a written proxy signed by the person and
filed with the secretary of the corporation. A proxy shall be deemed signed
if the shareholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission, or otherwise) by the
shareholder or the shareholder's attorney-in-fact. A validly executed proxy
which does not state that it is irrevocable shall continue in full force and
effect unless (i) revoked by the person executing it, before the vote
pursuant to that proxy, by a writing delivered to the corporation stating
that the proxy is revoked, or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by, the person executing the
proxy; or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy
is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy. The revocability of a proxy
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that states on its face that it is irrevocable shall be governed by the
provisions of Section 705(e) and 705(f) of the Corporations Code of
California.
Section 13. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the board of directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any shareholder or a shareholder's
proxy shall, appoint inspectors of election at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting on the request of one or more shareholders or proxies, the
holders of a majority of shares or their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any shareholder or a
shareholder's proxy shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to any provisions of the California
General Corporation Law and any limitations in the articles of incorporation and
these bylaws relating to action required to be approved by the shareholders or
by the outstanding
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shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of
directors of the corporation shall not be less than nine (9) nor more than
sixteen (16) until changed by an amendment of the articles of incorporation or
by a bylaw amending this Section 2, duly adopted by the vote or written consent
of holders of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of action by written consent,
are equal to more than 16 2/3% of the outstanding shares entitled to vote. The
exact number of directors shall be fixed from time to time, within the limits
specified in the articles of incorporation or in this Section 2: (1) by
resolution duly adopted by the board of directors; or (ii) by a bylaw or
amendment thereof duly adopted by the vote of a majority of the shares entitled
to vote represented in a duly held meeting at which a quorum is present, or by
the written consent of the holders of a majority of the outstanding shares
entitled to vote, or by the board of directors; or (iii) by approval of the
shareholders (as defined in Section 153 of the General Corporation Law).
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
shall be elected at each annual meeting of the shareholders to hold office until
the next annual meeting. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4. VACANCIES. Vacancies in the board of directors may
be filled by a majority of the remaining directors, though less than a
quorum, or by a sole remaining director, except that a vacancy created by the
removal of a director by the vote or written consent of the shareholders or
by court order may be filled only by the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or by the unanimous written consent of holders of the outstanding
shares entitled to vote. Each director so elected shall hold office until the
next annual meeting of the shareholders and until a successor has been
elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist in event of the death, resignation or removal of any director, or if the
board of directors by resolution declares vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of directors is increased, or if any director or
directors are elected, to elect the number of directors to be voted for at that
meeting.
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The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, by any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors of
the corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meeting for the board of directors may be held at any place within or outside
the State of California that has been designated from time to time by resolution
of the board. In the absence of such a designation, regular meetings shall be
held at the principal executive office of the corporation. Special meetings of
the board may be held at any place within or outside the State of California
that has been designated in the notice of meeting or, if not stated in the
notice or there is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such directors shall
be deemed to be present in person at the meeting.
Section 6. ANNUAL MEETING. Immediately following each annual
meeting of shareholders, the board of directors shall hold a regular meeting for
the purpose of organization, any desired election of officers, and the
transaction of other business. Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the
board of directors shall be held without call at such time as shall from time to
time be fixed by the board of directors. Such regular meetings may be held
without notice.
Section 8. SPECIAL MEETINGS. Special Meetings of the board of
directors for any purpose or purposes shall be called at any time by the
chairman of the board or the president or any vice president or the secretary or
any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least for (4) days before the
time of the holding of the meeting. In case the notice
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is delivered personally, or by telephone or telegram, it shall be delivered
personally or by telephone to the telegraph company at least forty-eight (48)
hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose of the meeting nor the place if the meeting is to be held at
the principal executive office of the corporation.
Section 9. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except to
adjourn as provided in Section 11 of this Article III. Every act or decision
done or made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the board of
directors, subject to the provisions of Section 310 of the Corporations Code of
California (as to approval of contracts or transactions in which a director has
a direct or indirect material financial interest), Section 311 of that Code (as
to appointment of committees), and Section 317(e) of that Code (as to
indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.
Section 10. WAIVER OF NOTICE. The transactions of any meeting of
the board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any director who
attends the meeting without protesting before or at its commencement, the lack
of notice to that director.
Section 11. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting, in the manner specified
in Section 8 of this Article III, to the directors who were not present at the
time of the adjournment.
