<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 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) Number)
</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:
STANLEY F. FARRAR, ESQ. EDWARD J. MCANIFF, ESQ.
Sullivan & Cromwell O'Melveny & Myers LLP
444 South Flower Street 400 South Hope Street
Los Angeles, California 90071 Los Angeles, California 90071
(213) 955-8000 (213) 669-6000
------------------------------
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. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
- ------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE (2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, no par value..................... 3,103,431 shares $31.46 $97,647,239 $29,590.07
</TABLE>
(1) Represents the estimated maximum number of shares of Common Stock, no par
value ("Western Common Stock"), that are issuable upon consummation of the
merger of Santa Monica Bank ("SMB") with Western Bank or another
wholly-owned subsidiary of Western Bancorp.
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee is based on the
average of the high and low sale prices on November 19, 1997 of the Common
Stock, par value $3.00 per share ("SMB Common Stock"), of SMB on the
American Stock Exchange multiplied by the number of shares of Western Common
Stock into which such shares of SMB Common Stock will be converted upon
consummation of the Merger and computed based on the estimated maximum
number of shares of SMB Common Stock that may be converted into the
securities to be registered.
(3) A fee of $39,634 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) 7,077,332 shares (the then estimated number of shares of SMB Common
Stock to which the transaction applies) by (ii) the per unit price of $28.00
computed pursuant to Securities Exchange Act Rule 0-11 and by (iii) one-50th
of one percent. No additional fee is payable because the amount of the
registration fee hereunder, $29,590.07, is less than 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>
SANTA MONICA BANK
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY.
November 20, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of shareholders of
Santa Monica Bank to be held on December 23, 1997, at 3:00 p.m. At such time you
will be asked to consider and vote on a proposal to approve the principal terms
of a proposed merger (the "Merger") of Santa Monica Bank with Western Bank or
another wholly-owned subsidiary of Western Bancorp ("Western"), pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of July 30,
1997, and amended and restated as of November 20, 1997, by and among Western,
Western Bank and Santa Monica Bank. Upon the Merger becoming effective, each
outstanding share of Santa Monica Bank's 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 either (i) $28.00 in cash (the "Cash Consideration")
or (ii) 0.875 shares of common stock, no par value per share, of Western (the
"Stock Consideration"). For a more detailed description of the terms and
conditions of the Merger see "THE MERGER AGREEMENT" in the attached Joint Proxy
Statement-Prospectus and a copy of the Merger Agreement, which is reproduced as
Appendix A thereto. Each shareholder of Santa Monica Bank may elect to, and may,
receive the Cash Consideration and, if the number of shareholders electing to
receive the Cash Consideration is so great as to prevent a reorganization under
Section 368(a) of the Internal Revenue Code (a "Reorganization"), in which
shareholders receiving stock would not be taxed on receipt of such shares, all
the holders of Santa Monica Bank's common stock shall receive the Cash
Consideration. If the value of the shares electing to receive the Cash
Consideration is such as to permit a Reorganization, the shareholders not
electing to receive cash will receive the Stock Consideration subject to the
limitation that no more than 50% of the outstanding shares of Santa Monica
Bank's common stock may receive the Stock Consideration and that in such an
event, Santa Monica Bank shareholders electing Stock Consideration will receive
both stock and cash on a pro rata basis unless Western at its sole option
increases the amount of Stock Consideration above the 50% level. If there is not
such a Reorganization, the form of the Merger will be appropriately modified. A
description of that modification and additional information about the Merger,
Santa Monica Bank and Western are contained in the accompanying Joint Proxy
Statement-Prospectus and the appendices thereto, all of which should be
carefully reviewed.
THE BOARD OF DIRECTORS OF SANTA MONICA BANK HAS CONCLUDED THAT THE MERGER IS
IN THE BEST INTERESTS OF SANTA MONICA BANK AND THE SANTA MONICA BANK
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SANTA MONICA BANK SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER. NationsBanc
Montgomery Securities, Inc., Santa Monica Bank's financial advisor, has
delivered to the Santa Monica Bank Board its opinion, dated November 20, 1997,
that the Cash Consideration and the Stock Consideration received by the Santa
Monica Bank shareholders pursuant to the Merger are each fair to the
shareholders from a financial point of view. The opinion of NationsBanc
Montgomery Securities, Inc., dated November 20, 1997 (and certain assumptions
and qualifications therein), is described in the accompanying Joint Proxy
Statement-Prospectus and reproduced in Appendix B thereto.
It is important that your shares be represented and voted at the Special
Meeting regardless of the number of shares you own and whether or not you plan
to attend the Special Meeting. The affirmative vote of the holders of a majority
of Santa Monica Bank's common stock entitled to vote at the 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 voting
against the Merger. Therefore, we urge you to sign, date and mail the enclosed
proxy. If you decide to attend the Special Meeting and wish to vote in person,
you may withdraw your proxy at that time.
YOU SHOULD NOT SEND IN SHARE CERTIFICATES AT THIS TIME.
Sincerely,
[LOGO]
W. Paul Carver
CHAIRMAN OF THE BOARD
[LOGO]
Aubrey L. Austin
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF SANTA MONICA BANK
TO BE HELD AT 3:00 P.M., TUESDAY, DECEMBER 23, 1997
TO THE SHAREHOLDERS
OF SANTA MONICA BANK:
Notice is hereby given that a Special Meeting of Shareholders of Santa
Monica Bank will be held in the Starlight Room of the Miramar Hotel, Ocean
Avenue and Wilshire Boulevard, Santa Monica, California, on Tuesday, December
23, 1997, at 3:00 p.m. for the following purposes:
1. To consider and vote on a proposal to approve the principal terms of the
proposed Merger (the "Merger") of Santa Monica Bank with Western Bank or
another wholly-owned subsidiary of Western Bancorp ("Western") pursuant
to an Agreement and Plan of Merger, dated as of July 30, 1997, and
amended and restated as of November 20, 1997, by and among Western,
Western Bank and Santa Monica Bank (the "Merger Agreement"); and
2. To transact such other business as may properly come before the Santa
Monica Bank Special Meeting or any postponement or adjournment thereof.
Under the terms of the Merger Agreement, Santa Monica Bank's directors will
be required to submit their irrevocable resignations, effective upon
consummation of the Merger. In the event that the Merger is not consummated as
contemplated, all directors previously elected will continue to serve as
directors for the balance of their terms and until their successors have been
elected and duly qualified.
The Board of Directors has fixed the close of business on November 17, 1997
as the record date for determination of the shareholders entitled to notice of
and to vote at the Special Meeting or any adjournment 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 common stock.
THE BOARD OF DIRECTORS HAS CONCLUDED THAT THE MERGER IS IN THE BEST
INTERESTS OF SANTA MONICA BANK AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" THE PRINCIPAL TERMS OF THE MERGER.
Shareholders may be entitled to exercise dissenters' rights as provided in
the California General Corporation Law (the "CGCL") and to receive cash in the
amount equal to the fair market value of their shares of common stock of Santa
Monica Bank as of July 30, 1997 in lieu of receiving the consideration provided
in the Merger Agreement by complying with certain procedures specified by the
CGCL. See "THE MERGER--Dissenters' Rights" in the accompanying Joint Proxy
Statement-Prospectus.
The accompanying Joint Proxy Statement-Prospectus and the Appendices thereto
(including the Merger Agreement attached as Appendix A thereto and certain of
the Annexes to the Merger Agreement) form a part of this Notice.
By Order of the Board
of the Directors
[SIG]
--------------------------------------
Dario Quiroga,
SECRETARY
Dated: November 20, 1997
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, YOU SHOULD DATE, SIGN AND RETURN THE ENCLOSED PROXY. IF YOU
ATTEND THE SPECIAL MEETING, YOU WILL BE ENTITLED TO VOTE IN PERSON, IF YOU WISH.
YOU SHOULD NOT FORWARD SHARE CERTIFICATES AT THIS TIME.
<PAGE>
[LOGO]
November 20, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Western Special
Meeting") of Shareholders of Western Bancorp ("Western"), to be held on Tuesday,
December 23, 1997, at 4100 Newport Place, Third Floor, Newport Beach, California
92660 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
Santa Monica Bank ("SMB") with Western Bank or another wholly-owned subsidiary
of Western pursuant to an Agreement and Plan of Merger, dated as of July 30,
1997, and amended and restated as of November 20, 1997, by and among Western,
Western Bank and SMB (the "Merger Agreement"). Upon the Merger becoming
effective, each share of common stock, par value $3.00 per share, of SMB ("SMB
Common Stock") issued and outstanding at such time (other than (a) shares that
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, at the option of the holder of such
share of SMB Common Stock, either $28 in cash (the "Cash Consideration") or,
subject to certain limitations set forth in the Merger Agreement, 0.875 shares
(the "Stock Consideration") of common stock, no par value, of Western ("Western
Common Stock").
The Board of Directors of Western (the "Western Board") 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, as financial advisor to Western, has
delivered its opinion, dated September 17, 1997, to the Western Board that the
Merger is fair from a financial point of view to the Western Shareholders.
Therefore, the Western Board unanimously recommends that the Western
Shareholders vote "FOR" the approval and adoption of the principal terms of the
Merger.
I urge you to consider carefully these important matters that 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 proxy form, date and sign it and return it in the enclosed
envelope. A prompt response will be appreciated. If you are able to attend the
Western Special Meeting you may revoke your proxy and vote in person if you
wish.
Sincerely,
[LOGO]
Hugh S. Smith, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
WESTERN BANCORP
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 23, 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 10:00 a.m. local time on Tuesday, December 23, 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 Santa Monica Bank, a California banking
corporation ("SMB"), with Western Bank, a California banking corporation
("Western Bank"); and
(2) To consider and act upon such other business as may properly come before
the Western Special Meeting or any adjournment or postponement thereof.
The accompanying Joint Proxy Statement-Prospectus and the Appendices thereto
(including the Agreement and Plan of Merger, dated as of July 30, 1997, and
amended and restated as of November 20, 1997, by and among Western, Western Bank
and SMB attached as Appendix A thereto and certain of the Annexes to the Merger
Agreement) form a part of this Notice.
Only holders of record of shares of common stock of Western at the close of
business on November 17, 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 common stock of
Western.
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
common stock of Western as of July 30, 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,
[LOGO]
Julius G. Christensen
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Newport Beach, California
November 20, 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 THE SHAREHOLDERS OF WESTERN VOTE TO APPROVE THE PRINCIPAL TERMS
OF THE MERGER.
------------------------
<PAGE>
WESTERN BANCORP SANTA MONICA BANK
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 December 23, 1997
and at any adjournments and postponements thereof (the "Western Special
Meeting"). This Joint Proxy Statement-Prospectus also is being furnished to the
shareholders of Santa Monica Bank, a California banking corporation ("SMB"), in
connection with the solicitation of proxies by the Board of Directors of SMB
(the "SMB Board") from holders of outstanding shares of common stock, par value
$3.00 per share ("SMB Common Stock"), of SMB for use at a Special Meeting of
shareholders of SMB ("SMB Shareholders" and, together with the Western
Shareholders, the "Shareholders") to be held on December 23, 1997 and at any
adjournments or postponements thereof (the "SMB 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 SMB with a wholly-owned subsidiary of Western, pursuant to an Agreement and
Plan of Merger, dated as of July 30, 1997, and amended and restated as of
November 20, 1997, by and among Western, Western Bank, a California banking
corporation and wholly-owned subsidiary of Western ("Western Bank"), and SMB
(the "Merger Agreement"), which is attached as Appendix A to this Joint Proxy
Statement-Prospectus and is incorporated herein by reference. Pursuant to the
Merger Agreement, SMB will merge with Western Bank, or, if the number of SMB
Shareholders electing the Cash Consideration (as defined below) is so great that
a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code") (in which SMB Shareholders will recognize no gain or loss
for tax purposes on the receipt of shares of Western Common Stock in exchange
for shares of SMB Common Stock in the Merger), is not available, with a
newly-formed wholly-owned subsidiary of Western (the "Merger"), and then with
Western Bank. In either case, Western Bank will be the surviving bank and will
operate under the name Santa Monica Bank. Upon the Merger becoming effective,
each share of SMB Common Stock issued and outstanding at the Effective Time (as
defined herein) (other than (a) shares that 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
(CONTINUED ON FOLLOWING PAGE)
IN ORDER FOR ANY SHAREHOLDER TO EXERCISE DISSENTERS' RIGHTS, A NOTICE MUST
BE SENT BY SUCH SHAREHOLDER AND RECEIVED BY WESTERN OR SMB, AS THE CASE MAY BE,
ON OR BEFORE DECEMBER 23, 1997, THE DATE OF THE SPECIAL MEETINGS, AND ANY SUCH
SHAREHOLDER MUST VOTE AGAINST THE APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER.
SEE "SUMMARY--DISSENTERS' RIGHTS" AND "THE MERGER--DISSENTERS' RIGHTS."
Western Common Stock is designated for quotation on Nasdaq under the symbol
"WEBC."
SEE "RISK FACTORS" ON PAGE 33 FOR A DISCUSSION OF CERTAIN FACTORS 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, THE FEDERAL DEPOSIT INSURANCE
CORPORATION 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.
<PAGE>
NO FEDERAL DEPOSIT INSURANCE CORPORATION INSURANCE APPLIES TO THIS
TRANSACTION. WESTERN AND SMB DO NOT GUARANTEE THE INVESTMENT VALUE OF
THE TRANSACTION DESCRIBED IN THIS JOINT PROXY STATEMENT-
PROSPECTUS. AN INVESTMENT IN WESTERN COMMON STOCK MAY
LOSE VALUE BEFORE OR AFTER THE EFFECTIVE DATE OF
THE MERGER.
------------------------
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS NOVEMBER 20, 1997.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
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, at the option of the holder of such share of SMB Common Stock, either
$28 in cash (the "Cash Consideration") or, subject to certain limitations set
forth in the Merger Agreement, 0.875 shares of Western Common Stock (the "Stock
Consideration" and, together with the cash consideration, the "Merger
Consideration"). Based on the closing price per share of Western Common Stock on
November 19, 1997, as reported on the Nasdaq National Market ("Nasdaq"), the per
share equivalent price of SMB Common Stock based on the 0.875 conversion number
was $28. Because the 0.875 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 SMB Shareholders. See "RISK FACTORS-- Limited
Market for Western Common Stock."
As discussed in greater detail in this Joint Proxy Statement-Prospectus, if
the aggregate amount of Cash Consideration to be paid in the Merger according to
the allocation procedures set forth in the Merger Agreement plus the amount of
any other cash distributed to SMB Shareholders in the Merger (including cash in
lieu of fractional shares and cash distributed to Dissenting Shareholders (as
defined herein) of SMB, if any) would exceed 60% of the total consideration paid
by Western in the Merger (valuing the Stock Consideration by reference to the
closing price per share of Western Common Stock as reported by Nasdaq on the
date immediately prior to the Effective Date (as defined herein)), Western may,
but is not obligated to, elect to increase the Stock Consideration so that the
aggregate amount of cash paid by Western in the Merger is less than or equal to
60% of the total consideration paid by Western.
If Western does not elect to increase the Stock Consideration under such
circumstances, the Merger will not qualify as a Reorganization (as defined
herein). In such an event, notwithstanding anything to the contrary set forth in
this Joint Proxy Statement-Prospectus, each share of SMB Common Stock will be
converted into the right to receive the Cash Consideration, regardless of
whether the holder of such share has made an Election (as defined herein) to
receive Cash Consideration. The receipt of cash by SMB Shareholders in the
Merger will have certain federal income tax consequences as described more fully
herein. See "THE MERGER--Certain Federal Income Tax Consequences."
Based upon the 7,077,332 shares of SMB Common Stock outstanding on the SMB
Record Date (as defined herein), it is expected that 3,096,333 shares of Western
Common Stock would be issued in the Merger (or, if all of the 16,224 shares of
SMB Common Stock reserved for issuance upon exercise of employee stock options
outstanding on the SMB Record Date were issued and outstanding at the Effective
Time, it is expected that 3,103,431 shares of Western Common Stock would be
issued in the Merger), assuming (x) no Dissenters' Rights are perfected by SMB
Shareholders, (y) no cash is paid in lieu of fractional shares and (z) Western
issues the maximum number of shares of Western Common Stock that it can be
required to issue under the Merger Agreement. In addition, in order to raise the
capital necessary to fund the Cash Consideration, Western has entered into
standby stock purchase agreements (the "Standby Agreements") with certain
investors (the "Private Placement Investors"), pursuant to which, if the Merger
is consummated, such investors will purchase a minimum of approximately
1,982,000 shares of Western Common Stock and a maximum of approximately
4,293,500 shares of Western Common Stock. See "THE PRIVATE PLACEMENT."
<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 SINCE THE DATE OF THIS JOINT PROXY
STATEMENT-PROSPECTUS.
AVAILABLE INFORMATION
Each of Western and SMB is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
therewith, Western files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission") and SMB files reports,
proxy statements and other information with the Federal Deposit Insurance
Corporation (the "FDIC"). The reports, proxy statements and other information
filed by SMB with the FDIC may be inspected and copied at the offices of the
FDIC, Registration, Disclosure and Securities Operations Unit, 550 17th Street
N.W., Washington, D.C. 20429, Room F-6043. Voice Phone Number 202/898-8911 and
202/898-8913. Fax Number 202/898-3909. The reports, proxy statements and other
information filed by Western 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 Nasdaq. 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. The reports, proxy
statements and other information filed by SMB with the FDIC during the 12
calendar months immediately preceding the filing of Western's Registration
Statement (as defined below) have been filed with the Commission as part of the
Current Reports on Form 8-K filed by Western on October 3, 1997 and October 31,
1997 and may be inspected and copied at the public reference facilities of the
Commission and at the Commission's regional offices at the addresses listed
above, and accessed electronically at the Commission's home page listed above.
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 the proxy statement of
both Western and SMB relating to the solicitation of proxies for their use at
their respective Special Meetings as well as 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 SMB on or about November 24, 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, EXCLUDING EXHIBITS UNLESS
SPECIFICALLY INCORPORATED HEREIN, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
JULIUS G. CHRISTENSEN, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY,
WESTERN BANCORP, 4100 NEWPORT PLACE, SUITE 900, NEWPORT BEACH, CALIFORNIA 92660.
TELEPHONE REQUESTS MAY BE DIRECTED TO JULIUS G. CHRISTENSEN, AT (714) 863-2459.
DOCUMENTS RELATING TO SMB, EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED
HEREIN, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO DARIO QUIROGA, SENIOR VICE
PRESIDENT, CASHIER, CHIEF FINANCIAL OFFICER AND SECRETARY, SANTA MONICA BANK,
1251 FOURTH STREET, SANTA MONICA, CALIFORNIA 90401. TELEPHONE REQUESTS MAY BE
DIRECTED TO DARIO QUIROGA, AT (310) 394-9611. IN ORDER TO ENSURE TIMELY DELIVERY
OF DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY DECEMBER 12, 1997.
The following documents filed with the Commission by Western (file number
0-13551) are incorporated herein by reference:
(a) Western's Annual Report, as amended, on Form 10-KSBA for the fiscal
year ended December 31, 1996 (which amends and restates Western's Form
10-KSB for 1996) (the "Western Annual Report");
(b) Western's Current Reports on Form 8-K, dated April 14, 1997, May 2,
1997, June 18, 1997, July 15, 1997 (presenting Western's restated
consolidated financial statements reflecting the effect of the merger of
Western with California Commercial Bankshares ("CCB") on a
pooling-of-interests basis), August 11, 1997, August 28, 1997, October 3,
1997, October 23, 1997 (presenting Western's supplemental consolidated
financial statements reflecting the effect of the merger of Western with SC
Bancorp ("SCB") on a pooling-of-interests basis), October 31, 1997 and
November 13, 1997 (presenting Western's supplemental condensed consolidated
financial statements reflecting the effect of the merger of Western with SCB
on a pooling-of-interests basis as of September 30, 1997);
(c) Western's Quarterly Reports on Form 10-QSB (filed under the name
"Monarch Bancorp"), dated May 15, 1997, and on Form 10-Q, dated August 14,
1997, and November 14, 1997;
(d) The Annual Report on Form 10-K/A filed by CCB (file number 2-78788)
(which was merged with and into Western) for the fiscal year ended December
31, 1996;
(e) The Annual Report on Form 10-K/A filed by SCB (file number 0-11046)
(which was merged with and into Western) for the fiscal year ended December
31, 1996;
(f) The following documents filed with the FDIC by SMB, which have been
filed as part of the Current Report on Form 8-K filed by Western on October
3, 1997;
(i) SMB's Annual Report on Form F-2 for the fiscal year ended
December 31, 1996 (the "SMB Annual Report");
(ii) SMB's Current Reports on Form F-3, dated April 17, 1997 and
August 8, 1997;
(iii) SMB's Quarterly Reports on Form F-4, dated April 19, 1997 and
August 6, 1997;
(iv) SMB's Proxy Statement to security holders for the fiscal year
ended December 31, 1996; and
(g) The SMB Quarterly Report on Form F-4, dated October 22, 1997, filed
with the FDIC by SMB, which has been filed as part of the Current Report on
Form 8-K filed by Western on October 31, 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 Western 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 all documents
3
<PAGE>
and reports filed by SMB 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 filed by Western with the Commission and shall be deemed to be
incorporated by reference and to be a part hereof from the date of such filing
with the Commission 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 that 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.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 3
TABLE OF CONTENTS......................................................... 5
TABLE OF DEFINED TERMS.................................................... 8
SUMMARY................................................................... 10
The Companies............................................................. 10
Additional Information.................................................... 11
The Merger................................................................ 11
The Private Placement..................................................... 13
The Special Meetings...................................................... 14
Votes Required............................................................ 14
Revocability of Proxies................................................... 15
Recommendations of the Boards of Directors................................ 15
Opinions of Financial Advisors............................................ 16
Effective Time............................................................ 16
Conditions to the Merger.................................................. 16
Waiver and Amendment...................................................... 17
Termination............................................................... 18
Regulatory Approvals...................................................... 18
Operations and Management After the Merger................................ 18
Interests of Certain Persons in the Merger................................ 19
Description of Western Capital Stock and Dividend Policy.................. 19
Certain Tax Consequences.................................................. 19
Accounting Treatment...................................................... 20
Dissenters' Rights........................................................ 20
Risk Factors.............................................................. 20
Markets and Market Prices................................................. 21
Summary Historical Financial Data......................................... 23
Summary Unaudited Pro Forma and Selected Historical Data.................. 26
RISK FACTORS.............................................................. 33
Forward-Looking Statements May Not Prove Accurate......................... 33
Competition............................................................... 33
Ability to Integrate the Operations of Western and SMB; Rapid Growth...... 33
General Business Risk..................................................... 34
Concentration of Operations; Recessionary Environments; Decline in Real
Estate Values........................................................... 34
Interest Rate Risk........................................................ 35
Shares Eligible for Future Sale; Dilution................................. 35
Regulation................................................................ 36
Limited Market for Western Common Stock................................... 36
INFORMATION REGARDING WESTERN............................................. 37
Business of Western....................................................... 37
Quarterly Dividend........................................................ 37
Incorporation of Certain Information By Reference......................... 37
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION REGARDING SMB................................................. 38
Business of SMB........................................................... 38
Incorporation of Certain Information by Reference......................... 38
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA..................... 39
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA............ 43
THE SPECIAL MEETING OF WESTERN SHAREHOLDERS............................... 50
General................................................................... 50
Matters to be Considered at the Western Special Meeting................... 50
The Western Record Date................................................... 50
Votes Required and Voting of Proxies...................................... 50
Solicitation of Proxies................................................... 51
Revocability of Proxies................................................... 51
Security Ownership of Certain Beneficial Owners and Western Management.... 52
Dissenters' Rights........................................................ 55
Submission of Shareholder Proposals for Western's 1998 Annual Meeting..... 55
THE SPECIAL MEETING OF SMB SHAREHOLDERS................................... 56
General................................................................... 56
Matters To Be Considered at the SMB Special Meeting....................... 56
The SMB Record Date....................................................... 56
Votes Required and Voting of Proxies...................................... 56
Solicitation of Proxies................................................... 57
Revocability of Proxies................................................... 57
Security Ownership of Certain Beneficial Owners and SMB Management........ 57
Dissenters' Rights........................................................ 60
Submission of Shareholder Proposals for SMB's 1998 Annual Meeting......... 61
FIP LITIGATION............................................................ 61
THE MERGER................................................................ 62
Background of the Merger.................................................. 62
Structure of the Merger................................................... 65
Reasons for the Merger; Recommendations of the Boards of Directors........ 66
Opinions of Financial Advisors............................................ 69
Certain Federal Income Tax Consequences................................... 78
Regulatory Approvals...................................................... 82
Resale of Western Common Stock............................................ 83
Certain Effects of the Merger............................................. 83
Interests of Certain Persons in the Merger................................ 84
Dissenters' Rights........................................................ 86
Accounting Treatment...................................................... 88
THE PRIVATE PLACEMENT..................................................... 88
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE MERGER AGREEMENT...................................................... 89
The Merger................................................................ 89
Election Procedures....................................................... 89
Allocation................................................................ 90
Effective Time and Effective Date......................................... 92
Exchange of Stock Certificates; Dividends................................. 92
No Fractional Shares...................................................... 93
Conduct of the Business of SMB and Western Prior to the Merger............ 93
Representations and Warranties............................................ 94
Certain Covenants......................................................... 94
Conditions................................................................ 97
Termination............................................................... 98
Termination Payment....................................................... 98
Expenses.................................................................. 99
THE SHAREHOLDER AGREEMENTS................................................ 99
DESCRIPTION OF WESTERN CAPITAL STOCK AND
COMPARISON OF SHAREHOLDER RIGHTS........................................ 100
Description of Western Capital Stock...................................... 100
Comparison of Corporate Structure......................................... 100
Voting Rights............................................................. 100
Dividends and Dividend Policy............................................. 100
Number of Directors....................................................... 101
Indemnification of Directors and Officers................................. 101
VALIDITY OF WESTERN COMMON STOCK.......................................... 101
EXPERTS................................................................... 101
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIST OF APPENDICES
Appendix A -- Agreement and Plan of Merger, dated as of July 30, 1997, and amended and restated as of
November 20, 1997, by and among Western, Western Bank and SMB.
Appendix B -- Fairness Opinion of NationsBanc Montgomery Securities, Inc.
Appendix C -- Fairness Opinion of Piper Jaffray Inc.
Appendix D -- Chapter 13 of the CGCL.
</TABLE>
7
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Acquisition Proposal...................................................... 94
Affiliates................................................................ 97
All-Cash Scenario......................................................... 71
AMEX...................................................................... 21
BHCA...................................................................... 10
BMA....................................................................... 82
BPI....................................................................... 19
Cash Consideration........................................................ 1
Cash Election Shares...................................................... 89
Cash EPS.................................................................. 76
CCB....................................................................... 3
CCB Merger................................................................ 10
CGCL...................................................................... 1
Change in Control Agreements.............................................. 84
Code...................................................................... 1
Commission................................................................ 2
Continuing Employee....................................................... 85
Conversion Number......................................................... 12
Costs..................................................................... 95
CRA....................................................................... 81
Cut-Off Date.............................................................. 12
Demand.................................................................... 86
Designated Cash Shares.................................................... 13
Dissenters' Rights........................................................ 20
Dissenters' Rights Condition.............................................. 17
Dissenting Shareholder.................................................... 87
Dissenting Shares......................................................... 87
Effective Date............................................................ 92
Effective Time............................................................ 92
Election.................................................................. 89
Election Deadline......................................................... 90
Election Form............................................................. 89
Employee.................................................................. 84
EPS....................................................................... 75
Exchange Act.............................................................. 2
Exchange Agent............................................................ 89
FDIC...................................................................... 2
Federal Reserve Board..................................................... 16
50% Stock Scenario........................................................ 71
FIP....................................................................... 36
Fund...................................................................... 54
GAAP...................................................................... 70
Hypothetical Redemption Analysis.......................................... 80
Hypothetical Shares....................................................... 80
Indemnified Parties....................................................... 95
Initial Shares............................................................ 61
IRS....................................................................... 78
Letter of Transmittal..................................................... 92
LTM....................................................................... 75
Mailing Date.............................................................. 89
Maximum Amount............................................................ 96
Merger.................................................................... 1
Merger Agreement.......................................................... 1
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Merger Consideration...................................................... 1
Minimum Shares............................................................ 14
Montgomery................................................................ 16
Montgomery Engagement Letter.............................................. 73
Nasdaq.................................................................... 1
NBSC...................................................................... 10
Party Shareholders........................................................ 99
Piper Opinion............................................................. 69
Private Placement......................................................... 14
Private Placement Investors............................................... 1
Private Placement Shares.................................................. 14
Registration Statement.................................................... 2
Reorganization............................................................ 12
Reorganization Condition.................................................. 12
Reported EPS.............................................................. 76
Reverse Stock Split....................................................... 22
SC Bank................................................................... 10
SCB....................................................................... 3
SCB Merger................................................................ 10
Securities Act............................................................ 2
Shareholder Agreements.................................................... 15
Shareholders.............................................................. 1
SMB....................................................................... 1
SMB Annual Report......................................................... 3
SMB Board................................................................. 1
SMB Common Stock.......................................................... 1
SMB Management............................................................ 25
SMB Record Date........................................................... 56
SMB Shareholders.......................................................... 1
SMB Special Meeting....................................................... 1
Special Meetings.......................................................... 1
Standby Agreements........................................................ 1
Standby Shares............................................................ 14
State Commissioner........................................................ 16
Stock Consideration....................................................... 1
Stock Election Shares..................................................... 90
Stock Number.............................................................. 12
Surviving Corporation..................................................... 12
Survivor.................................................................. 11
Tax Opinions.............................................................. 20
Western................................................................... 1
Western Annual Report..................................................... 3
Western Bank.............................................................. 1
Western Bank Board........................................................ 11
Western Board............................................................. 1
Western Certificate....................................................... 92
Western Common Stock...................................................... 1
Western Employee Plans.................................................... 85
Western Management........................................................ 23
Western Offer............................................................. 75
Western Preferred Stock................................................... 100
Western Record Date....................................................... 50
Western Shareholders...................................................... 1
Western Special Meeting................................................... 1
</TABLE>
9
<PAGE>
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. 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, NATIONAL BANK OF SOUTHERN CALIFORNIA
("NBSC"), SOUTHERN CALIFORNIA BANK ("SC BANK") 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 SMB INCLUDED IN THIS JOINT PROXY STATEMENT-PROSPECTUS,
THE APPENDICES HERETO AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE HAS
BEEN FURNISHED BY SMB. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO
"WESTERN" HEREIN SHALL BE TO WESTERN AND ITS SUBSIDIARIES, INCLUDING NBSC, SC
BANK AND WESTERN BANK.
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 WESTERN AND SMB 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 WESTERN'S AND SMB'S FORWARD-LOOKING STATEMENTS ARE SET
FORTH BELOW AND ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS. FURTHERMORE,
WESTERN AND SMB 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. SHAREHOLDERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON ANY OF THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN. ALL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO WESTERN, SMB OR PERSONS ACTING ON
EITHER OF THEIR BEHALVES ARE QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS SET FORTH HEREIN.
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, SC Bank 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 4, 1997, Western consummated its
merger with CCB (the "CCB Merger") 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. On October 10, 1997, Western consummated its merger with SCB (the "SCB
Merger") pursuant to which SCB merged with and into Western. It is expected that
NBSC will be merged with and into SC Bank, a wholly-owned subsidiary of SCB
prior to the SCB Merger, with SC Bank being the surviving bank, and applications
for prior approval of such merger have been submitted to the appropriate
regulatory authorities. 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. SC Bank
provides banking and other financial services primarily in southeastern Los
Angeles and in Orange and San Diego counties. At September 30, 1997, Western had
consolidated total assets, total deposits and shareholders' equity of
$867,123,000, $762,064,000 and $81,209,000, 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.
10
<PAGE>
SMB
SMB is a full-service community bank, organized in 1928. As of December 31,
1996, SMB was the 38th largest bank in the State of California. SMB's main
office and its executive offices are located in Santa Monica, California. SMB
has eight offices located in Los Angeles County, including one in each of
Pacific Palisades, West Los Angeles, Malibu and Marina Del Rey, as well as four
in Santa Monica. At September 30, 1997, SMB had total assets, total deposits and
total shareholders' equity of $663,522,000, $579,633,000 and $78,877,000,
respectively, and a total of 283 employees. SMB provides a wide variety of
banking services to its customers. Services include those traditionally offered
by commercial banks, such as checking and saving accounts, commercial,
industrial, real estate and installment loans, and safe deposit facilities. SMB
also has a trust department with total assets under administration of
$667,665,000 (at market value) at September 30, 1997. SMB concentrates its
marketing among small and medium-sized businesses, persons and firms in the
medical, dental, legal and accounting professions, and developers of commercial
and residential real estate projects. SMB also serves consumers and, to a lesser
extent, larger corporations. SMB's principal executive offices are located at
1251 Fourth Street, Santa Monica, California 90401, and its telephone number is
(310) 394-9611.
ADDITIONAL INFORMATION
For additional information regarding the business of Western and SMB, see
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE,"
"UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA," "INFORMATION REGARDING
SMB," "INFORMATION REGARDING WESTERN" and "FIP LITIGATION."
THE MERGER
On July 30, 1997, the SMB Board, and on July 29, 1997, the Western Board and
the Board of Directors of Western Bank (the "Western Bank Board"), each approved
the Merger Agreement, which was executed and delivered on July 30, 1997 by
Western, Western Bank and SMB. The Merger Agreement provides for the merger of
SMB with Western Bank (in such circumstances, the "Survivor") or, under the
circumstances described in the following paragraph, for the merger of a
newly-formed wholly-owned subsidiary of Western into SMB (in such circumstances,
the "Survivor"), which will promptly thereafter be merged into Western Bank,
with Western Bank ultimately being the Surviving Corporation (as defined herein)
and operating under the name "Santa Monica Bank." In connection with the Merger,
each share of SMB Common Stock issued and outstanding at the Effective Time
(other than (a) shares that have not been voted in favor of approval of the
principal terms of the Merger and with respect to which Dissenters' Rights 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, at the option of the SMB Shareholder holding such share of SMB
Common Stock, either the Cash Consideration or, subject to the limitations set
forth in the Merger Agreement with respect to proration, fractional shares and
the possibility of an all-cash merger, the Stock Consideration. With the
exception of shares for which Dissenters' Rights have been perfected, each share
of Western Common Stock outstanding immediately prior to the Effective Time will
remain outstanding after the Merger as one share of Western Common Stock.