Section 13. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the board of directors may be taken without a meeting,
if all members of the board shall individually or collectively consent in
writing to that action. Such action by
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written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent or consents shall be filed with the
minutes of the proceedings of the board.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their services,
and such reimbursement of expenses, as may be fixed or determined by resolution
of the board. This Section 14 shall not be construed to preclude any director
from serving the corporation in any other capacity as an officer, agent,
employee, or otherwise, and receiving compensation for those services.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The board of directors may,
by resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any committee, to the extent provided
in the resolution of the board, shall have all the authority of the board,
except with respect to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholders' approval of
the outstanding shares;
(b) the filing of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on
the board or on any committee;
(d) the amendment or repeal of by-laws or the adoption of new
by-laws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range
determined by the board of directors; or
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(g) the appointment of any other committees of the board of
directors or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action
of committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these by-laws, Sections 5 (place of meeting), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action without
meeting), with such changes in the context of those by-laws as are necessary to
substitute the committee and its members for the board of directors and its
members, except that the time of regular meetings of committees maybe determined
either by resolution of the board of directors or by resolution of the
committee; special meetings of committees may also be called by resolution of
the board of directors; and notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
by-laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article. Any number of offices may be
held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the board of
directors, and each shall serve at the pleasure of the board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The board of directors may
appoint, and may empower the president to appoint, such officers as the business
of the corporation may require, each of whom shall hold office, for such period,
have such authority and perform such duties as are provided in the by-laws or as
the board of directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed,
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either with or without cause, by the board of directors, at any regular or
special meeting of the board, or, except in case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because
of death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these by-laws for regular appointments to
that office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if
such an officer be elected, shall, if present, preside at meetings of the board
of directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the board of directors or prescribed by the
by-laws. If there is no president, the chairman of the board shall in addition
be the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article V.
Section 7. PRESIDENT. Subject to such supervisory powers, if any,
as may be given by the board of directors to the chairman of the board, if there
be such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the chairman of the board, or if there be none, at all meetings of
the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or the by-laws.
Section 8. VICE PRESIDENT. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
board of directors or, if not ranked, a vice president designated by the board
of directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the by-laws, and the president, or the chairman of the
board.
Section 9. SECRETARY. The secretary shall keep or cause to be
kept, at the principal executive office or such other place as the board of
directors, committees of
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directors may direct, a book of minutes of all meeting and actions of directors,
committees of directors, and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice given,
the names of those present at directors' meetings, the number of shares present
or represented at shareholders' meetings, and the proceedings.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, a share register, or a duplicate share register, showing the names of
the shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given , notice of all the
meetings of the shareholders and of the board of directors required by the
by-laws or by law to be given, and he shall keep the seal of the corporation if
one be adopted, in safe custody, and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or by the
by-laws.
Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings, and shares.
The books of account shall at all reasonable times be open to inspection by any
director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or the by-laws.
Section 11. DISALLOWANCE OF COMPENSATION AND EXPENSE DEDUCTIONS.
Any payments made to an officer of the corporation, such as salary, commission,
bonus, interest, rent, travel or entertainment expense incurred by such officer,
which shall be disallowed in whole or in part as a deductible expense by the
Internal Revenue Service or the California Franchise Tax Board, shall be
reimbursed by such officer to the corporation to the full extent of such
disallowance. It shall be the duty of the directors, as a board, to enforce
payment of such amount disallowed. In lieu of payment by the officer, subject
to the determination of the directors, proportionate amounts may be withheld
from his future compensation payments until the amount owed to the corporation
has been recovered.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a director, officer,
employee, or other agent of this corporation, or is or was serving at the
request of this corporation as a director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of this corporation or
of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses:
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 4 or Section 5(c) of this Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This
corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any proceeding (other than an action by or in the right
of this corporation) by reason of the fact that such person is or was an agent
of this corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding if
that person acted in good faith and in a manner that person reasonably believed
to be in the best interests of this corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of that person was
unlawful. The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendre or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
corporation or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE CORPORATION. This corporation shall
indemnify any person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action by or in the right of
this corporation to procure a judgment in its favor by reason of the fact
that that person is or was an agent of this corporation, against expenses
actually and reasonably incurred by that person in connection with the
defense or settlement of that action if that person acted in good faith, in a
manner that person believed to be in the best interests of this corporation
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances. No
indemnification shall be made under this Section 3:
(a) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable to this corporation in
the
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performance of that person's duty to this corporation, unless and only
to the extent that the court in which that action was brought shall
determine upon application that, in view of all the circumstances of
the case, that person is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this corporation has been successful on the merits of defense of any
proceeding referred to in Section 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of
this Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article, by:
(a) A majority vote of a quorum consisting of directors who are
not parties to the proceeding;
(b) Approval by the affirmative vote of a majority of the shares
of this corporation entitled to vote represented at a duly held
meeting at which a quorum is present or by the written consent of
holders of a majority of the outstanding shares entitled to vote. For
this purpose, the shares owned by the person to be indemnified shall
not be considered outstanding or entitled to vote thereon; or
(c) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the attorney or
other person rendering services in connection with the defense,
whether or not such application by the agent, attorney, or other
person is opposed by this corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending
any proceeding may be advanced by this corporation before the final disposition
of the proceeding on receipt of an undertaking by or on behalf of the agent to
repay the amount
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<PAGE>
of the advance unless it shall be determined ultimately that the agent is
entitled to be indemnified as authorized in this Article.
Section 7. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
directors and officers of this corporation or any subsidiary hereof may be
entitled by contract or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Section 4 or Section 5(c), in any
circumstances where it appears:
(a) That it would be inconsistent with a provision or the
articles, a resolution of the shareholders, or an agreement in effect
at the time of the accrual of the alleged cause of action asserted in
the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by
the board of directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
corporation would have the power to indemnify the agent against that liability
under the provisions of this Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of the
corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
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<PAGE>
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep at its principal executive office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number and class of shares held
by each shareholder.
Shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five (5) days' prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the shareholders' names and addresses who
are entitled to vote for the election of directors, and their shareholders, as
of the most recent record date for which that list has been compiled or as of a
date specified by the shareholder after the date of demand. This list shall be
made available to any such shareholder by the transfer agent on or before the
later of five (5) days after the demand is received or the date specified in the
demand as of the date as of which the list is to be compiled. The record of
shareholders shall also be open to inspection on the written demand of any
shareholder or holder of a voting trust certificate, at any time during usual
business hours, for a purpose reasonably related to the holder's interests as a
shareholder of a voting trust certificate. Any inspection and copying under
this Section 1 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The corporation
shall keep at its principal executive office, or if its principal executive
office is not in the State of California, at its principal business office in
this state, the original or a copy of the by-laws as amended to date, which
shall be open to inspection by the shareholders at all reasonable times during
office hours. If the principal executive office of the corporation is outside
the State of California and the corporation has no principal business office in
this state, the secretary shall, upon the written request of any shareholder,
furnish to that shareholder a copy of the by-laws as amended to date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the shareholders
and the board of directors and any committee or committees of the board of
directors shall be kept at such place or places designated by the board of
directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in
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written form or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection upon
the written demand of any shareholder or holder of a voting trust certificate,
at any reasonable time during usual business hours, for a purpose reasonably
related to the holder's interests as a shareholder or as the holder of a voting
trust certificate. The inspection may be made in person or by an agent or
attorney, and shall include the right to copy and make extracts. These rights
of inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. This inspection by a director may be made in
person or by agent or attorney and the right of inspection includes the right to
copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The board of directors
shall cause an annual report to be sent to the shareholders not later than one
hundred twenty (120) days after the close of the fiscal year adopted by the
corporation. This report shall be sent at least fifteen (15) days before the
annual meeting of shareholders to be held during the next fiscal year and in the
manner specified in this Section 5 of Article II of the by-laws for giving
notice to shareholders of the corporation. The annual report shall contain a
balance sheet as of the end of the fiscal year and an income statement and
statement of changes in financial position for the fiscal year, accompanied by
any report of independent accountants or, if there is no such report, the
certificate of an authorized officer of the corporation that the statements were
prepared without audit from the books and records of the corporation.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as of
the end of each such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for twelve
(12) months and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and a balance
sheet of the corporation as of the end of that period, the chief financial
officer shall cause that statement to be prepared, if not already prepared, and
shall deliver personally or mail that statement or statements to the person
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<PAGE>
making the request within thirty (30) days after the receipt of the request. If
the corporation has not sent to the shareholders its annual report for the last
fiscal year, this report shall likewise be delivered or mailed to the
shareholder or shareholders within thirty (30) days after the request.
The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual, or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The
corporation shall, during the period commencing on July 1 of each year and
ending on December 31 of each year, file with the Secretary of State of the
State of California, on the prescribed form, a statement setting forth the
authorized number of directors, the names and complete business or residence
addresses of all incumbent directors, the names and complete business or
residence addresses of the chief executive officer, secretary, and chief
financial officer, the street address of its principal executive office and
principal business office in this state, and the general type of business
constituting the principal business activity of the corporation, together with a
designation of the agent of the corporation for the purpose of service of
process, all in compliance with Section 1502 of the Corporations Code of
California.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the board of directors may
fix, in advance, a record date, which shall not be more than sixty (60) days
before any such action, and in that case only shareholders of record on the date
so fixed are entitled to receive the dividend, distribution, or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date so
fixed, except as otherwise provided in the California General Corporation Law.
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<PAGE>
If the board of directors does not fix a record date, the record date
for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks,
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the board of directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The
board of directors, except as otherwise provided in these by-laws, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and this
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.