STRUCTURE
The Merger Agreement provides a mechanism through which SMB will become a
wholly-owned subsidiary of Western, and SMB Shareholders will receive as
consideration from Western either cash or Western Common Stock or both,
depending on the elections made by SMB Shareholders as to the type of
consideration to be received. The Merger Agreement provides that, if the SMB
Shareholders and the Western Shareholders approve the principal terms of the
Merger Agreement, and subject to receipt of
11
<PAGE>
regulatory approvals and other customary closing conditions as more fully set
forth below, then either (i) SMB will merge into Western Bank, with Western Bank
being the Survivor, provided that the number of SMB Shareholders electing to
receive cash as consideration in the transaction is not so great as to prevent
the transaction from qualifying as a reorganization (a "Reorganization") under
Section 368(a) of the Code, so that the SMB Shareholders will not recognize any
gain or loss for tax purposes on the receipt of shares of Western Common Stock
in exchange for some or all of their shares of SMB Common Stock in the Merger,
or (ii) if the number of SMB Shareholders electing to receive Cash Consideration
is so great as to prevent the transaction from qualifying as a Reorganization,
then a newly-formed wholly-owned subsidiary of Western will merge into SMB, with
SMB being the Survivor (the alternative structures described in (i) and (ii)
above are hereinafter referred to collectively as the "Merger"). In the event
that the Merger takes the form of the transaction described in (ii) above,
Western has agreed that promptly after the Merger it will cause SMB to merge
into Western Bank. In either case, the ultimate surviving entity will be Western
Bank, which will change its name to "Santa Monica Bank" (such surviving entity
is herein referred to as the "Surviving Corporation"). See "THE MERGER-- Certain
Federal Income Tax Consequences" and "THE MERGER AGREEMENT--The Merger."
At the Effective Time, shares of SMB Common Stock as to which a valid
election to receive the Cash Consideration has been made will be converted into
the right to receive $28 in cash, and shares of SMB Common Stock as to which
such election has not been made will be converted into the right to receive
0.875 shares (the "Conversion Number") of Western Common Stock, subject to the
limitations described above and elsewhere herein. See "THE MERGER AGREEMENT--
Election Procedures."
It is a condition to the Reorganization (as previously defined) that at
least 40%, in value, of the total consideration received by SMB Shareholders is
in the form of Western Common Stock (the "Reorganization Condition"). Because
the value of the Western Common Stock to be received depends on its market
price, the 40% valuation cannot be calculated until the day before the Effective
Date (the "Cut-Off Date"). Satisfaction of the Reorganization Condition is not a
condition to the Merger. If on the Cut-Off Date the Reorganization Condition is
not satisfied, the Merger will be an all-cash merger in which every SMB
Shareholder will receive $28 in cash per share of SMB Common Stock and the
Merger will be effected by merging a newly-formed wholly-owned subsidiary of
Western into SMB. Regardless of whether the Reorganization Condition is
satisfied, each SMB Shareholder who makes an effective Election (as defined
herein) to receive Cash Consideration in the Merger will receive Cash
Consideration.
ALLOCATION
Within five days after the Election Deadline (as defined herein), unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, the Exchange Agent (as defined herein) will be required to
effectuate the allocation among holders of SMB Common Stock to receive Stock
Consideration or Cash Consideration upon consummation of the Merger in the
manner described below.
If the number of Stock Election Shares (as defined herein) is less than or
equal to the number of shares of SMB Common Stock that would be entitled to
receive in the aggregate the maximum number of shares of Western Common Stock
that Western has agreed to issue in the Merger (the "Stock Number"), then,
unless the number of Stock Election Shares is so low as to prevent a
Reorganization (as previously defined):
(i) all Stock Election Shares will be converted into the right to receive
the Stock Consideration; and
(ii) all Cash Election Shares (as defined herein) will be converted into the
right to receive the Cash Consideration.
If the number of Stock Election Shares is greater than the number of shares
of SMB Common Stock that would be entitled to receive in the aggregate the Stock
Number, then, unless Western chooses, at its
12
<PAGE>
sole discretion, to issue a greater number of shares of Western Common Stock to
SMB Shareholders than the Stock Number:
(i) all Cash Election Shares will be converted into the right to receive the
Cash Consideration; and
(ii) the Exchange Agent shall designate Stock Election Shares to be
converted into Cash Election Shares ("Designated Cash Shares") on a
pro-rata basis based on the aggregate number of Stock Election Shares
held by such SMB Shareholder for each SMB Shareholder with respect to
those shares of SMB Common Stock held by such SMB Shareholder that are
Stock Election Shares, so that the number of shares of Western Common
Stock that will be issued in the Merger equals as closely as
practicable the Stock Number, and any Designated Cash Shares will be
converted into the right to receive the Cash Consideration. For
example, if 60% of the holders of shares of SMB Common Stock elect to
receive Western Common Stock in the Merger, each holder 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.
If the aggregate amount of Cash Consideration to be paid in the Merger
according to the allocation procedures set forth above plus the amount of any
other cash distributed to SMB Shareholders in the Merger (including cash in lieu
of fractional shares and cash distributed to Dissenting Shareholders of SMB, if
any) would exceed 60% of the total consideration paid by Western in the Merger
(valuing the Stock Consideration by reference to the closing price per share of
Western Common Stock as reported by Nasdaq on the date immediately prior to the
Effective Date), Western may, but is not obligated to, elect to increase the
Stock Consideration so that the aggregate amount of cash paid by Western in the
Merger is less than or equal to 60% of the total consideration paid by Western.
In such case, the conversion ratio reflecting the Stock Consideration to be
issued in exchange for each Stock Election Share will be increased so that the
Stock Election Shares in the aggregate will be converted into the right to
receive such increased number of shares of Western Common Stock such that the
value of the shares of Western Common Stock issued in the Merger equals or
exceeds 40% of the total consideration paid by Western.
If Western does not elect to increase the Stock Consideration under such
circumstances, the Merger will not qualify as a Reorganization. Therefore, in
such event, notwithstanding anything to the contrary set forth in this Joint
Proxy Statement-Prospectus, each share of SMB Common Stock will be converted
into the right to receive the Cash Consideration, regardless of whether the
holder of such share has made an Election to receive Cash Consideration.
BECAUSE THE TAX CONSEQUENCES OF RECEIVING CASH CONSIDERATION OR STOCK
CONSIDERATION WILL DIFFER, SMB SHAREHOLDERS ARE URGED TO READ CAREFULLY THE
INFORMATION SET FORTH UNDER THE CAPTION "THE MERGER-- CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." BECAUSE THE STOCK CONSIDERATION CAN FLUCTUATE IN VALUE, THE
ECONOMIC VALUE PER SHARE RECEIVED BY SMB SHAREHOLDERS WHO RECEIVE THE STOCK
CONSIDERATION MAY, AS OF THE DATE OF RECEIPT BY THEM, BE MORE OR LESS THAN THE
AMOUNT OF CASH CONSIDERATION PER SHARE RECEIVED BY SMB SHAREHOLDERS WHO RECEIVE
CASH CONSIDERATION.
THE FAILURE BY AN SMB SHAREHOLDER TO SUBMIT TIMELY A PROPERLY COMPLETED
ELECTION FORM WILL RESULT IN SUCH SHAREHOLDER BEING DEEMED TO HAVE ELECTED TO
RECEIVE STOCK CONSIDERATION IN THE MERGER. SEE "THE MERGER AGREEMENT-- ELECTION
PROCEDURES." In the event that no SMB Shareholder were to make an effective
Election to receive Cash Consideration in the Merger, if Western were to choose,
at its sole discretion, to issue such a greater number of shares of Western
Common Stock to SMB Shareholders than the Stock Number so that no cash (other
than cash in lieu of fractional shares and cash distributed to Dissenting
Shareholders of SMB, if any) would be paid in the Merger, then 100% of the total
consideration (other than cash in lieu of fractional shares) paid by Western in
the Merger would consist of shares of Western Common Stock.
13
<PAGE>
THE PRIVATE PLACEMENT
In order to raise the capital necessary to fund the payment of Cash
Consideration in the Merger, Western has entered into the Standby Agreements
(such Standby Agreements together constituting the "Private Placement") with the
Private Placement Investors (some of whom are Western directors, Western
officers and/or Western Shareholders), pursuant to which, if the Merger is
consummated, the Private Placement Investors have committed to purchase a
minimum of approximately 1,982,000 shares of Western Common Stock (the "Minimum
Shares") and to stand by to purchase up to approximately 2,311,500 additional
shares of Western Common Stock if requested to do so by Western (the "Standby
Shares" and, together with the Minimum Shares, the "Private Placement Shares").
The purchase price of the Private Placement Shares is $28 per share, and Western
will determine the exact number of Private Placement Shares to be sold pursuant
to the Standby Agreements after the Election Deadline.
The Private Placement Investors have agreed to pay the purchase price prior
to the Effective Time, and the stock transfer agent will cause the Private
Placement Shares to be issued and delivered to the Private Placement Investors
at the Effective Time. The Private Placement Shares have not been registered
under the Securities Act; however, pursuant to the Standby Agreements, Western
has agreed to file under the Securities Act, no later than 120 days after the
Effective Date, subject to certain adjustments, a "shelf" registration statement
providing for the registration of the Private Placement Shares. Depending on the
number of Private Placement Shares that are issued by Western pursuant to the
Standby Agreements, the Private Placement Shares will constitute between 12.6%
and 28.8% of the outstanding shares of Western Common Stock (after giving effect
to the Merger).
THE SPECIAL MEETINGS
WESTERN
The Western Special Meeting to consider and vote on, among other things,
approval of the principal terms of the Merger will be held on Tuesday, December
23, 1997 at 10:00 a.m. local time, at 4100 Newport Place, Third Floor, Newport
Beach, California 92660. Only holders of record of Western Common Stock at the
close of business on the Western Record Date will be entitled to vote at the
Western Special Meeting. At such date, there were outstanding and entitled to
vote 10,640,354 shares of Western Common Stock. Each share of Western Common
Stock is entitled to one vote for each share held of record upon each matter
properly submitted at the Western Special Meeting.
SMB
The SMB Special Meeting to consider and vote on, among other things,
approval of the principal terms of the Merger will be held on Tuesday, December
23, 1997 at 3:00 p.m. local time, in the Starlight Room of the Miramar Hotel,
Ocean Avenue and Wilshire Boulevard, Santa Monica, California. Only holders of
record of SMB Common Stock at the close of business on the SMB Record Date will
be entitled to vote at the SMB Special Meeting. At such date, there were
outstanding and entitled to vote 7,077,332 shares of SMB Common Stock. Each
share of SMB Common Stock is entitled to one vote for each share held of record
upon each matter properly submitted at the SMB Special Meeting.
For additional information relating to the Special Meetings, see "THE
SPECIAL MEETING OF WESTERN SHAREHOLDERS" and "THE SPECIAL MEETING OF SMB
SHAREHOLDERS."
VOTES REQUIRED
WESTERN
Approval of the matters to be voted upon in connection with the Merger by
the Western Shareholders requires the affirmative vote of the holders of a
majority of the outstanding shares of Western Common Stock entitled to vote. As
a result, the failure to vote in person or by proxy on any such proposal at the
14
<PAGE>
Western Special Meeting or abstaining on any proposal has the same effect as
voting against the applicable proposal. See "THE SPECIAL MEETING OF WESTERN
SHAREHOLDERS--Votes Required and Voting of Proxies."
As of the Western Record Date, Western's directors and officers beneficially
held, in the aggregate, the ability to direct the voting with respect to
approximately 26.8% of the outstanding Western Common Stock entitled to vote at
the Western Special Meeting. Each of the officers and directors of Western is
expected to vote in favor of the principal terms of the Merger.
SMB
Approval of the matters to be voted upon in connection with the Merger by
the SMB Shareholders requires the affirmative vote of the holders of a majority
of the outstanding shares of SMB Common Stock entitled to vote. As a result, the
failure to vote in person or by proxy on any such proposal at the SMB Special
Meeting or abstaining on any proposal has the same effect as voting against the
applicable proposal. See "THE SPECIAL MEETING OF SMB SHAREHOLDERS--Votes
Required and Voting of Proxies."
As of the SMB Record Date, SMB's directors and officers beneficially held,
in the aggregate, the ability to direct the voting with respect to approximately
27.4% of the outstanding SMB Common Stock entitled to vote at the SMB Special
Meeting. Shareholders (who are also directors of SMB) holding approximately
26.5% of SMB Common Stock outstanding on the SMB Record Date have entered into
agreements (the "Shareholder Agreements") pursuant to which they have agreed,
among other things, to vote "FOR" the adoption and approval of the Merger
Agreement and the Merger. See "THE SHAREHOLDER AGREEMENTS." Western has agreed
that neither it nor any of its affiliates will acquire more than 5% of the
outstanding SMB Common Stock prior to the Effective Time. As of the SMB Record
Date, Western held no shares of SMB Common Stock. See "THE SPECIAL MEETING OF
SMB SHAREHOLDERS--Votes Required and Voting of Proxies," "THE SHAREHOLDER
AGREEMENTS" and "THE MERGER AGREEMENT--Conditions."
REVOCABILITY OF PROXIES
The presence of a Western Shareholder or SMB Shareholder (as the case may
be) at the relevant Special Meeting (or at any postponement or adjournment
thereof) will not automatically revoke such shareholder's proxy. However, a
Western Shareholder or SMB Shareholder (as the case may be) 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)
delivery to the secretary of the relevant company prior to or at the relevant
Special Meeting 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 Julius G. Christensen,
Executive Vice President, General Counsel and Secretary, Western Bancorp, 4100
Newport Place, Suite 900, Newport Beach, California 92660. In the case of SMB
Shareholders, any written revocation of proxy or other related communications
should be addressed to Dario Quiroga, Senior Vice President, Cashier, Chief
Financial Officer and Secretary of Santa Monica Bank, 1251 Fourth Street, Santa
Monica, California 90401.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Western Board and the SMB Board 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
15
<PAGE>
shareholders of their respective companies and unanimously recommend a vote
"FOR" the matters to be voted upon by such shareholders in connection with the
Merger. The conclusions of the Western and SMB Boards with respect to the Merger
are based upon a number of factors. 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, Western's financial advisor, has rendered its written
opinion, dated September 17, 1997, to the Western Board to the effect that, as
of such date, the Merger Consideration to be paid by Western in the Merger is
fair to the Western Shareholders from a financial point of view. The written
opinion of Piper Jaffray, dated as of the date hereof, is attached to this Joint
Proxy Statement-Prospectus as Appendix C and should be read in its entirety. See
"THE MERGER--Opinions of Financial Advisors."
SMB
NationsBanc Montgomery Securities, Inc. ("Montgomery") delivered to the SMB
Board its opinions, dated July 30, 1997 and the date hereof, to the effect that,
as of each of such dates, each of the Cash Consideration and the Stock
Consideration to be paid by Western in the Merger is fair to the SMB
Shareholders from a financial point of view. The written opinion of Montgomery
Securities, dated as of the date hereof, 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."
EFFECTIVE TIME
The Merger will become effective on the date and at the time that an
agreement of merger and related documents are filed with the California
Secretary of State, provided that the California Secretary of State accepts such
agreement and documents for filing as of such date, or such later date as may be
specified in such agreement of merger or as may be required by the California
Secretary of State. Subject to conditions specified in the Merger Agreement, the
parties expect the Merger to become effective on or about January 23, 1998
although there can be no assurance as to whether or when the Merger will occur.
See "THE MERGER AGREEMENT--Effective Time and Effective Date" and "--Conditions
to the Merger."
CONDITIONS TO THE MERGER
The respective obligations of Western and SMB to consummate the Merger are
subject to certain conditions, including (a) the approval by the Shareholders of
the principal terms of the Merger; (b) receipt of approvals, consents and
waivers required by law in connection with the Merger and the other transactions
contemplated by the Merger Agreement, including approval or waiver by the Board
of Governors of the Federal Reserve System ("the Federal Reserve Board"), the
FDIC and the California Commissioner of Financial Institutions (the "State
Commissioner") (the parties having agreed that no such approval, consent or
waiver will be deemed to have been received if it includes any condition or
requirement that would result in a material adverse effect (as defined) on
Western or SMB or would reduce the economic benefits of the Merger in so
significant and adverse a manner for either party that such party would not have
entered into the Merger Agreement had such condition or requirement been known
to it); (c) the absence of any statute, rule, regulation, order, injunction or
decree being in effect and prohibiting or restricting the consummation of the
Merger or any other transaction contemplated by the Merger Agreement; (d) the
Registration Statement having become effective and there having been issued no
stop order suspending the effectiveness of the Registration Statement and no
proceedings for that purpose initiated or threatened by the Commission; and (e)
except if the failure to obtain such opinions is
16
<PAGE>
due solely to the circumstances contemplated in the Merger Agreement, pursuant
to which, if the Reorganization Condition is not satisfied, all SMB shareholders
will receive the Cash Consideration, receipt of an opinion of counsel by each of
Western and SMB, from its respective special counsel, to the effect that the
Merger will be a Reorganization within the meaning of Section 368(a) of the Code
and that Western, Western Bank and SMB each will be a party to the
Reorganization.
The obligations of Western and Western Bank to consummate the Merger also
are subject to the fulfillment or waiver by Western prior to the Effective Time
of certain conditions, including the following: (a) the representations and
warranties of SMB being true and correct unless the failure to be true and
correct is not likely to have a material adverse effect on SMB; (b) the
performance by SMB in all material respects of all covenants and agreements
contained in the Merger Agreement required to be performed by SMB before the
Effective Time; (c) receipt by Western of a customary "cold comfort" letter from
Arthur Andersen LLP with respect to certain financial statements and data of
SMB; (d) receipt by Western of written resignations, effective as of the
Effective Time, of each SMB Director and certain officers of SMB as agreed to by
Western and SMB; (e) receipt by Western, prior to the solicitation of
shareholder approval, of an opinion of Piper Jaffray confirming the fairness of
the terms of the Merger to the Western Shareholders from a financial point of
view; (f) receipt by Western of a certificate of satisfaction of the Franchise
Tax Board of the State of California that all taxes imposed on SMB have been
paid or secured; (g) Dissenters' Rights having been exercised by no more than 5%
of the outstanding shares of SMB Common Stock or Western Common Stock (the
"Dissenters' Rights Condition"); and (h) as of December 31, 1997, SMB's book
value having been not less than $77,900,000 and SMB's allowance for loan and
lease losses having been not less than $7,992,000. The Merger Agreement
expressly provides that the Dissenters' Rights Condition may be waived by
Western in its sole discretion either prior to or subsequent to the approval by
the Shareholders of the principal terms of the Merger.
In addition, the obligation of SMB to consummate the Merger also is subject
to the fulfillment or waiver by SMB prior to the Effective Time of certain
conditions, including the following: (a) the representations and warranties of
Western being true and correct unless the failure so to be true and correct is
not likely to have a material adverse effect on Western; (b) the performance by
Western in all material respects of all covenants and agreements contained in
the Merger Agreement required to be performed before the Effective Time; (c)
receipt by SMB of a customary "cold comfort" letter from KPMG Peat Marwick LLP
with respect to certain financial statements and data of Western; (d) receipt by
SMB of an opinion of Sullivan & Cromwell, special counsel to Western, dated the
Effective Date, to the effect that the Western Common Stock being issued
pursuant to the Merger Agreement will be duly authorized, validly issued, fully
paid and non-assessable; (e) as of the Effective Time, Aubrey L. Austin will be
appointed to the Board of Directors of Western and the Surviving Corporation and
will be the Chairman, President and Chief Executive Officer of the Surviving
Corporation; and (f) receipt by SMB, prior to each of the solicitation of
shareholder approval and the Effective Time, of an opinion of Montgomery
confirming the fairness of the terms of the Merger to the SMB Shareholders from
a financial point of view.
WAIVER AND AMENDMENT
Prior to the Effective Time, the conditions to each party's obligation to
consummate the Merger may be waived by such party in whole or in part to the
extent permitted by applicable law. In addition, Western and SMB may amend the
Merger Agreement at any time prior to the Effective Time by written agreement,
approved by their respective Boards, so long as the principal terms of the
Merger are not changed after approval by the Shareholders. See "THE MERGER
AGREEMENT--Conditions." The Merger Agreement expressly provides that Western may
waive the Dissenters' Rights Condition, whether prior to or subsequent to the
approval by the Shareholders of the principal terms of the Merger. Accordingly,
Western may determine to proceed with the Merger notwithstanding the failure of
this condition to be satisfied
17
<PAGE>
(due to the exercise of Dissenters' Rights by more than 5% of the shareholders
of either Western or SMB), although it is not obligated to do so.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Merger, either prior to or subsequent to its approval by the
Shareholders, (a) by mutual consent of Western and SMB, if so determined by
their respective Boards; (b) by either Western or SMB, if so determined by its
Board, if (i) the shareholders of Western or SMB fail to approve the principal
terms of the Merger, (ii) the other party materially breaches any
representation, warranty, covenant or agreement contained in the Merger
Agreement and such breach is not cured or curable within a specified grace
period, or (iii) the Merger is not consummated by February 28, 1998, unless such
failure is due to a breach of any representation, warranty or covenant contained
in the Merger Agreement by the party seeking to terminate; (c) by either Western
or SMB, if either the approval or waiver of a governmental authority required
for consummation of the Merger is not obtained or any governmental authority
prohibits consummation of the Merger; (d) by Western if SMB solicits an
Acquisition Proposal (as defined); or (e) by SMB if the SMB Board receives an
Acquisition Proposal and determines, based upon the written advice of counsel,
to accept the proposal and that proceeding with the Merger would violate
fiduciary duties of the SMB Board to the SMB Shareholders. See "THE MERGER
AGREEMENT--Termination."
If the Merger Agreement is terminated by SMB pursuant to a material breach
of any representation, warranty, covenant or agreement of Western therein that
is not cured or curable within 30 days after written notice of such breach,
Western will pay to SMB $5.0 million plus all costs and expenses incurred by SMB
in connection with the Merger, up to $1.0 million. If the Merger Agreement is
terminated (i) by Western pursuant to a material breach of any representation,
warranty, covenant or agreement of SMB therein that is not cured or curable
within 30 days after written notice of such breach, SMB will pay to Western $3.0
million or (ii) under the circumstances described in clauses (d) or (e) of the
preceding paragraph, SMB will pay to Western $10.0 million, in either case (i)
or (ii), plus all costs and expenses incurred by Western in connection with the
Merger, up to $1.0 million. See "THE MERGER AGREEMENT--Termination Payment."
REGULATORY APPROVALS
The Merger is subject to prior approval by the Federal Reserve Board under
Section 3 of the BHCA, the FDIC under the Bank Merger Act and the State
Commissioner pursuant to the California Financial Code. Western and SMB
submitted applications seeking approval of the Merger and related matters to the
FDIC on September 25, 1997 and to the State Commissioner on September 25, 1997
and November 19, 1997. Western and SMB also submitted a request for a waiver of
jurisdiction from the Federal Reserve Board. See "THE MERGER--Regulatory
Approvals" and "THE MERGER AGREEMENT--Conditions." It is expected that the
approvals and waiver will be received prior to the Special Meetings, but there
can be no assurance that such approvals and waiver will be obtained.
OPERATIONS AND MANAGEMENT AFTER THE MERGER
The Merger Agreement provides that Aubrey L. Austin will be appointed to the
Western Board and the Board of Directors of the Surviving Corporation and will
be the Chairman, President and Chief Executive Officer of the Surviving
Corporation. SMB will cause to be delivered to Western at the Effective Time the
resignations of the members of the SMB Board and of such officers as are agreed
to by Western and SMB in advance of the Effective Time. See "THE MERGER--Certain
Effects of the Merger."
Western Bank and Mr. Austin currently are negotiating the terms of an
employment agreement to be effective upon consummation of the Merger, which
would supersede Mr. Austin's change in control agreement.
18
<PAGE>
After the Merger, the Surviving Corporation will be headquartered at 1251
Fourth Street, Santa Monica, California. The telephone number at such offices
will be (310) 394-9611. For a discussion of certain matters relating to the
operations and business of the Surviving Corporation, see "THE MERGER--Certain
Effects of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Western Board and the SMB Board,
Shareholders should be aware that certain members of management of each of
Western and SMB and of the Western Board and the SMB Board have certain
interests in the transactions contemplated by the Merger Agreement that are in
addition to the interests of shareholders generally and that may create
potential conflicts of interest.
These interests include, among others, provisions in the Merger Agreement
relating to the indemnification of SMB officers and directors, directors' and
officers' liability insurance and certain employment agreements and employee
benefit plans. The Surviving Corporation will honor the current employee change
in control agreements of Aubrey L. Austin, Dario Quiroga and Linda Mazarella,
and it currently is expected that Western will enter into an employment
agreement with Mr. Austin, pursuant to which Mr. Austin will serve as Chairman,
President and Chief Executive Officer of the Surviving Corporation. In addition,
Mr. Austin will be appointed to the Western Board and the Board of Directors of
the Surviving Corporation as of the Effective Time.
Additionally, John M. Eggemeyer, a director of Western, beneficially owns
80% of Belle Plaine Partners, Inc. ("BPI"), which provided financial advisory
and consulting services in connection with the Merger. See "THE
MERGER--Interests of Certain Persons in the Merger," "THE MERGER
AGREEMENT--Certain Covenants--INDEMNIFICATION; DIRECTORS' AND OFFICERS'
INSURANCE," and "THE SPECIAL MEETING OF WESTERN SHAREHOLDERS--Security Ownership
of Certain Beneficial Owners and Western Management."
Also, in connection with the Private Placement, Joseph J. Digange, Mr.
Eggemeyer, B. Scott Hardt, William H. Jacoby, Robert L. McKay, John Rose, Hugh
S. Smith, Matthew P. Wagner and Dale Walter, who are directors and/or executive
officers of Western, and William J. Ruh, who is a principal of BPI, have entered
into Standby Agreements with Western, and Arnold C. Hahn, an executive officer
of Western, is expected to enter into a Standby Agreement with Western. Pursuant
to such Standby Agreements, if the Merger is consummated, such individuals will
purchase 80,150 Minimum Shares and will stand by to purchase up to 80,150
Standby Shares, in each case at a purchase price of $28 per share. See "THE
PRIVATE PLACEMENT."
DESCRIPTION OF WESTERN CAPITAL STOCK AND DIVIDEND POLICY
The authorized capital stock of Western as of the Western Record Date
consists of 100,000,000 shares of Western Common Stock, of which 10,633,079
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 is 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.
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, Western announced that the
Western Board had approved the institution of a quarterly dividend, and, on
August 29, 1997, Western announced that the Western Board declared a dividend of
$0.15 per common share payable on December 10, 1997 to Western Shareholders of
record on November 10, 1997.
19
<PAGE>
See "DESCRIPTION OF WESTERN CAPITAL STOCK AND COMPARISON OF SHARE-HOLDER
RIGHTS."
CERTAIN TAX CONSEQUENCES
It is intended that, unless the Reorganization Condition is not satisfied,
the Merger will be treated as a Reorganization. Consummation of the Merger as a
Reorganization (as previously defined) is conditioned upon receipt by Western of
confirmation, immediately prior to the Effective Time, of the opinion of
Sullivan & Cromwell and receipt by SMB of confirmation, immediately prior to the
Effective Time, of the opinion of O'Melveny & Myers LLP, which opinions were
received 30 days after execution of the Merger Agreement (the "Tax Opinions"),
substantially to the effect that, for federal income tax purposes: (i) the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code and (ii) each of Western, Western Bank and SMB will be a party to
that reorganization within the meaning of Section 368(b) of the Code. Similar
opinions were delivered by such firms on August 29, 1997. Those earlier opinions
were based on the assumptions that the Merger would be effected in accordance
with the terms of the Merger Agreement and that the Reorganization Condition
would be satisfied. See "THE MERGER-- Certain Federal Income Tax Consequences."
If the Merger is treated as a Reorganization, (i) no gain or loss will be
recognized by SMB Shareholders who receive solely Western Common Stock in
exchange for SMB Common Stock (except to the extent such shareholder receives
cash in lieu of a fractional share interest in Western Common Stock) and (ii)
SMB Shareholders who receive solely cash in exchange for SMB Common Stock will
generally recognize gain or loss in an amount equal to the difference between
the amount of cash received and the shareholder's aggregate adjusted basis in
the SMB Common Stock held by such holder. For a discussion of the tax
consequences of the Merger to SMB Shareholders who receive Western Common Stock
and cash, see "THE MERGER--Certain Federal Income Tax Consequences."
The recipt of cash will be taxable to an SMB shareholder, regardless of
whether such shareholder has elected to receive solely Western Common Stock in
the Merger. 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 SMB Shareholder, each SMB
Shareholder should consult his or her own tax advisor concerning certain other
federal and all state, local and foreign tax consequences of the Merger that may
be applicable.
In the event that the condition to the obligations of the parties pursuant
to the Merger Agreement that the parties receive the Tax Opinions is not
satisfied (except if the failure to obtain such opinions is due solely to the
failure to satisfy the Reorganization Condition), the parties either will
terminate the Merger Agreement for the failure of such condition or they will
waive such condition and resolicit the vote of the Shareholders to approve the
principal terms of the Merger without the condition that the Tax Opinions be
received by the parties. In connection with such resolicitation, the
Shareholders will be provided with an updated discussion of the federal income
tax consequences that may be applicable.
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, the Merger will be
accounted for as a purchase in accordance with generally accepted accounting
principles. See "THE MERGER--Accounting Treatment."
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. IN ORDER FOR ANY SHAREHOLDER TO
EXERCISE DISSENTERS' RIGHTS, A NOTICE OF SUCH SHAREHOLDER'S INTENTION TO
EXERCISE HIS OR
20
<PAGE>
HER DISSENTERS' RIGHTS AS PROVIDED IN THE CGCL MUST BE SENT BY SUCH SHAREHOLDER
AND RECEIVED BY WESTERN OR SMB, AS THE CASE MAY BE, ON OR BEFORE THE DATES 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
TO VOTE AGAINST THE PRINCIPAL TERMS OF THE MERGER WILL RESULT IN A WAIVER OF
SUCH SHAREHOLDER'S DISSENTERS' RIGHTS. SEE "THE MERGER--DISSENTERS' 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.
MARKETS AND MARKET PRICES
As of the Western Record Date, there were approximately 1,450 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 SMB Record Date, there were approximately 1,200 holders of record
of SMB Common Stock. SMB Common Stock is listed on the American Stock Exchange
(the "AMEX") under the symbol "SMO."
The following table summarizes the approximate high and low sales prices on
a per share basis for the Western Common Stock (prior to June 3, 1997, the
prices are the average of the bid and ask prices as quoted by dealers making a
market in such common stock, and after June 3, 1997, the prices are as reported
by Nasdaq), and the SMB Common Stock (as reported by AMEX), for the periods
indicated.
<TABLE>
<CAPTION>
WESTERN(1) COMMON SMB COMMON STOCK
STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1995
First Quarter........................................ $ 12.75 $ 10.20 $ 9.13 $ 7.63
Second Quarter....................................... * * 9.06 8.25
Third Quarter........................................ 11.48 10.20 14.13 11.13
Fourth Quarter....................................... 11.48 10.20 13.88 12.13
1996
First Quarter........................................ 11.05 8.93 14.13 12.00
Second Quarter....................................... 17.00 8.50 13.13 12.00
Third Quarter........................................ 14.88 8.50 15.00 11.50
Fourth Quarter....................................... 29.75 13.86 17.50 14.25
1997
First Quarter........................................ 34.00 19.13 19.25 16.63
Second Quarter....................................... 37.19 28.63 21.13 16.50
Third Quarter........................................ 33.25 28.63 27.31 21.00
Fourth Quarter (through November 19)................. 33.75 29.88 28.00 27.00
</TABLE>
- ------------------------
* No Reported Trades.
(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 Nasdaq and on that date Western
effected a 1.0 for 8.5 reverse stock split (the "Reverse Stock Split"). The
prices of Western
21
<PAGE>
Common Stock 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 Nasdaq.
The following table sets forth the closing price per share of Western Common
Stock as reported by Nasdaq, the closing price per share of SMB Common Stock as
reported by AMEX and the "equivalent per share price" (as defined below) of SMB
Common Stock as of July 30, 1997, the last trading day before the date on which
Western and SMB announced the execution of the Merger Agreement and as of
November 19, 1997, the last practicable date prior to the date of this Joint
Proxy Statement-Prospectus. The "equivalent per share price" of SMB Common Stock
on any date equals the closing price of the Western Common Stock on such date,
as reported on Nasdaq, multiplied by the Conversion Number.
<TABLE>
<CAPTION>
WESTERN COMMON SMB COMMON EQUIVALENT PER
MARKET PRICE PER SHARE AS OF STOCK STOCK SHARE PRICE
- --------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
July 30, 1997................................ $ 32.00 $ 24.50 $ 28.00
November 19, 1997............................ $ 32.00 $ 27.50 $ 28.00
</TABLE>
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 SMB Shareholders. See "RISK FACTORS-- Limited Market for
Western Common Stock." 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 ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR WESTERN COMMON
STOCK AND SMB COMMON STOCK.
Upon consummation of the Merger, it is expected that there will be up to
approximately 2,650 holders of record of Western Common Stock, depending on the
number of SMB Shareholders who receive Stock Consideration in exchange for their
shares of SMB Common Stock.
22
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
WESTERN
The following summary historical financial data for the nine months ended
September 30, 1997 and 1996 are derived from unaudited consolidated financial
statements of Western, which have been restated to reflect the effects of the
CCB Merger on a pooling-of-interests basis and the SCB Merger on a pooling-
of-interests basis and include, in the opinion of management of Western (the
"Western Management"), all adjustments (consisting only of normal accruals)
necessary to present fairly the data for such periods. The results for the
nine-month period ended September 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 supplemental consolidated financial statements of Western,
which have been restated to reflect the effects of the CCB Merger on a
pooling-of-interests basis and the SCB Merger on a pooling-of-interests basis.