Section 4. CERTIFICATE FOR SHARES. A certificate or certificates
for shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares are fully paid, and the board of directors
may authorize the issuance of certificates of shares as partly paid provided
that these certificates shall state the amount of the consideration to be paid
for them and the amount paid. All certificates shall be signed in the name of
the corporation by the chairman of the board or vice chairman of the board or
the president or vice president and by the chief financial officer or an
assistant treasurer or the secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the shareholder.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent, or registrar as of the date of issue.
Section 5. LOST CERTIFICATES. Except as provided in this
Section 5, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the corporation and cancelled at
the same time. The board of directors may, in case any share certificate or
certificate for any other security is lost, stolen, or destroyed, authorize the
issuance of a replacement certificate on such terms and conditions as the board
may require, including provision for indemnification of the corporation secured
by a bond or other adequate security sufficient to protect the corporation
against any claim that may be made against it, including any expense or
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<PAGE>
liability, on account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
chairman of the board, the president, or any vice president, or any other person
authorized by resolution of the board of directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any and
all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to these
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised either by such officers in person or by any other person authorized to
do so by proxy duly executed by these officers.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the California General Corporation Law shall govern the
construction of these by-laws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New by-laws may be adopted
or these by-laws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding share entitled to vote; provided,
however, that if the articles of incorporation of the corporation set forth the
number of authorized directors of the corporation, the authorized number of
directors may be changed only by an amendment of the articles of incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the right of
shareholders as provided in Section 1 of this Article IX, to adopt, amend, or
repeal by-laws, by-laws may be adopted, amended, or repealed by the board of
directors; provided, however, that the board of directors may adopt a by-law or
amendment of a by-law changing the authorized number of directors only for the
purpose of fixing the exact number of directors within the limits specified in
the articles of incorporation or in Section 2 of Article III of these by-laws.
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EXHIBIT 5.1
September 9, 1997
Western Bancorp,
4100 Newport Place,
Suite 900,
Newport Beach, California 92660.
Dear Sirs:
In connection with the registration under the Securities Act of 1933
(the "Act") of 3,663,441 shares (the "Securities") of Common Stock, without par
value, of Western Bancorp, a California corporation (the "Company"), we, as your
special counsel, have examined such corporate records, certificates and other
documents, and such questions of law, as we have considered necessary or
appropriate for the purposes of this opinion. Upon the basis of such
examination, we advise you that, in our opinion, when the registration statement
relating to the Securities (the "Registration Statement") has become effective
under the Act, the terms of the sale of the Securities have been duly
established in conformity with the Company's articles of incorporation, and the
Securities have been duly issued and sold as contemplated by the Registration
Statement and upon consummation of the merger of SC Bancorp with and into the
<PAGE>
Western Bancorp -2-
Company, the Securities will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of California, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction.
We have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Validity
of Western Common Stock" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
Sullivan & Cromwell
<PAGE>
Exhibit 8.1
[LETTERHEAD]
May 29, 1997
Monarch Bancorp,
1251 Westwood Blvd.,
Los Angeles, California 90024.
Gentlemen:
We have acted as counsel to Monarch Bancorp, a California corporation
("Acquiror"), in connection with the merger of SC Bancorp ("SCB") with and into
Acquiror as contemplated by the Agreement and Plan of Reorganization dated as of
April 29, 1997, by and between Acquiror and SCB (the "Merger Agreement"), and we
render this opinion to you pursuant to Section 10.1(f) of the Merger Agreement.
Capitalized terms not defined herein have the meanings assigned to them in the
Merger Agreement.
For purposes of the opinion set forth below, we have relied, with your
consent, upon the accuracy and completeness of (i) the representations and other
statements of fact set forth in the Merger Agreement and (ii) the letters of
representation, dated May 29, 1997, that we have received from Acquiror and SCB.
With your consent, we have
<PAGE>
Monarch Bancorp -2-
not attempted to verify independently the accuracy of any information in these
documents and have assumed that the statements and representations contained
therein will be true from the date of this opinion through the Effective Time.
In addition, in connection with this opinion we have assumed, with your consent,
that the Merger will be effected in accordance with the Merger Agreement and
that all the provisions of the Merger Agreement will be performed in accordance
with their terms.
On the basis of the foregoing, and our consideration of such other
matters of law and fact as we have considered necessary or appropriate, we
advise you that, in our opinion, the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and Acquiror and SCB will each
be a "party to a reorganization" within the meaning of Section 368(b) of the
Code.
The tax consequences described above may not apply to SCB shareholders that
acquired shares upon the exercise of employee stock options or otherwise as
compensation, that hold their shares as part of a "straddle" or "conversion
transaction" or that are insurance companies, securities dealers, financial
institutions or foreign persons.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
Exhibit 8.2
[LETTERHEAD]
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
May 29, 1997
SC Bancorp
3800 East La Palma Avenue
Anaheim, California 92807
Dear Sirs:
We have acted as your special counsel in connection with the proposed
transaction (the "Merger") contemplated by the Agreement and Plan of
Reorganization by and between Monarch Bancorp ("Acquiror") and SC Bancorp
(the "Company"), dated as of April 29, 1997 (the "Merger Agreement").
You have requested our preliminary opinions as to certain federal income
tax consequences of the Merger. In rendering these preliminary opinions, we
have reviewed (i) the Merger Agreement, (ii) the representation letters
provided by the Company and the Acquiror, each dated as of even date
herewith, and (iii) such other documents and corporate records as we have
deemed appropriate. For purposes of the opinions set forth below, we have
assumed and relied, with your consent, upon the accuracy and completeness as
of date hereof of the statements and representations contained in the
representation letters received from you and from Acquiror and in other
transaction documents. Moreover, we have assumed with your consent that (i)
each such statement and representation will continue to be accurate and
complete as of the Effective Time; (ii) the Merger will be consummated in
accordance with the provisions of the Merger Agreement; and (iii) no material
condition to the closing of the Merger will be waived. We have neither
investigated nor verified the accuracy and completeness of those
representations or documents. Copies of the representation letters are
attached hereto and incorporated herein by reference. We have further assumed
the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as copies.
In rendering our opinions, we also have considered and relied upon the
Internal Revenue Code of 1986, as amended (the "Code"), administrative
rulings, judicial decisions, regulations (including Treasury regulations)
and other such authorities as we have deemed appropriate. The statutory
provisions, regulations, interpretations, and other authorities upon which
our opinions are based are subject to change, and any such change could apply
retroactively. Our opinions, however, assume that no such authority will
change in any way that would affect any issue or transaction that is a
subject of our opinions.
<PAGE>
SC Bancorp
May 29, 1997
Page 2
On the basis and subject to the accuracy of (i) the statements and
representations contained in the materials referred to above and (ii) the
above assumptions, and our considerations of such other matters as we have
deemed necessary, it is our opinion that, for U.S. federal income tax
purposes:
1) The Merger will qualify as a reorganization under section 368(a) of the
Code, and
2) Each of Acquiror and SCB will be a party to that reorganization within
the meaning of section 368(b) of the Code.
Except for the opinions set forth above, we express no opinion as to any
other tax consequences of the Merger to any party under federal, state,
local, or foreign laws. These opinions may not be used, circulated, quoted or
otherwise referred to for any purpose, or relied upon by any other person for
any purpose without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to a
Registration Statement to be filed by Acquiror, pursuant to the Securities
Act of 1933, as amended (the "Act") covering the shares of common stock of
the Acquiror issuable in the Merger (the "Registration Statement"), and the
reference to us in the Prospectus included in the Registration Statement. In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Dewey Ballantine
DEWEY BALLANTINE
<PAGE>
MONARCH BANCORP
1251 Westwood Blvd.
Los Angeles CA 90024
May 29, 1997
Dewey Ballantine,
1775 Pennsylvania Avenue, NW
Washington, NC 20006
Re: Agreement and Plan of Reorganization by and between
Monarch Bancorp ("Acquiror") and SC Bancorp ("SCB"),
dated as of April 29, 1997, (the "Merger Agreement")
Dear Sirs:
We understand that you will be rendering an opinion that the merger
of SCB with and into Acquiror as contemplated by the Merger Agreement
(the "Merger") will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that Acquiror and SCB will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
connection with your preparation of this opinion, we hereby represent
that the following facts are true, correct, and complete in all
respects. Capitalized terms used and not defined herein have the
meanings assigned to them in the Merger Agreement.
<PAGE>
Dewey Ballantine
May 29, 1997
Page 2
1. The fair market value of Acquiror Common Stock and
other consideration received by each SCB shareholder will be
approximately equal to the fair market value of the SCB stock
surrendered in the Merger.
2. To the best of the knowledge of the management of
Acquiror, there is no plan or intention on the part of SCB's
shareholders to sell, exchange, or otherwise dispose of the number of
shares of Acquiror Common Stock received in the Merger that would reduce
SCB's shareholders' ownership of Acquiror Common Stock to a number of
shares having a value, as of the Effective Time, of less than 50 percent
of the value of all of the formerly outstanding stock of SCB as of the
same date. For purposes of this representation, shares of SCB stock
exchanged for cash or other property, surrendered by dissenters or
exchanged for cash in lieu of fractional shares of Acquiror Common Stock
will be treated as outstanding SCB stock on the date of the Merger.
Moreover, shares of SCB stock and shares of Acquiror stock held by SCB
shareholders and otherwise sold, redeemed or disposed of prior or
subsequent to the Merger will be considered in making this
representation.