The data should be read in conjunction with the supplemental 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. See "AVAILABLE
INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED SEPTEMBER AT OR FOR THE YEARS
30,(1) ENDED DECEMBER 31,
------------------------ -------------------------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
----------- ----------- ----------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income...................... $ 74,839 $ 50,189 $ 74,237 $ 62,629 $ 53,079 $ 57,722 $ 69,804
Interest expense..................... 21,931 15,143 22,488 20,452 13,562 18,853 26,528
----------- ----------- ----------- --------- --------- --------- ---------
Net interest income.............. 52,908 35,046 51,749 42,177 39,517 38,869 43,276
Provision for loan and lease losses.. 2,125 395 1,018 8,564 3,510 17,919 13,914
----------- ----------- ----------- --------- --------- --------- ---------
Net interest income after
provision for loan and lease
losses......................... 50,783 34,651 50,731 33,613 36,007 20,950 29,362
Non-interest income.................. 7,371 7,008 9,875 7,826 8,447 15,871 10,440
Non-interest expense................. 42,604 32,177 47,961 44,961 41,061 45,649 41,052
----------- ----------- ----------- --------- --------- --------- ---------
Income (loss) before income
taxes.......................... 15,550 9,482 12,645 (3,522) 3,393 (8,828) (1,250)
Income tax expense (benefit)......... 8,022 3,884 3,656 (1,733) 1,680 (1,979) (529)
----------- ----------- ----------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of a change in
accounting principle........... $ 7,528 $ 5,598 $ 8,989 $ (1,789) $ 1,713 $ (6,849) $ (721)
Cumulative effect of change in
accounting principle............... -- -- -- -- -- (41) --
----------- ----------- ----------- --------- --------- --------- ---------
Net income (loss)................ $ 7,528 $ 5,598 $ 8,989 $ (1,789) $ 1,713 $ (6,890) $ (721)
----------- ----------- ----------- --------- --------- --------- ---------
----------- ----------- ----------- --------- --------- --------- ---------
ENDING BALANCE SHEET DATA:
Assets............................... $ 1,369,815 $ 1,307,422 $ 1,338,913 $ 866,385 $ 759,194 $ 799,558 $ 905,490
Securities........................... 244,263 341,372 332,818 184,978 220,095 248,879 232,439
Loans and leases, net of deferred
fees and costs..................... 874,283 781,455 817,358 543,042 439,241 460,975 547,797
Allowance for loan and lease losses.. 15,160 16,309 15,757 13,130 12,115 19,077 13,687
Goodwill............................. 31,065 33,112 32,968 4,131 2,464 2,616 2,008
Deposits............................. 1,199,408 1,151,590 1,177,014 774,057 675,971 731,829 809,992
Borrowed funds....................... 23,733 19,848 20,290 7,366 15,161 10,168 28,396
Common shareholders' equity.......... 134,527 125,004 129,047 77,628 62,274 51,572 57,778
</TABLE>
23
<PAGE>
WESTERN (CONTINUED)
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER AT OR FOR THE YEARS
30,(1) ENDED DECEMBER 31,
-------------- -----------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
------ ------ ------- ------ ------ ------- ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA AND OTHER SELECTED RATIOS(2):
Earnings (loss) per common and common equivalent share.............. $ 0.69 $ 0.74 $ 1.08 $(0.27) $ 0.33 $ (1.67) $(0.17)
Dividends declared per share........................................ 0.15 -- -- -- -- -- --
Book value per share................................................ 12.65 11.85 12.36 10.64 10.52 12.59 14.40
Tangible book value per share....................................... 9.73 8.71 9.20 10.08 10.10 11.95 13.90
Shareholders' equity to assets at period end........................ 9.82% 9.56% 9.64% 8.96% 8.20% 6.45% 6.38%
Tangible Shareholders' equity to
tangible assets at period end..................................... 7.73 7.21 7.36 8.52 7.90 6.14 6.17
Return on average assets............................................ 0.75 0.93 0.90 (0.21) 0.22 (0.79) (0.08)
Return on average equity............................................ 7.58 11.00 9.78 (2.59) 2.65 (12.54) (1.24)
Average equity/average assets....................................... 9.85 8.52 9.25 8.31 8.20 6.26 6.52
Net interest margin................................................. 5.95 6.45 5.86 5.69 5.71 4.91 5.30
</TABLE>
- --------------------------
(1) Includes the accounts and operating results of Western since the September
30, 1996 acquisition date.
(2) Excludes stock options as common stock equivalents in 1995, 1993 and 1992 as
the effect thereof was antidulitive.
24
<PAGE>
SMB
The following summary historical financial data for the nine months ended
September 30, 1997 and 1996 are derived from unaudited financial statements of
SMB and include, in the opinion of management of SMB (the "SMB Management"), all
adjustments (consisting only of normal accruals) necessary to present fairly the
data for such periods. The results for the nine-month period ended September 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
SMB. The data should be read in conjunction with the financial statements,
related notes and other financial information included or incorporated by
reference in this Joint Proxy Statement-Prospectus. See "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED AT OR FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income.......................... $ 36,556 $ 33,496 $ 45,314 $ 45,678 $ 41,819 $ 44,765 $ 60,973
Interest expense......................... 10,995 10,064 13,498 14,205 12,421 13,865 22,196
--------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME.................. 25,561 23,432 31,816 31,473 29,398 30,900 38,777
Provision for loan losses................ -- -- -- 2,000 3,542 21,300 35,000
--------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES.......................... 25,561 23,432 31,816 29,473 25,856 9,600 3,777
Non-interest income...................... 5,330 5,102 7,024 7,209 7,277 7,639 7,843
Non-interest expense..................... 18,531 19,536 25,757 28,373 32,231 36,771 29,345
--------- --------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... 12,360 8,998 13,083 8,309 902 (19,532) (17,725)
Income tax expense (benefit)............. 4,338 2,247 3,467 3,042 381 (8,543) (8,327)
--------- --------- --------- --------- --------- --------- ---------
NET INCOME (LOSS).................... $ 8,022 $ 6,751 $ 9,616 $ 5,267 $ 521 $ (10,989) $ (9,398)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
ENDING BALANCE SHEET DATA:
Assets................................... $ 663,522 $ 612,291 $ 631,561 $ 618,863 $ 667,519 $ 688,301 $ 802,697
Securities............................... 150,282 125,546 141,139 134,599 167,033 125,353 124,130
Loans, net of deferred fees and costs.... 384,383 365,403 374,855 369,226 364,739 426,314 559,285
Allowance for loan losses................ 8,517 9,407 8,955 11,032 14,898 28,145 34,516
Deposits................................. 579,633 537,583 553,983 550,278 605,280 624,873 729,774
Borrowed funds........................... 1,967 1,987 1,982 2,000 2,016 2,146 2,270
Common shareholders' equity.............. 78,877 70,298 72,975 64,466 59,010 59,391 69,029
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings (loss) per common and common
equivalent share....................... $ 1.13 $ 0.95 $ 1.36 $ 0.74 $ 0.07 $ (1.55) $ (1.33)
Dividends declared per share............. 0.28 0.10 0.15 -- -- -- 0.45
Book value per share..................... $ 11.15 $ 9.93 $ 10.31 $ 9.11 $ 8.34 $ 8.39 $ 9.76
Shareholders' equity to assets at period
end.................................... 11.89% 11.48% 11.55% 10.42% 8.84% 8.63% 8.60%
Return on average assets................. 1.64 1.48 1.56 0.84 0.07 (1.51) (1.09)
Return on average equity................. 14.25 13.56 14.22 8.68 0.80 (16.93) (11.04)
Average equity/average assets............ 11.54 10.92 10.97 9.69 8.70 9.01 9.56
Net interest margin (tax-equivalent
yield)................................. 5.98 6.02 6.04 6.03 5.40 5.26 5.46
</TABLE>
25
<PAGE>
SUMMARY UNAUDITED PRO FORMA AND SELECTED HISTORICAL DATA
The following tables and text set forth certain unaudited pro forma and
selected historical data for Western and SMB based on three assumed scenarios
for the Merger:
1. Holders of 40% of the outstanding shares of SMB Common Stock elect to
have such shares converted into the right to receive the Stock
Consideration;
2. None of the holders of SMB Common Stock receive Stock Consideration; and
3. Holders of 50% of the outstanding shares of SMB Common Stock elect to
have such shares converted into the right to receive the Stock
Consideration.
Western Management cannot predict the number of holders of SMB Common Stock who
will elect to receive shares of Western Common Stock in the Merger, and cannot
predict which of the three presented scenarios is more likely to occur than the
others. Because satisfaction of the Reorganization Condition requires that at
least 40% in value of the total consideration received by SMB Shareholders is in
the form of Western Common Stock, assuming that any Stock Consideration is paid
to SMB Shareholders in the Merger, the scenario in which 40% of the holders of
SMB Common Stock receive Stock Consideration is the most dilutive scenario for
Western Shareholders on an earnings per share basis. If the Reorganization
Condition is not met, the Merger will be an all-cash merger and all SMB
Shareholders will receive cash in exchange for their shares of SMB Common Stock.
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA BASED ON A 40% STOCK
ELECTION BY SMB SHAREHOLDERS
The following table sets forth certain unaudited pro forma combined
condensed financial data for Western and SMB, as if the Merger had occurred at
the beginning of each of the periods presented and assuming that the holders of
40% of the outstanding shares of SMB Common Stock elect the Stock Consideration
(approximately 2,477,100 shares of Western Common Stock) and Western issues in
the Private Placement approximately 1,982,000 additional shares of Western
Common Stock to raise the capital necessary to fund the Cash Consideration. This
information should be read in conjunction with the historical and supplemental
consolidated financial statements of Western and SMB including the notes
thereto, incorporated herein by reference or included elsewhere in this Joint
Proxy Statement-Prospectus.
26
<PAGE>
See "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA" and "AVAILABLE
INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE NINE AT OR FOR THE YEAR
MONTHS ENDED SEPTEMBER ENDED DECEMBER 31,
30, 1997 1996
------------------------ ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
RESULTS OF OPERATIONS:
Interest income.............................................................. $ 108,883 $ 116,203
Interest expense............................................................. 33,854 37,223
----------- --------
NET INTEREST INCOME...................................................... 75,029 78,980
Provision for loan and lease losses.......................................... 2,125 1,018
----------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES................ 72,904 77,962
Non-interest income.......................................................... 12,701 16,899
Non-interest expense......................................................... 67,558 82,282
----------- --------
INCOME BEFORE INCOME TAXES................................................. 18,047 12,579
Income tax expense........................................................... 10,739 4,962
----------- --------
NET INCOME................................................................. $ 7,308 $ 7,617
----------- --------
----------- --------
ENDING BALANCE SHEET DATA:
Assets....................................................................... $ 2,115,059
Securities................................................................... 394,545
Loans and leases, net of deferred fees and costs............................. 1,261,056
Allowance for loan and lease losses.......................................... 23,677
Goodwill..................................................................... 150,173
Deposits..................................................................... 1,778,887
Borrowed funds............................................................... 39,103
Common shareholders' equity.................................................. 262,428
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent share.............................. $ 0.48 $ 0.60
Dividends declared per share................................................. 0.15 --
Book value per share......................................................... $ 17.39 $ 16.88
Tangible book value per share................................................ 7.44 6.38
Shareholders' equity to assets at period end................................. 12.41% 12.34%
Tangible shareholders' equity to tangible assets at period end............... 5.71 5.05
Return on average assets..................................................... 0.47 0.45
Return on average equity..................................................... 3.76 3.53
Average equity/average assets................................................ 12.48 12.76
Net interest margin.......................................................... 5.87 5.80
</TABLE>
27
<PAGE>
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA BASED ON A 40% STOCK ELECTION
BY SMB SHAREHOLDERS
The following table sets forth for Western Common Stock and SMB Common Stock
certain selected historical and unaudited pro forma equivalent per share data at
September 30, 1997 and for the nine months ended September 30, 1997, and at the
end of and for the year ended December 31, 1996, giving effect to the Merger
using the purchase method of accounting. These tables also assume that the
holders of 40% of the outstanding shares of SMB Common Stock elect Stock
Consideration (approximately 2,477,100 shares of Western Common Stock) and
Western issues in the Private Placement approximately 1,982,000 additional
shares of Western Common Stock to raise the capital necessary to fund the Cash
Consideration. The information is derived from the unaudited pro forma combined
condensed financial data of Western and the historical financial statements of
SMB 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, supplemental and pro forma combined financial information
of Western and SMB including the notes thereto, appearing elsewhere in this
Joint Proxy Statement-Prospectus or incorporated herein by reference. See
"UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA" and "AVAILABLE
INFORMATION."
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------- -------------------
<S> <C> <C>
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE(1):
Western........................................................... $ 0.69 $ 1.08
SMB............................................................... 1.13 1.36
Western combined pro forma........................................ 0.48 0.60
SMB equivalent pro forma.......................................... 0.42 0.52
Western cash dividends per share.................................. 0.15 --
SMB cash dividends per share...................................... 0.28 0.15
Western combined pro forma cash dividends per share............... 0.15 --
SMB equivalent pro forma cash dividends per share................. 0.13 --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996
------------------------- -------------------
<S> <C> <C>
BOOK VALUE PER SHARE(2):
Western(3)........................................................ $ 12.01 $ 11.26
SMB............................................................... 11.15 10.31
Western combined pro forma........................................ 17.39 16.88
SMB equivalent pro forma.......................................... 15.21 14.77
</TABLE>
- ------------------------
(1) The Western combined pro forma earnings per common and common equivalent
share were calculated by using aggregate historical income information for
Western and SMB 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, the
historical average shares of SMB as adjusted by the conversion number of
0.875 and the shares assumed to be issued in the Private Placement. The SMB
equivalent pro forma per share amounts were computed by multiplying the
Western combined pro forma amounts by the conversion number of 0.875.
(2) The Western combined pro forma book value per share is based on the
aggregate pro forma common shareholders' equity of Western and SMB divided
by the total pro forma common shares of the combined entity based on the
conversion number of 0.875 and the shares assumed to be issued in the
Private Placement. The SMB equivalent pro forma book value per share at
period end represents the Western pro forma amounts multiplied by the
conversion number of 0.875.
(3) Presented on a pro forma basis after giving effect (a) at September 30,
1997, to the SCB Merger, including estimated costs of the SCB Merger and (b)
at December 31, 1996, to the SCB and CCB Mergers, including estimated costs
of such mergers.
28
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA BASED ON AN ALL-CASH
MERGER
The following table sets forth certain unaudited pro forma combined
condensed financial data for Western and SMB, as if the Merger had occurred at
the beginning of each of the periods presented and assuming that none of the
holders of SMB Common Stock elect Stock Consideration and Western issues in the
Private Placement approximately 4,293,500 shares of Western Common Stock to
raise the capital necessary to fund the Cash Consideration. This information
should be read in conjunction with the historical and supplemental consolidated
financial statements of Western and SMB including the notes thereto,
incorporated herein by reference or included elsewhere in this Joint Proxy
Statement-Prospectus. See "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
DATA" and "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE NINE AT OR FOR THE YEAR
MONTHS ENDED SEPTEMBER ENDED DECEMBER 31,
30, 1997 1996
------------------------ ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
RESULTS OF OPERATIONS:
Interest income.................................................. $ 108,883 $ 116,203
Interest expense................................................. 34,835 38,532
----------- --------
NET INTEREST INCOME.......................................... 74,048 77,671
Provision for loan and lease losses.............................. 2,125 1,018
----------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE
LOSSES..................................................... 71,923 76,653
Non-interest income.............................................. 12,701 16,899
Non-interest expense............................................. 67,558 82,282
----------- --------
INCOME BEFORE INCOME TAXES..................................... 17,066 11,270
Income tax expense............................................... 10,331 4,418
----------- --------
NET INCOME..................................................... $ 6,735 $ 6,852
----------- --------
----------- --------
ENDING BALANCE SHEET DATA:
Assets........................................................... $ 2,115,059
Securities....................................................... 394,545
Loans and leases, net of deferred fees and costs................. 1,261,056
Allowance for loan and lease losses.............................. 23,677
Goodwill......................................................... 150,173
Deposits......................................................... 1,778,887
Borrowed funds................................................... 53,647
Common shareholders' equity...................................... 247,884
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent share.................. $ 0.44 $ 0.54
Dividends declared per share..................................... 0.15 --
Book value per share............................................. $ 16.61 $ 16.09
Tangible book value per share.................................... 6.55 5.47
Shareholders' equity to assets at period end..................... 11.72% 11.63%
Tangible shareholders' equity to tangible assets at period end... 4.97 4.29
Return on average assets......................................... 0.43 0.41
Return on average equity......................................... 3.68 3.41
Average equity/average assets.................................... 11.77 11.88
Net interest margin.............................................. 5.79 5.70
</TABLE>
29
<PAGE>
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA BASED ON AN ALL-CASH MERGER
The following table sets forth for Western Common Stock and SMB Common Stock
certain selected historical and unaudited pro forma per share data at September
30, 1997 and for the nine months ended September 30, 1997, and at the end of and
for the year ended December 31, 1996, giving effect to the Merger using the
purchase method of accounting. These tables also assume that none of the holders
of SMB Common Stock elect Stock Consideration and Western issues in the Private
Placement 4,293,500 additional shares of Western Common Stock to raise the
capital necessary to fund the Cash Consideration. The information is derived
from the unaudited pro forma combined condensed financial data of Western and
the historical financial statements of SMB 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, supplemental and pro
forma combined financial information of Western and SMB including the notes
thereto, appearing elsewhere in this Joint Proxy Statement-Prospectus or
incorporated herein by reference. See "UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL DATA" and "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------- -------------------
<S> <C> <C>
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE(1):
Western........................................................... $ 0.69 $ 1.08
SMB............................................................... 1.13 1.36
Western combined pro forma........................................ 0.44 0.54
Western cash dividends per share.................................. 0.15 --
SMB cash dividends per share...................................... 0.28 0.15
Western combined cash dividends per share......................... 0.15 --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996
------------------------- -------------------
<S> <C> <C>
BOOK VALUE PER SHARE(2):
Western(3)........................................................ $ 12.01 $ 11.26
SMB............................................................... 11.15 10.31
Western combined pro forma........................................ 16.61 16.09
</TABLE>
- ------------------------
(1) The Western combined pro forma earnings per common and common equivalent
share were calculated by using aggregate historical income information for
Western and SMB 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
assumed shares to be issued in the Private Placement.