<PAGE>
Dewey Ballantine
May 29, 1997
Page 3
3. Acquiror has no plan or intention to reacquire any of its stock
issued in the Merger.
4. Acquiror has no plan or intention to sell or otherwise dispose of
any of the assets of SCB acquired in the Merger, except for dispositions made
in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
5. Following the Merger, Acquiror will continue the historic business
of SCB or use a significant portion of SCB's historic business assets in a
business.
6. Acquiror, SCB, and the shareholders of SCB will pay their
respective expenses, if any, incurred in connection with the Merger.
7. There is no intercorporate indebtedness existing between SCB and
Acquiror that was issued, acquired, or will be settled at a discount.
8. Acquiror is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
9. The fair market value of the assets of SCB transferred to Acquiror
will equal or exceed the sum of the liabilities assumed by Acquiror plus the
amount of
<PAGE>
Dewey Ballantine
May 29, 1997
Page 4
liabilities, if any, to which the transferred assets are subject.
10. The payment of cash in lieu of fractional shares of Acquiror stock
is solely for the purpose of avoiding the expense and inconvenience to
Acquiror of issuing fractional shares and does not represent separately
bargained for consideration. The total cash consideration that will be paid
in the Merger to SCB shareholders instead of issuing fractional shares on
Acquiror stock should not exceed one percent of the total consideration that
will be issued in the transaction to SCB shareholders in exchange for their
SCB stock. The fractional share interests of each SCB shareholder will be
aggregated, and no SCB shareholder of record will receive cash in an amount
equal to or greater than the value of one full share of Acquiror stock.
11. Acquiror has a valid corporate business purpose for entering into
the Merger.
You are hereby authorized to rely on the representations made above when
rendering your opinion without undertaking any independent verification of
any such representation.
<PAGE>
Dewey Ballantine
May 29, 1997
Page 5
We recognize that your tax opinion may not accurately describe the
consequences of the Merger if any of the foregoing representations are not
accurate in all respects. The foregoing representations are accurate as of
the date hereof, and you may assume that the representations will continue to
be accurate through and including the Effective Time unless we notify you
otherwise in writing.
Very truly yours,
MONARCH BANCORP
BY: /s/ Arnold Hahn
---------------------------
Name: Arnold Hahn
Title Chief Financial Officer
<PAGE>
[LETTERHEAD]
May 29, 1997
Dewey Ballantine
1775 Pennsylvania Avenue, N.W.
Washington, D.C. 20006-4605
Re: Agreement and Plan of Reorganization by and between Monarch Bancorp
("Acquiror") and SC Bancorp ("SCB") dated as of April 29, 1997 (the
"Merger Agreement")
Dear Sirs:
We understand that you will be rendering an opinion that the merger of
SCB with and into Acquiror as contemplated by the Merger Agreement (the
"Merger") will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that Acquiror and SCB will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In connection with your preparation of
this opinion, we hereby represent that the following facts are true, correct,
and complete in all respects. Capitalized terms used and not otherwise
defined herein have the meanings assigned to them in the Merger Agreement.
1. The fair market value of Acquiror Common Stock and other
consideration received by each SCB shareholder will be
approximately equal to the fair market value of the SCB
stock surrendered in exchange.
2. To the best of the knowledge of the management of SCB, there is
no plan or intention on the part of the shareholders of SCB to
sell, exchange, or otherwise dispose of a number of shares of
Acquiror Common Stock received in the Merger that would reduce
SCB shareholders' ownership of Acquiror Common Stock to a number
of shares having a value, as of the Effective Time, of less than
50 percent of the value of all of the formerly outstanding stock
of SCB as of the same date. For purposes of this representation,
shares of SCB stock exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of
fractional shares of Acquiror Common Stock will be treated as
outstanding SCB stock on the date of the transaction. Moreover,
shares of the SCB stock and shares of Acquiror Common Stock held
by SCB shareholders and otherwise sold, redeemed, or disposed of
prior to or subsequent to the transaction will be considered in
making this representation.
3. The liabilities of SCB assumed by Acquiror and the liabilities
to which the transferred assets of SCB are subject were incurred
by SCB in the ordinary course of its business.
4. The fair market value of the assets of SCB transferred to
Acquiror will equal or exceed the sum of the liabilities assumed
by Acquiror plus the amount of liabilities, if any, to which the
transferred assets are subject.
<PAGE>
Dewey Ballantine
May 29, 1997
Page 2
5. The total adjusted basis of the assets of SCB transferred to
Acquiror will equal or exceed the sum of the liabilities assumed by
Acquiror plus the amount of liabilities, if any, to which the
transferred assets are subject.
6. Acquiror, SCB, and the shareholders of SCB will pay their
respective expenses, if any, incurred in connection with the Merger.
7. There is no intercorporate indebtedness existing between SCB and
Acquiror that was issued, acquired, or will be settled at a
discount.
8. SCB is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
9. SCB is not under the jurisdiction of a court in a Title II or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. The payment of cash in lieu of functional shares of Acquiror stock
is solely for the purpose of avoiding the expense and inconvenience
to Acquiror of issuing fractional shares and does not represent
separately bargained for consideration. The total cash
consideration that will be paid in the Merger to SCB shareholders
instead of issuing fractional shares of Acquiror stock should not
exceed one percent of the total consideration that will be issued
in the transaction to SCB shareholders in exchange for their SCB
stock. The fractional share interests of each SCB shareholder will
be aggregated, and no SCB shareholder of record will receive cash
in an amount equal to or greater than the value of one full share
of Acquiror Stock.
11. SCB has a valid corporate business purpose for entering into the
Merger.
You are hereby authorized to rely on the representations made above when
rendering your opinion without undertaking any independent verification of
any such representation.
We recognize that your tax opinion may not accurately describe the
consequences of the Merger if any of the foregoing representations are not
accurate in all respects. The foregoing representations are accurate as of
the date hereof, and you may assume that the representations will continue to
be accurate through and including the Effective Time unless we notify you
otherwise in writing.
Very truly yours,
SC BANCORP
By: /s/ Bruce W. Roat
-----------------------------------
Name Bruce W. Roat
Title Executive Vice President and
Chief Financial Officer
BWR:ja
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Western Bancorp:
We consent to the use of our reports incorporated herein by reference and to
the references to our firm under the heading "Experts" in the Joint Proxy
Statement-Prospectus. Our report, dated June 4, 1997, contains explanatory
paragraphs indicating that: (i) We did not audit the 1996 consolidated
financial statements of California Commercial Bankshares. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for California
Commercial Bankshares in the 1996 consolidated financial statements of
Western Bancorp, is based on the report of the other auditors; (ii) The
consolidated balance sheet of Western Bancorp (formerly Monarch Bancorp) as
of December 31, 1995, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the years in the
two-year period ended December 31, 1995 were audited by other auditors;
(iii) Separate consolidated financial statements of California Commercial
Bankshares also included in the 1995 and 1994 restated consolidated financial
statements were audited by other auditors; and (iv) We also audited the
combination of the consolidated balance sheet as of December 31, 1995, and
the combination of the related statements of operations, changes in
shareholders' equity and cash flows for each of the years in the two-year
period ended December 31, 1995, after restatement for the pooling of
interests.
KPMG PEAT MARWICK LLP
Los Angeles, California
September 8, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Western Bancorp of our report dated January 24, 1997 (March
17, 1997 as to Notes 7 and 13), incorporated by reference in the Annual
Report on Form 10-K and, as amended, on Form 10-K/A of SC Bancorp for the
year ended December 31, 1996 and to the reference to us under the heading
"Experts" in the Joint Proxy Statement-Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Los Angeles, California
September 9, 1997
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Western Bancorp of our report dated January 24, 1997 (March
17, 1997 as to Notes 7 and 13), appearing in the Annual Report on Form 10-K,
as amended, and Form 10-K/A of California Commercial Bankshares and
subsidiary for the year ended December 31, 1996 and to the reference to us
under the heading "Experts" in the Joint Proxy Statement-Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
Los Angeles, California
September 9, 1997
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent, as successor accountants of Dayton & Associates (said firm
being merged with and into Vavrinek, Trine, Day & Co. on September 1, 1996) to
the incorporation by reference of their Independent Auditor's Report dated
February 29, 1996 regarding the consolidated balance sheets of Monarch Bancorp
and Subsidiaries as of December 31, 1995 and December 31, 1994, and the related
statements of operations, changes in capital, and cash flows for each of the two
years in the period ended December 31, 1995, in the Form S-4 filed with the
Securities and Exchange Commission and to the reference to us under the heading
"Experts" in the Joint Proxy Statement - Prospectus, which is part of the
Registration Statement.
Vavrinek, Trine, Day & Co.
September 8, 1997
Laguna Hills, California
<PAGE>
EXHIBIT 23.7
September 9, 1997
We hereby consent to the filing of our opinion, dated May 29, 1997,
addressed to Western Bancorp (formerly named Monarch Bancorp) as an exhibit to
the Registration Statement, dated the date hereof (the "Registration
Statement"), and the reference to us under the headings "Summary -- the Merger
- -- Certain Federal Income Tax Consequences," "The Merger -- Certain Federal
Income Tax Consequences" and "The Merger Agreement -- Conditions" in the
Prospectus included in the Registration Statement. In giving such consent, we
do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Sullivan & Cromwell
<PAGE>
Exhibit 23.8
[LETTERHEAD]
CONSENT OF PIPER JAFFRAY INC.