(2) The Western combined pro forma book value per share is based on the
aggregate pro forma common shareholders' equity of Western divided by the
total pro forma outstanding common shares of the combined entity. The pro
forma outstanding common shares of the combined entity were calculated by
adding the Western historical outstanding common shares to the assumed
shares to be issued in the Private Placement.
(3) Presented on a pro forma basis after giving effect (a) at September 30,
1997, to the SCB Merger, including estimated costs of the SCB Merger and (b)
at December 31, 1996, to the SCB and CCB Mergers, including estimated costs
of such mergers.
30
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA BASED ON A 50% STOCK
ELECTION BY SMB SHAREHOLDERS
The following table sets forth certain unaudited pro forma combined
condensed financial data for Western and SMB, as if the Merger had occurred at
the beginning of each of the periods presented and assuming that the holders of
50% of the outstanding shares of SMB Common Stock elect the Stock Consideration
(approximately 3,096,300 shares of Western Common Stock) and Western issues in
the Private Placement approximately 1,982,000 shares of Western Common Stock to
raise the capital necessary to fund the Cash Consideration. This information
should be read in conjunction with the historical and supplemental consolidated
financial statements of Western and SMB including the notes thereto,
incorporated herein by reference or included elsewhere in this Joint Proxy
Statement-Prospectus. See "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
DATA" and "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE NINE AT OR FOR THE YEAR
MONTHS ENDED SEPTEMBER ENDED DECEMBER 31,
30, 1997 1996
------------------------ ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
RESULTS OF OPERATIONS:
Interest income.............................................. $ 108,883 $ 116,203
Interest expense............................................. 32,516 35,440
----------- --------
NET INTEREST INCOME...................................... 76,367 80,763
Provision for loan and lease losses.......................... 2,125 1,018
----------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE
LOSSES..................................................... 74,242 79,745
Non-interest income.......................................... 12,701 16,899
Non-interest expense......................................... 67,558 82,282
----------- --------
INCOME BEFORE INCOME TAXES................................. 19,385 14,362
Income tax expense........................................... 11,294 5,702
----------- --------
NET INCOME................................................. $ 8,091 $ 8,660
----------- --------
----------- --------
ENDING BALANCE SHEET DATA:
Assets....................................................... $ 2,115,059
Securities................................................... 394,545
Loans and leases, net of deferred fees and costs............. 1,261,056
Allowance for loan and lease losses.......................... 23,677
Goodwill..................................................... 150,173
Deposits..................................................... 1,778,887
Borrowed funds............................................... 19,286
Common shareholders' equity.................................. 282,245
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent share.............. $ 0.51 $ 0.65
Dividends declared per share................................. 0.15 --
Book value per share......................................... $ 17.96 $ 17.48
Tangible book value per share................................ 8.41 7.39
Shareholders' equity to assets at period end................. 13.34% 13.30%
Tangible shareholders' equity to tangible assets at period
end........................................................ 6.72 6.09
Return on average assets..................................... 0.52 0.51
Return on average equity..................................... 3.86 3.67
Average equity/average assets................................ 13.45 13.96
Net interest margin.......................................... 5.97 5.93
</TABLE>
31
<PAGE>
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA BASED ON A 50% STOCK ELECTION
BY SMB SHAREHOLDERS
The following table sets forth for Western Common Stock and SMB Common Stock
certain selected historical and unaudited pro forma equivalent per share data at
September 30, 1997 and for the nine months ended September 30, 1997, and at the
end of and for the year ended December 31, 1996, giving effect to the Merger
using the purchase method of accounting. These tables also assume that the
holders of 50% of the outstanding shares of SMB Common Stock elect Stock
Consideration (approximately 3,096,000 shares of Western Common Stock) and
Western issues in the Private Placement approximately 1,982,000 shares of
Western Common Stock to raise the capital necessary to fund the Cash
Consideration. The information is derived from the unaudited pro forma combined
condensed financial data of Western and the historical financial statements of
SMB 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, supplemental and pro forma combined financial information
of Western and SMB including the notes thereto, appearing elsewhere in this
Joint Proxy Statement-Prospectus or incorporated herein by reference. See
"UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA" and "AVAILABLE
INFORMATION."
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------- -------------------
<S> <C> <C>
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE(1):
Western........................................................... $ 0.69 $ 1.08
SMB............................................................... 1.13 1.36
Western combined pro forma........................................ 0.51 0.65
SMB equivalent pro forma.......................................... 0.44 0.57
Western cash dividends per share.................................. 0.15 --
SMB cash dividends per share...................................... 0.28 0.15
Western combined pro forma cash dividends per share............... 0.15 --
SMB equivalent pro forma cash dividends per share................. 0.13 --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996
------------------------- -------------------
<S> <C> <C>
BOOK VALUE PER SHARE(2):
Western(3)........................................................ $ 12.01 $ 11.26
SMB............................................................... 11.15 10.31
Western combined pro forma........................................ 17.96 17.48
SMB equivalent pro forma.......................................... 15.72 15.30
</TABLE>
- ------------------------
(1) The Western combined pro forma earnings per common and common equivalent
share were calculated by using aggregate historical income information for
Western and SMB 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, the
historical average shares of SMB as adjusted by the conversion number of
0.875 and the shares assumed to be issued in the Private Placement. The SMB
equivalent pro forma per share amounts were computed by multiplying the
Western combined pro forma amounts by the conversion number of 0.875.
(2) The Western combined pro forma book value per share is based on the
aggregate pro forma common shareholders' equity of Western and SMB divided
by the total pro forma common shares of the combined entity based on the
conversion number of 0.875 and the shares assumed to be issued in the
Private Placement. The SMB equivalent pro forma book value per share at
period end represents the Western pro forma amounts multiplied by the
conversion number of 0.875.
(3) Presented on a pro forma basis after giving effect (a) at September 30,
1997, to the SCB Merger, including estimated costs of the SCB Merger and (b)
at December 31, 1996, to the SCB and CCB Mergers, including estimated costs
of such mergers.
32
<PAGE>
RISK FACTORS
IN ADDITION TO THE INFORMATION CONTAINED ELSEWHERE IN THIS JOINT PROXY
STATEMENT PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, 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.
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used or incorporated by reference in this Joint Proxy
Statement-Prospectus, the words "anticipate," "estimate," "expect," "project,"
"believe" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions including those set forth below. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, expected
or projected. Several key factors that have a direct bearing on Western's
ability to attain its goals are discussed below.
COMPETITION
The banking business in California generally, and in Western's and SMB's
service areas in particular, is highly competitive with respect to both loans
and deposits and is dominated by a relatively small number of major financial
institutions that have many offices operating throughout wide geographic areas.
In addition, there are numerous other independent commercial banks and savings
associations within their primary service areas, many of which have greater
resources, greater capital and, in some cases, less stringent regulatory
limitations. Certain of their 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 SMB; RAPID GROWTH
Because the markets in which Western and SMB 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
Western Bank and SMB or that such operating efficiencies will be realized in the
time frame currently anticipated. See "THE MERGER--Background of the Merger."
Western has experienced rapid growth in total assets, primarily due to
several recent significant acquisitions. In the first of such acquisitions,
Western acquired Western Bank on September 30, 1996, thereby increasing its
total assets from $80.2 million to $490.2 million at September 30, 1996, an
increase of 511%. In June 1997, Western merged with CCB, thereby acquiring NBSC
and increasing Western's total assets, as of December 31, 1996, from $512.4
million to $862.9 million, or 68%. As a result of the SCB Merger, which was
consummated on October 10, 1997, Western's total assets, as of December 31,
1996, increased further to $1.34 billion, an increase of 55%. Following the
Merger, on a pro forma basis as of December 31, 1996, Western's total assets
would have increased to $2.06 billion, an increase of 54%. The ability of
Western to operate effectively following this rapid growth will depend in part
on its ability to integrate the operations of the recently acquired entities and
its ability to attract and retain key personnel. If the integration of Western,
CCB, SCB and SMB does not proceed as anticipated, the results of operations of
Western could be adversely affected. Also, there can be no assurance that
Western will be able to realize the operating efficiencies that Western
Management expects to achieve through the CCB Merger and the SCB Merger.
In addition, due to the substantial size of these acquisitions, any
comparison of financial data as of and for the time periods prior to such
acquisitions may not be meaningful.
33
<PAGE>
GENERAL BUSINESS RISK
The business of Western and SMB is subject to various business risks. The
volume of loan originations is dependent upon demand for loans of the type
originated and serviced by Western and SMB. 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 Western and SMB less attractive.
In addition, Western and SMB may be adversely affected by other factors that
could (a) increase the cost to the borrower of loans originated by Western and
SMB, (b) create alternative lending sources for such borrowers, or (c) increase
the cost of funds of Western and SMB at rates faster than any increase in
interest income, thereby narrowing their net interest rate margins. Although
both Western and SMB also have 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 either Western or SMB fully to utilize new deposits to fund
loans, and accordingly each has increased its relative holdings of securities
investments. Managements of both Western and SMB 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 the
asset mix desired by Western and SMB can be achieved and 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 business in
which Western and SMB are engaged.
In the ordinary course of business, Western and SMB are subject to claims
made against them by borrowers and investors arising from, among other things,
losses that are claimed to have been incurred as a result of (a) alleged
breaches of fiduciary obligation, (b) alleged misrepresentations, errors or
omissions by employees and officers (including appraisers), (c) alleged
incomplete documentation, or (d) alleged failure by Western or SMB to comply
with applicable laws and regulations. Western believes that any liability with
respect to any currently asserted claims or legal actions against Western or SMB
is not likely to be material to the consolidated financial position or results
of operations of Western or the Surviving Corporation; however, any claims
asserted in the future may result in legal expense or liabilities that could
have a material adverse effect on the financial positions and results of
operations of Western or the Surviving Corporation. See "FIP LITIGATION."
CONCENTRATION OF OPERATIONS; RECESSIONARY ENVIRONMENTS; DECLINE IN REAL ESTATE
VALUES
The business activities of Western and SMB currently are focused in Southern
California, with the majority of their business concentrated in Los Angeles and
Orange counties. The business of Western after the Merger is expected to
continue to be concentrated in Southern California for the foreseeable future.
Although Western 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 Western and SMB are dependent upon
general trends in the Los Angeles County, Orange County and Southern California
economies and residential and commercial real estate markets. The risks to which
the business of Western and SMB is subject, and to which the business of Western
after the Merger 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 can
result in increased numbers of, and larger, claims and legal actions and in a
decline in demand for the services provided by Western and SMB. In addition, a
significant decline in market values of properties of the type that secure loans
originated by Western and SMB 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 Western and
SMB. Such a decline could also diminish the market for loans originated by
Western and SMB. Any of the foregoing could have a material adverse effect on
the financial position and results of operations of Western and the Surviving
Corporation, and
34
<PAGE>
could have a greater adverse impact on Western and the Surviving Corporation
than on certain competitors that may have greater resources and capital. In
addition, the concentration of Western's operations in Los Angeles and Orange
counties exposes it to greater risk than other banking companies with a wider
geographic base in the event of catastrophes, such as earthquakes, fires and
floods, in this region.
INTEREST RATE RISK
It is expected that Western, through its subsidiaries including the
Surviving Corporation, will continue to realize income primarily from the
differential or "spread" between the interest earned on loans, securities and
other 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 Western'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 Western'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 authorized 100,000,000 shares of Western Common Stock, of which
10,640,354 shares were outstanding, and 3,096,333 additional shares will be
issued in the Merger to SMB Shareholders, assuming no shares of SMB Common Stock
reserved for issuance on the SMB Record Date are issued on or prior to the
Effective Date and assuming Western issues in connection with the Merger the
maximum number of shares of Western Common Stock it can be required to issue
pursuant to the Merger Agreement. Pursuant to its stock option plans, Western
had outstanding options to purchase an additional 288,229 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 of between $13.77
and $15.81. As of the SMB Record Date, SMB had outstanding options to purchase
16,224 shares of SMB Common Stock with exercise prices of between $21.12 and
$32.50.
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 other than
the proposed acquisition of SCB. 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. See
"UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA."
In order to raise the capital necessary to fund the payment of Cash
Consideration in the Merger, Western has entered into the Standby Agreements
with the Private Placement Investors, pursuant to which, if the Merger is
consummated, such investors will purchase a minimum of approximately 1,982,000
shares of Western Common Stock and a maximum of approximately 4,293,500 shares
of Western Common Stock. See "THE PRIVATE PLACEMENT." After the Merger and the
Private Placement, there may be up to 15,711,557 shares of Western Common Stock
outstanding. Sales of substantial amounts of Western Common Stock through the
Private Placement and/or in connection with the issuance of shares in any future
acquisition 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. See "NOTES TO UNAUDITED PRO
FORMA COMBINED CONDENSED FINANCIAL DATA."
35
<PAGE>
In addition, Hovde Capital, Inc., as a purported assignee of Financial
Institution Partners, L.P. (collectively, "FIP"), has asserted a right under an
agreement between FIP and CCB to purchase 266,659 additional shares of common
stock of CCB at $6.75 per share and to an ongoing right of first refusal to
maintain FIP's beneficial ownership interest in CCB. FIP seeks specific
enforcement of this agreement, but does not in its complaint specify whether the
common stock it believes it has the right to purchase is that of CCB or of
Western. Nor does FIP specify whether the number of shares it seeks to purchase
or have a right of first refusal to purchase, if in Western Common Stock, is
subject to adjustment in any way as a result of the CCB Merger. Western
Management considers FIP's claims to be without merit and believes that FIP has
no contractual right or current right of first refusal to purchase any shares of
common stock of CCB or Western. If, however, FIP were entitled to purchase
266,659 additional shares of Western Common Stock, Western Management estimates,
for illustrative purposes, that the effect would be that the weighted average
shares outstanding, for the purpose of computing earnings per share, would have
increased by approximately 2.5% for the nine-month period ended September 30,
1997, resulting in earnings per share dilution of approximately 2.4%.
REGULATION
The operations of Western and SMB 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. Western and SMB each
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 Western and SMB is highly regulated, the laws, rules and
regulations applicable to Western and SMB are subject to regular modification
and change. There are currently proposed various laws, rules and regulations
that, if adopted, would impact Western and 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, which could make
compliance much more difficult or expensive, restrict Western'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
Western or otherwise adversely affect the business or prospects of Western.
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 Western after the Merger will be able to resell their securities
or otherwise liquidate their investment, if at all, without considerable delay
or considerable impact on the sales price. See "SUMMARY--Markets and Market
Prices."
There can be no assurance as to the market value of Western Common Stock,
which market value may be significantly affected by various factors, including
but not limited to announcements of expanded services by Western or its
competitors, acquisitions of related companies and variations in quarterly
operating results, as well as by the dilutive effects of the matters described
above in "--Shares Eligible for Future Sale; Dilution." The limited trading
market for Western Common Stock may cause fluctuations in the market value of
Western Common Stock to be exaggerated, leading to price volatility in excess of
that which would occur in a more active trading market.
INFORMATION REGARDING WESTERN
BUSINESS OF 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, SC Bank and Western Bank. Western was organized on May 20,
1983 as a California corporation and commenced operation as a bank holding
36
<PAGE>
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. On October 10, 1997, Western
consummated the SCB Merger pursuant to which SCB merged with and into Western.
It is expected that NBSC will be merged with and into SC Bank, a wholly-owned
subsidiary of SCB prior to the SCB Merger, with SC Bank being the surviving
bank, and applications for prior approval of such merger have been submitted to
the appropriate regulatory authorities.
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. SC Bank has 14
branches serving southeastern Los Angeles and Orange and San Diego counties.
Western Bank has five branches in Los Angeles County, with its head office in
Westwood, California. NBSC, SC Bank and Western Bank 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 September
30, 1997, Western had consolidated total assets, total deposits and
shareholders' equity of $867,123,000, $762,064,000 and $81,209,000, respectively
($1,370,903,000, $1,199,408,000 and $127,666,000, respectively, after giving
effect to the SCB Merger and the related estimated merger costs).
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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Additional information relating to Western, including information relating
to the business, management, properties, financial condition and results of
operations of Western, is included in documents incorporated by reference into
this Joint Proxy Statement-Prospectus. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
37
<PAGE>
INFORMATION REGARDING SMB
BUSINESS OF SMB
SMB is a full-service community bank. Organized in 1928, SMB is the 38th
largest bank in the State of California. SMB's main office and its executive
offices are located in Santa Monica, California. All SMB branches are located in
Los Angeles County. Specifically, SMB has a branch in each of Pacific Palisades,
West Los Angeles, Malibu and Marina Del Rey, as well as four in Santa Monica. At
September 30, 1997, SMB had total assets, total deposits and total shareholders'
equity of $663,522,000, $579,633,000 and $78,877,000, respectively, and a total
of 283 employees.
SMB provides a wide variety of banking services to its customers. The
services provided include those traditionally offered by commercial banks, such
as checking and saving accounts, commercial, industrial, real estate and
installment loans, and safe deposit facilities. SMB also has a trust department
with total market value of assets under administration of $667,665,000 at
September 30, 1997. SMB concentrates its marketing among small and medium-sized
businesses, persons and firms in the medical, dental, legal and accounting
professions, and developers of commercial and residential real estate projects.
SMB also serves consumers and, to a lesser extent, larger corporations.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Additional information relating to SMB, including information relating to
the business, management, properties, financial condition and results of
operations of SMB, is included in documents incorporated by reference into this
Joint Proxy Statement-Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
38
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed financial data combines
the historical supplemental consolidated condensed 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 effect of the SCB Merger
accounted for on a pooling-of-interests basis and the historical condensed
financial statements of SMB, giving effect to the Merger as if such transaction
had been effective on September 30, 1997, with respect to the Unaudited Pro
Forma Combined Condensed Balance Sheets, and as of the beginning of the periods
indicated, with respect to the Unaudited Pro Forma Combined Condensed Statements
of Income. The information with respect to the Merger is presented under the
purchase method of accounting. The information for the nine months ended
September 30, 1997 is derived from the unaudited consolidated financial
statements of Western and SMB, which include, in the opinion of the managements
of Western and SMB, respectively, 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 and supplemental
consolidated financial statements of Western and SMB including the 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 unaudited 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 "AVAILABLE INFORMATION." The unaudited pro forma combined
condensed financial data does not give effect to any operating efficiencies
anticipated in conjunction with the Merger.
The Unaudited Pro Forma Combined Condensed Balance Sheet is not necessarily
indicative of the actual financial position that would have existed had the
Merger been consummated on September 30, 1997, 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 consolidated financial
position and results of operations will differ, perhaps significantly, from the
pro forma amounts reflected herein because (i) assumptions used in preparing
such pro forma data may be revised in the future due to changes in values of
assets and changes in operating results between the dates of the unaudited pro
forma financial data and the date on which the Merger takes place, (ii)
adjustments may need to be made to the unaudited historical financial data upon
which such pro forma data are based, or (iii) a variety of other factors.
Western cannot predict the number of SMB Shareholders who will elect to
receive Cash Consideration in exchange for their shares of SMB Common Stock.
Consequently, it is impossible to predict the percentage of the total
consideration paid by Western in the Merger that will consist of Western Common
Stock.
Because satisfaction of the Reorganization Condition requires that at least
40% in value of the total consideration received by SMB Shareholders is in the
form of Western Common Stock, Western has chosen to present certain pro forma
data based on the assumption that the Stock Consideration will constitute 40% of
the total consideration. Assuming that any Stock Consideration is paid to SMB
Shareholders in the Merger, the scenario in which 40% of the holders of SMB
Common Stock receive Stock Consideration is the most dilutive scenario for
Western Shareholders on an earnings per share basis. If the Reorganization
Condition is not met, the Merger will be an all-cash merger and all SMB
Shareholders will receive cash in exchange for their shares of SMB Common Stock.
39
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SCB PRO FORMA
WESTERN PRO FORMA WESTERN AND SMB ADJUSTMENTS WESTERN
(HISTORICAL) ADJUSTMENTS(7) SCB COMBINED (HISTORICAL)(1) (2)(3)(4)(5) PRO FORMA
----------- --------------- -------------- ------------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and due from banks............... $ 105,962 -- $ 105,962 $ 39,330 $ 145,292
Interest bearing deposits in other
banks............................... 9 -- 9 -- -- 9
Federal funds sold.................... 84,000 -- 84,000 79,000 (50,000)(a) 113,000
----------- --------------- -------------- ------------- ------------ -----------
Total cash and cash equivalents... 189,971 -- 189,971 118,330 (50,000) 258,301
Federal Reserve Bank and Federal Home
Loan Bank stock..................... 5,519 -- 5,519 -- -- 5,519
Securities:
Securities held to maturity......... 5,365 -- 5,365 -- -- 5,365
Securities available for sale....... 233,379 -- 233,379 150,282 -- 383,661
----------- --------------- -------------- ------------- ------------ -----------
Total securities.................. 244,263 -- 244,263 150,282 -- 394,545
Net loans............................. 859,123 -- 859,123 375,866 2,390(b) 1,237,379
Property, plant and equipment......... 13,615 (635) 12,980 10,288 12,456(c) 35,724
Other real estate owned............... 8,354 -- 8,354 3,311 -- 11,665
Goodwill.............................. 31,065 -- 31,065 -- 119,108(d) 150,173
Other assets.......................... 23,424 1,723 25,147 5,445 (3,320)(e) 27,272
----------- --------------- -------------- ------------- ------------ -----------
Total assets...................... $1,369,815 $ 1,088 $1,370,903 $ 663,522 $ 80,634 $2,115,059
----------- --------------- -------------- ------------- ------------ -----------
----------- --------------- -------------- ------------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-interest bearing deposits......... $ 430,547 -- $ 430,547 $ 179,292 -- $ 609,839
Interest bearing deposits............. 768,861 -- 768,861 400,341 (154)(f) 1,169,048
----------- --------------- -------------- ------------- ------------ -----------
Total deposits.................... 1,199,408 -- 1,199,408 579,633 (154) 1,778,887
Borrowed funds........................ 23,733 -- 23,733 1,967 13,403(g) 39,103
Accrued interest payable and other
liabilities......................... 12,147 7,949 20,096 3,045 11,500(h) 34,641
----------- --------------- -------------- ------------- ------------ -----------
Total liabilities................. 1,235,288 7,949 1,243,237 584,645 24,749 1,852,631
----------- --------------- -------------- ------------- ------------ -----------
SHAREHOLDERS' EQUITY:
Preferred stock....................... -- -- -- -- -- --
Common stock.......................... 111,311 -- 111,311 21,232 113,530(i) 246,073
Additional paid-in capital............ -- -- -- 2,983 (2,983)(j) --
Retained earnings..................... 23,429 (6,861) 16,568 54,251 (54,251)(j) 16,568
Unrealized gains (losses) on
securities available for sale,
net................................. (213) -- (213) 411 (411)(k) (213)
----------- --------------- -------------- ------------- ------------ -----------
Total shareholders' equity........ 134,527 (6,861) 127,666 78,877 55,885 262,428
----------- --------------- -------------- ------------- ------------ -----------
Total liabilities and
shareholders' equity............ $1,369,815 $ 1,088 $1,370,903 $ 663,522 $ 80,634 $2,115,059
----------- --------------- -------------- ------------- ------------ -----------
----------- --------------- -------------- ------------- ------------ -----------
Number of common shares outstanding... 10,633.3 10,633.3 7,077.3 15,092.4
Common shareholders' equity per
share............................... $ 12.65 $ 12.01 $ 11.15 $ 17.39
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA."
40
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
WESTERN SMB ADJUSTMENTS WESTERN PRO
COMBINED WITH SCB (7) (HISTORICAL)(1) (2)(3)(4)(5) FORMA
---------------------- ------------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans.................... $ 59,700 $ 27,433 $ (449)(l) $ 86,684
Interest on interest bearing deposits in other
banks....................................... 2 -- -- 2
Interest on investment securities............. 12,343 6,415 -- 18,758
Interest on federal funds sold................ 2,794 2,708 (2,063)(m) 3,439
---------- ------------- ----------- -----------
Total interest income....................... 74,839 36,556 (2,512) 108,883
---------- ------------- ----------- -----------
INTEREST EXPENSE:
Interest expense on deposits.................. 20,915 10,848 23(n) 31,786
Interest expense on other borrowings.......... 1,016 147 905(o) 2,068
---------- ------------- ----------- -----------
Total interest expense...................... 21,931 10,995 928 33,854
---------- ------------- ----------- -----------
NET INTEREST INCOME:............................ 52,908 25,561 (3,440) 75,029
Less: provision for loan and lease losses..... 2,125 -- -- 2,125
---------- ------------- ----------- -----------
Net interest income after provision for loan and
lease losses.................................. 50,783 25,561 (3,440) 72,904
---------- ------------- ----------- -----------
NON-INTEREST INCOME:
Service charges and fees...................... 5,014 2,727 -- 7,741
Trust fees.................................... -- 2,431 -- 2,431
Gain on sale of loans and other assets........ 78 -- -- 78
Securities gains.............................. 342 -- -- 342
Other income.................................. 1,937 172 -- 2,109
---------- ------------- ----------- -----------
Total non-interest income................... 7,371 5,330 -- 12,701
---------- ------------- ----------- -----------
NON-INTEREST EXPENSE:
Salaries and benefits......................... 19,172 10,707 -- 29,879
Occupancy, furniture and equipment............ 5,830 3,129 467(p) 9,426
Advertising and business development.......... 1,046 675 -- 1,721
Other real estate owned....................... 293 (556) -- (263)
Professional services......................... 3,115 1,547 -- 4,662
Telephone, stationery and supplies............ 1,600 975 -- 2,575
Goodwill amortization......................... 1,903 -- 5,956(q) 7,859
Data processing for company................... 1,203 -- -- 1,203
Customer services cost........................ 858 -- -- 858
Merger costs.................................. 3,404(s) 841(t) -- 4,245
Other......................................... 4,180 1,213 -- 5,393
---------- ------------- ----------- -----------
Total non-interest expense.................. 42,604 18,531 6,423 67,558
---------- ------------- ----------- -----------
Income before income taxes.................. 15,550 12,360 (9,863) 18,047
Income taxes................................ 8,022 4,338 (1,621)(r) 10,739
---------- ------------- ----------- -----------
Net income (loss)....................... $ 7,528 $ 8,022 $ (8,242) $ 7,308
---------- ------------- ----------- -----------
---------- ------------- ----------- -----------
PER SHARE INFORMATION:
Number of shares (weighted average)........... 10,843.2 7,077.3 15,302.3
Income per share (dollars).................... $ 0.69 $ 1.13 $ 0.48
</TABLE>
- --------------------------
(s) Represents the costs associated with the CCB Merger, which was consummated
on June 4, 1997.
(t) Represents costs to date associated with the SMB Merger.
See "NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA."
41
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
WESTERN COMBINED SMB ADJUSTMENTS WESTERN
WITH SCB (7) (HISTORICAL)(1) (2)(3)(4)(5) PRO FORMA
----------------- ------------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans....................... $ 58,374 $ 35,379 $ (598)(l) $ 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 (2,750)(m) 2,897
----------------- ------------- ----------- ------------
Total interest income.......................... 74,237 45,314 (3,348) 116,203
----------------- ------------- ----------- ------------
INTEREST EXPENSE:
Interest expense on deposits..................... 21,382 13,303 31(n) 34,716
Interest expense on other borrowings............. 1,106 195 1,206(o) 2,507
----------------- ------------- ----------- ------------
Total interest expense......................... 22,488 13,498 1,237 37,223
----------------- ------------- ----------- ------------
Net interest income:............................... 51,749 31,816 (4,585) 78,980
Less: provision for loan and lease losses........ 1,018 -- -- 1,018
----------------- ------------- ----------- ------------
Net interest income after provision for loan and
lease losses..................................... 50,731 31,816 (4,585) 77,962
----------------- ------------- ----------- ------------
NON-INTEREST INCOME:
Service charges and fees......................... 7,827 3,644 -- 11,471
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...................... 9,875 7,024 -- 16,899
----------------- ------------- ----------- ------------
NON-INTEREST EXPENSE:
Salaries and benefits............................ 23,016 14,001 -- 37,017
Occupancy........................................ 7,649 4,060 623(p) 12,332
Advertising and business development............. 971 669 -- 1,640
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 -- 7,941(q) 8,945
Data processing for company...................... 1,064 -- -- 1,064
Customer services cost........................... 832 -- -- 832
Other............................................ 5,975 2,202 -- 8,177
----------------- ------------- ----------- ------------
Total non-interest expense..................... 47,961 25,757 8,564 82,282
----------------- ------------- ----------- ------------
Income before income taxes......................... 12,645 13,083 (13,149) 12,579
Income taxes....................................... 3,656 3,467 (2,161)(r) 4,962
----------------- ------------- ----------- ------------
Net income..................................... $ 8,989 $ 9,616 $ (10,988) $ 7,617
----------------- ------------- ----------- ------------
----------------- ------------- ----------- ------------
PER SHARE INFORMATION:
Number of shares (weighted average).............. 8,320.3 7,077.3 12,779.4
Income per share (dollars)....................... $ 1.08 $ 1.36 $ 0.60
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA."
42
<PAGE>
NOTES TO 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. In addition, audited pro forma combined
condensed financial data do not include the FIP litigation as a factor.
NOTE 2: PURCHASE PRICE AND FUNDING
The purchase price is based on $28 per share for SMB Shareholders choosing
the Cash Consideration and an exchange ratio of 0.875 Western shares for each
SMB share for SMB Shareholders choosing the Stock Consideration. Based on the
$32.00 closing price of Western on the day prior to the announcement of the
Merger, those SMB shareholders choosing the Stock Consideration would receive a
value of $28 per share.
The total consideration to be paid in connection with the Merger is
calculated as follows (in thousands, except per share amounts):
<TABLE>
<S> <C>
Shares of SMB Common Stock outstanding at September 30, 1997.... 7,077,332
Price per share................................................. $28.00
---------
Total purchase price........................................ $ 198,165
---------
---------
</TABLE>
For purposes of this pro forma combined condensed financial data, it is
assumed that the purchase price will be financed as follows through a
combination of cash ($118.9 million) and Western Common Stock ($79.3 million)
(dollars in thousands):
<TABLE>
<S> <C>
Issuance of Western Common Stock for cash......................... $ 55,496
Proceeds from additional borrowings............................... 13,403
Use of Federal funds balances..................................... 50,000
Issuance of 2,477,100 shares of Western Common Stock to SMB
Shareholders.................................................... 79,266
---------
Total purchase price.......................................... $ 198,165
---------
---------
</TABLE>
SMB Shareholders will have the option to elect cash of $28 or 0.875 shares
of Western Common Stock for each share of SMB Common Stock owned. No more than
50% of the SMB Common Stock may be converted into shares of Western Common
Stock, unless so elected by Western. For purposes of these pro forma combined
condensed financial statements, it is assumed that holders of approximately 40%
of SMB Common Stock will elect to receive Western Common Stock (resulting in the
issuance of 2,477,100 shares of Western Common Stock) and that Western will
raise an additional $55,496,000 through a sale of approximately 1,982,000 shares
of Western Common Stock in the Private Placement. Although Western Management
believes that the assumptions contained in these pro forma combined condensed
financial statements regarding the percentage of holders of shares of SMB Common
Stock electing to receive shares of Western Common Stock in the 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
Merger.
43
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA (CONTINUED)
NOTE 2: PURCHASE PRICE AND FUNDING (CONTINUED)
Federal funds sold have been reduced on a pro forma basis by $50.0 million
at September 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 nine months ended September
30, 1997, and the year ended December 31, 1996, has been reduced by $2.1 million
and $2.8 million, respectively, representing the lost interest income on Federal
funds at 5.5%. Borrowings have been increased on a pro forma basis by $13.4
million at September 30, 1997. As a result, historical interest expense on the
accompanying pro forma combined condensed income statements for the nine months
ended September 30, 1997, and the year ended December 31, 1996, has been
increased by $905,000 and $1,206,000, respectively, representing the additional
interest expense on the incremental borrowings at 9.0%.
NOTE 3: ALLOCATION OF PURCHASE PRICE
The purchase price of SMB has been allocated as follows (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents......................................... $ 118,330
Securities........................................................ 150,282
Net loans......................................................... 378,256
Goodwill.......................................................... 119,108
Property, plant and equipment..................................... 22,744
Other real estate owned........................................... 3,311
Other assets...................................................... 2,125
Deposits.......................................................... (579,479)
Borrowed funds.................................................... (1,967)
Other liabilities................................................. (14,545)
---------
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.
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 Merger. While a portion
of these costs may be required to be recognized over time, the current estimate
of these costs has
44
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA (CONTINUED)
NOTE 4: MERGER COSTS (CONTINUED)
been recorded in the pro forma combined balance sheet in order to disclose the
aggregate effect of these activities on Western's pro forma combined financial
position. The estimated aggregate costs, primarily comprised of anticipated cash
charges, include the following:
<TABLE>
<CAPTION>
FUTURE CHARGES RELATED TO THE MERGER (TAX DEDUCTIBLE)
- -------------------------------------------------------------------
<S> <C>
Employee reduction costs (1)..................................... $ 1,800
Contract terminations............................................ 715
Retiree health benefits (paid out over several years)............ 1,970
Equipment write-offs............................................. 300
Estimated other conversion costs................................. 2,215
---------
Total Deductible Merger Costs.................................. 7,000
Related income tax effect........................................ (2,905)
Net tax deductible costs......................................... 4,095
---------
COSTS PAID FROM PROCEEDS (NONDEDUCTIBLE)
Investment banking and other professional fees................... 4,500
---------
Total Merger Costs (net of tax)................................ $ 8,595
---------
---------
</TABLE>
- ------------------------
(1) The estimated employee reduction costs reflect Western Management's estimate
that, as a result of the Merger, the workforce of Western and its
subsidiaries will be reduced by approximately 95 employees. Western
Management believes that a significant portion of this reduction will occur
due to normal attrition. The estimated employee reduction costs include
severance benefits expected to be paid to employees terminated as a result
of the Merger. Western Management expects that this reduction will take
place during 1998.