Board of Directors
Western Bancorp
We hereby consent to the use of our name in the Proxy Statement-Prospectus of
Western Bancorp and SC Bancorp., forming part of the Registration Statement on
Form S-4 of Western Bancorp and to the inclusion of our opinion as an appendix
to such Proxy Statement-Prospectus.
In giving the foregoing consent, we do not admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules or regulations of
the Securities and Exchange Commission thereunder.
PIPER JAFFRAY INC.
/s/ Piper Jaffray Inc.
Minneapolis, Minnesota
August 21, 1997
<PAGE>
[LETTERHEAD]
EXHIBIT 23.9
CONSENT
OF
CREDIT SUISSE FIRST BOSTON CORPORATION
Board of Directors
SC Bancorp
16420 Valley View Blvd.
La Mirada, CA 90637
Members of the Board:
We hereby consent to the inclusion of (i) our opinion letter, dated
September 9, 1997, to the Board of Directors of SC Bancorp (the "Company")
as attached as Appendix B to the Registration Statement of the Company on
Form S-4 (the "Registration Statement") relating to the proposed merger
involving the Company and Western Bancorp, and (ii) references made to our
firm and such opinion in the Registration Statement under the captions
entitled "Opinions of Financial Advisors - SCB," "THE MERGER - Background of
the Merger," "THE MERGER - Reasons for the Merger; Recommendations of the
Board of Directors," and "THE MERGER - Opinions of the Financial Advisors -
SCB". In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, nor do we admit that we
are "experts" for purposes of, the Securites Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Mark S. Maron
-----------------------------------
Mark S. Maron
Managing Director
September 9, 1997
<PAGE>
EXHIBIT 23.10
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Western Bancorp of our report dated January 19, 1996 on the
statement of condition of Santa Monica Bank as of December 31, 1995 and the
related statements of operations, changes in stockholders' equity and cash
flows for each of the two years in the period ended December 31, 1995,
included in Form 8-K of Western Bancorp dated August 28, 1997, and to the
reference to us under the heading "Experts" in the Joint Proxy
Statement-Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Los Angeles, California
September 9, 1997
<PAGE>
[LETTERHEAD]
Exhibit 23.11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our Report of Independent Public Accountants dated January 21,
1997 on the financial statements of Santa Monica Bank (the Bank) as of and
for the year ended December 31, 1996 and to the reference to our Firm in the
Experts section of this Form S-4 of Western Bancorp. It should be noted that
we have not audited any financial statements of the Bank subsequent to
December 31, 1996 or performed any audit procedures subsequent to the date of
our report.
Arthur Andersen LLP
Los Angeles, California
<PAGE>
Exhibit 99.1
September 8, 1997
Board of Directors
Western Bancorp
4100 Newport Place, Suite 900
Newport Beach, California 92660
Ladies and Gentlemen:
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named as a person who will become a
director of Western Bancorp, a California corporation (the "Company"), in the
Company's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Registration Statement"), and to the filing of this
consent as an exhibit to such Registration Statement.
Very truly yours,
/s/ Harold A. Beisswenger
--------------------------
Harold A. Beisswenger
<PAGE>
Exhibit 99.2
September 8, 1997
Board of Directors
Western Bancorp
4100 Newport Place, Suite 900
Newport Beach, California 92660
Ladies and Gentlemen:
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named as a person who will become a
director of Western Bancorp, a California corporation (the "Company"), in the
Company's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Registration Statement"), and to the filing of this
consent as an exhibit to such Registration Statement.
Very truly yours,
/s/ Larry D. Hartwig
-------------------------
Larry D. Hartwig
<PAGE>
Exhibit 99.3
September 8, 1997
Board of Directors
Western Bancorp
4100 Newport Place, Suite 900
Newport Beach, California 92660
Ladies and Gentlemen:
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named as a person who will become a
director of Western Bancorp, a California corporation (the "Company"), in the
Company's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Registration Statement"), and to the filing of this
consent as an exhibit to such Registration Statement.
Very truly yours,
/s/ William C. Greenbeck
--------------------------
William C. Greenbeck
<PAGE>
Exhibit 99.4
September 8, 1997
Board of Directors
Western Bancorp
4100 Newport Place, Suite 900
Newport Beach, California 92660
Ladies and Gentlemen:
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to being named as a person who will become a
director of Western Bancorp, a California corporation (the "Company"), in the
Company's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Registration Statement"), and to the filing of this
consent as an exhibit to such Registration Statement.
Very truly yours,
/s/ Donald E. Wood
--------------------------
Donald E. Wood