NOTE 5: KEY TO PRO FORMA ADJUSTMENTS
Summarized below are the pro forma adjustments necessary to reflect the
acquisition of SMB based on the purchase method of accounting:
(a) Use of Federal funds balances as part of the cash purchase price. See
note 2.
(b) Adjust net loans to estimated fair value. See note 3.
(c) Adjust property, plant and equipment to estimated fair value. See note
3.
(d) Reflect goodwill resulting from the purchase method of accounting. See
note 3.
(e) Reflect the deferred tax asset of $2,905,000 related to the deductible
merger costs (see note 4) and the deferred tax liability of $6,225,000
related to the fair value adjustments for net loans, property, plant and
equipment, and deposits (see note 3).
(f) Adjust deposits to estimated fair value. See note 3.
(g) Reflect proceeds from additional borrowings used to fund the cash
purchase price. See note 2.
(h) Adjust liabilities for accrued merger costs. See note 4.
45
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA (CONTINUED)
NOTE 5: KEY TO PRO FORMA ADJUSTMENTS (CONTINUED)
(i) Reflect the following (see note 2):
<TABLE>
<S> <C>
Issuance of Western Common Stock for cash............. $55,496,000
Issuance of Western Common Stock to SMB
Shareholders........................................ 79,266,000
Elimination of SMB Common Stock balance............... (21,232,000)
-----------
$113,530,000
-----------
-----------
</TABLE>
(j) Eliminate SMB's additional paid-in capital and retained earnings.
(k) Eliminate SMB's unrealized loss on securities available for sale.
(l) Reflect amortization of loan premium. See note 3.
(m) Reflect reduction of interest income on Federal funds used to fund the
cash purchase price. See note 2.
(n) Reflect amortization of premium on deposits. See note 3.
(o) Reflect additional interest expense on borrowings used to fund the cash
purchase price. See note 2.
(p) Reflect additional depreciation on property, plant and equipment. See
note 3.
(q) Reflect amortization of goodwill. See note 3.
(r) Reflect income tax benefit on pro forma adjustments to combined
condensed income statements.
NOTE 6: COMPUTATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
The following tables reconcile the weighted average shares outstanding in
the unaudited pro forma combined condensed income statements for the nine months
ended September 30, 1997 and the year ended December 31, 1996, based upon the
percentage of total consideration consisting of shares of Western Common Stock:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
CONSIDERATION CONSISTING OF
SHARES OF WESTERN COMMON STOCK
LESS THAN 50% OR
NINE MONTHS ENDED SEPTEMBER 30, 1997 40%(A) 40% GREATER
- ------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING
Current Western Shareholders................................................... 10,843.2 10,843.2 10,843.2
Shares issued to SMB Shareholders.............................................. -- 2,477.1 3,096.3
Private placement shares....................................................... 4,293.5 1,982.0 1,982.0
--------- --------- ---------
Total shares issued............................................................ 4,293.5 4,459.1 5,078.3
--------- --------- ---------
Total weighted average shares outstanding.................................. 15,136.7 15,302.3 15,921.5
--------- --------- ---------
--------- --------- ---------
</TABLE>
(a) If less than 40%, in value, of the total consideration received by SMB
Shareholders is in the form of Western Common Stock, then the Merger will be
an all-cash merger and all SMB Shareholders will receive cash in exchange
for their shares of SMB Common Stock.
46
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA (CONTINUED)
NOTE 6: COMPUTATION OF WEIGHTED AVERAGE SHARES OUTSTANDING (CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
CONSIDERATION CONSISTING OF
SHARES OF WESTERN COMMON STOCK
LESS THAN 50% OR
YEAR ENDED DECEMBER 31, 1996 40%(A) 40% GREATER
- ------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING
Current Western Shareholders................................................... 8,320.3 8,320.3 8,320.3
Shares issued to SMB Shareholders.............................................. -- 2,477.1 3,096.3
Private placement shares....................................................... 4,293.5 1,982.0 1,982.0
--------- --------- ---------
Total weighted average shares issued........................................... 4,293.5 4,459.1 5,078.3
--------- --------- ---------
Total shares outstanding................................................... 12,613.8 12,779.4 13,398.6
--------- --------- ---------
--------- --------- ---------
</TABLE>
(a) If less than 40%, in value, of the total consideration received by SMB
Shareholders is in the form of Western Common Stock, then the Merger will be
an all-cash merger and all SMB Shareholders will receive cash in exchange
for their shares of SMB Common Stock.
The following tables reconcile the shares outstanding in the Unaudited Pro
Forma Combined Condensed Balance Sheet at September 30, 1997, based upon the
percentage of total consideration consisting of shares of Western Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
CONSIDERATION CONSISTING OF
SHARES OF WESTERN COMMON STOCK
LESS THAN 50% OR
40%(A) 40% GREATER
--------- --------- ---------
<S> <C> <C> <C>
PRO FORMA SHARES OUTSTANDING
Current Western Shareholders................................................... 10,640.4 10,640.4 10,640.4
Shares issued to SMB Shareholders.............................................. -- 2,477.1 3,096.3
Private placement shares....................................................... 4,293.5 1,982.0 1,982.0
--------- --------- ---------
Total shares issued............................................................ 4,293.5 4,459.1 5,078.3
--------- --------- ---------
Total shares outstanding................................................... 14,933.9 15,099.5 15,718.7
--------- --------- ---------
--------- --------- ---------
PRO FORMA PERCENTAGE OWNERSHIP
Current Western Shareholders................................................... 71.2% 70.5% 67.7%
SMB Shareholders............................................................... 0.0% 16.4% 19.7%
Private placement investors.................................................... 28.8% 13.1% 12.6%
--------- --------- ---------
Total...................................................................... 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
(a) If less than 40%, in value, of the total consideration received by SMB
Shareholders is in the form of Western Common Stock, then the Merger will be
an all-cash merger and all SMB Shareholders will receive cash in exchange
for their shares of SMB Common Stock.
NOTE 7: SCB MERGER COSTS
The Western and SCB combined unaudited pro forma condensed balance sheet
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
47
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA (CONTINUED)
NOTE 7: SCB MERGER COSTS (CONTINUED)
rate of 41.5%) expected to be incurred in connection with the SCB Merger. While
the substantial majority of these costs are expected to be paid within one year,
the current estimate of these costs has been recorded in the Western and SCB
combined unaudited pro forma condensed balance sheet in order to disclose the
aggregate effect of these activities on Western and SCB's combined financial
position. The estimated aggregate costs, which are directly attributable to the
SCB Merger, include the following:
<TABLE>
<S> <C>
Tax deductible costs:
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
----------
Total tax deductible costs.................................... 4,152,000
Related income tax effect....................................... (1,723,000)
----------
Net tax deductible costs........................................ 2,429,000
Nondeductible investment banking and other professional fees...... 4,432,000
----------
Total estimated SCB Merger costs, net of taxes................ $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, after consummation of the SCB Merger, 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 SCB 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) after consummation of the SCB Merger, Western Management plans
to terminate such interest rate swaps.
The merger costs for the SCB Merger are shown as pro forma adjustments on
the accompanying unaudited pro forma combined condensed balance sheet as of
September 30, 1997, and are not included in
48
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA (CONTINUED)
NOTE 7: SCB MERGER COSTS (CONTINUED)
the unaudited pro forma combined condensed income statements. The merger costs
have been aggregated as follows on the Unaudited Pro Forma Combined Condensed
Balance Sheet:
<TABLE>
<S> <C> <C>
Property, plant and equipment:
Write-offs of leasehold improvements............. $ (99,000)
Write-offs of capitalized data processing
costs.......................................... (328,000)
Software cost write-offs......................... (208,000) $ (635,000)
----------
Other assets:
Deferred income taxes on tax deductible merger
costs.......................................... 1,723,000
Accrued interest payable and other liabilities:
Severance costs.................................. (2,365,000)
Termination of interest rate swap................ (902,000)
Conversion costs................................. (250,000)
Investment banking and other professional fees... (4,432,000) (7,949,000)
---------- ----------
Retained earnings.................................. $(6,861,000)
----------
----------
</TABLE>
Western Management's cost estimates are forward-looking. While the costs
represent Western Management's current estimate of merger costs associated with
the SCB Merger that will be incurred, the ultimate level and timing of
recognition of such costs will be based on the final integration in connection
with consummation of the SCB Merger. Readers are cautioned that the completion
of this integration and other actions that may be taken in connection with the
SCB 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. See "RISK FACTORS--Ability to Integrate the
Operations of Western and SMB; Rapid Growth."
49
<PAGE>
THE SPECIAL MEETING OF WESTERN SHAREHOLDERS
GENERAL
This Joint Proxy Statement-Prospectus is being furnished to holders of
Western Common Stock in connection with the solicitation of proxies by the
Western Board for use at the Western Special Meeting to be held on December 23,
1997 and at any adjournments or postponements thereof. This Joint Proxy
Statement-Prospectus and the accompanying proxy card are first being mailed to
the Western Shareholders on or about November 24, 1997. The Western Special
Meeting is scheduled to be held at 4100 Newport Place, Third Floor, Newport
Beach, California 92660 on December 23, 1997 at 10:00 a.m., local time. The
presence, in person or by proxy, of the holders of stock having at least a
majority of the votes attributable to the Western Common Stock outstanding and
entitled to vote at the Western Special Meeting is necessary to constitute a
quorum thereat.
WESTERN 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 SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PRINCIPAL TERMS OF THE
MERGER.
MATTERS TO BE CONSIDERED AT THE WESTERN SPECIAL MEETING
The purpose of the Western Special Meeting is to (a) consider and vote upon
the approval of the principal terms of the Merger and (b) transact 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
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE PRINCIPAL TERMS OF THE
MERGER.
THE WESTERN RECORD DATE
The Western Board has fixed the close of business on November 17, 1997, as
the record date (the "Western Record Date") for the determination of the Western
Shareholders entitled to receive notice of, and to vote at, the Western Special
Meeting. Only holders of record of shares of Western Common Stock at the close
of business on the Western Record Date will be entitled to notice of, and to
vote at, the Western Special Meeting and any postponements or adjournments
thereof. On the Western Record Date, 10,633,079 shares of Western Common Stock
were issued and outstanding.
VOTES REQUIRED AND VOTING OF PROXIES
Western will appoint an employee to function as inspector 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 will each be included in the determination of
the number of shares present; however, they will not be counted as votes in
favor of the principal terms of the Merger. Each share of Western Common Stock
held of record will be entitled to one vote upon each matter properly submitted
to the Western Shareholders at the Western Special Meeting and any postponement
or adjournment thereof.
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. The failure to vote, an abstention or a broker non-vote thus have the
same effect as a vote against the principal terms of the Merger.
50
<PAGE>
Each share of Western Common Stock represented by a proxy properly executed
and received by Western in time to be voted at the Western Special Meeting and
not revoked will be voted in accordance with the instructions indicated on such
proxy and, if no instructions are indicated, will be voted "FOR" the proposal to
approve the principal terms of the Merger at the Western Special Meeting or any
adjournment or postponement thereof. All proxies voted "FOR" such matters,
including proxies on which no instructions are indicated, may, at the discretion
of the proxy-holder, be voted "FOR" a motion to adjourn or postpone the Western
Special Meeting to another time and/or place for the purpose of soliciting
additional proxies or otherwise. Any proxy that is voted against approval of the
principal terms of the Merger or on which the relevant Western Shareholder
specifically abstains from voting with respect to such approval will not be
voted in favor of any such adjournment or postponement.
The Western Board is not currently aware of any business to be acted upon at
the Western Special Meeting other than as described herein. If, however, other
matters are properly brought before the Western Special Meeting, persons
appointed as proxies will have discretion to vote or act thereon in their best
judgment.
If a quorum is not obtained, or fewer shares of Western 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 Western
Special Meeting will be postponed or adjourned for the purpose of allowing
additional time to obtain 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 that have theretofore
effectively been revoked or withdrawn).
SOLICITATION OF PROXIES
Western has engaged D.F. King to assist in soliciting proxies in connection
with the Western Special Meeting. 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. Western 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 Western. In addition to solicitation by mail, directors, officers
and employees of Western and its subsidiaries may solicit proxies from Western
Shareholders personally or by telephone or telegram without additional
remuneration therefor. Western also will 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. Western will bear the cost of solicitation of proxies from
the Western Shareholders.
REVOCABILITY OF PROXIES
The presence of a Western Shareholder at the Western Special Meeting (or at
any postponement or adjournment thereof) will not automatically revoke such
Western Shareholder's proxy. However, a Western Shareholder may revoke a proxy
at any time prior to its exercise by (a) delivery to the Secretary of Western of
a written notice of revocation prior to or at the Western Special Meeting (or,
if the Western Special Meeting is adjourned or postponed, prior to or at the
time the adjourned or postponed meeting is actually held); (b) delivery to the
Secretary of Western prior to or at the Western Special Meeting (or, if the
Western Special Meeting is adjourned or postponed, prior to or at the time the
adjourned or postponed meeting is actually held) of a duly executed proxy
bearing a later date; or (c) attending the Western Special Meeting (or, if the
Western Special Meeting is adjourned or postponed, by attending the adjourned or
postponed meeting) and voting in person thereat. Any written revocation of proxy
or other related communications should be addressed to Julius G. Christensen,
Executive Vice President, General Counsel and Secretary, Western Bancorp, 4100
Newport Place, Suite 900, Newport Beach, California 92660.
51
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND WESTERN MANAGEMENT
As of the Western Record Date, the directors and officers of Western
beneficially held, in the aggregate, the ability to direct the voting with
respect to 2,850,426 shares of Western Common Stock, comprising approximately
26.8% 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 that will become
exercisable within 60 days, by Western's directors, executive officers and
shareholders known to Western to be holding more than 5% of such stock, and by
Western's directors and officers as a group. Certain of Western's directors and
officers have entered into Standby Agreements to purchase additional shares of
Western Common Stock in connection with the Private Placement. See "THE PRIVATE
PLACEMENT." Shares to be acquired pursuant to such agreements are not included
in the following table.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Castle Creek Capital Partner's Fund-I(3)........................... 1,666,999 15.6%
4370 La Jolla Village, Suite 400,
San Diego, CA 92122
Launch & Co. Mutual Discovery Fund................................. 625,522 5.9%
51 John F. Kennedy Parkway,
Short Hills, NJ 07078
John M. Eggemeyer(3)(6)............................................ 1,743,633 16.2%
4370 La Jolla Village, Suite 400,
San Diego, CA 92122
Hugh S. Smith, Jr.(4)(5)........................................... 13,082 0.1%
1251 Westwood Blvd.
Los Angeles, CA 90024
Rice E. Brown(6)(7)................................................ 1,482 *
27127 Calle Arroyo
Suite 1907
San Juan Capistrano, CA 92675
John W. Rose(6)(8)................................................. 29,645 0.3%
c/o FNB Corporation
Hermitage Square
Hermitage, PA 16148
Dale E. Walter(6).................................................. 7,058 0.1%
50855 Washington Square
Suite C-211
La Quinta, CA 92253
Matthew P. Wagner(5)(9)............................................ 31,562 0.3%
1251 Westwood Blvd.
Los Angeles, CA 90024
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
E. Lynn Caswell(10)................................................ 11,122 0.1%
2332 Mill Creek Drive
Suite 230
Laguna Hills, CA 92653
Robert L. McKay(6)(11)............................................. 721,049 6.8%
4100 Newport Place
Newport Beach, CA 92660
William H. Jacoby(6)(12)........................................... 235,801 2.2%
4100 Newport Place
Newport Beach, CA 92660
Mark H. Stuenkel(6)(13)............................................ 55,466 0.5%
4100 Newport Place
Newport Beach, CA 92660
Joseph J. Digange(6)(14)........................................... 7,843 0.1%
1251 Westwood Boulevard
Los Angeles, CA 90021
Arnold C. Hahn(15)................................................. 7,572 0.1%
4100 Newport Place
Newport Beach, CA 92660
Harold A. Beisswenger(6)(16)....................................... 14,233 0.1%
4100 Newport Place
Newport Beach, CA 92660
Larry D. Hartwig(6)(17)............................................ 50,079 0.5%
4100 Newport Place
Newport Beach, CA 92660
William C. Greenbeck(6)(18)........................................ 63,845 0.6%
4100 Newport Place
Newport Beach, CA 92660
Donald E. Wood(6)(19).............................................. 48,325 0.5%
4100 Newport Place
Newport Beach, CA 92660
Directors and Executive Officers as a group (18 persons)(20)....... 3,030,675 28.0%
------------ -----
------------ -----
</TABLE>
- ------------------------
* 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 of the Western Record Date. Except as disclosed in
53
<PAGE>
notes 3 through 19, all shares held by directors, executive officers and
Western Shareholders are with their sole investment power.
(2) 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 Western 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.
(3) Mr. Eggemeyer has direct beneficial ownership of 18,878 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 1,633,432 shares of Western Common Stock and warrants to
purchase 33,567 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."
(4) Mr. Smith beneficially owns 12,369 shares of Western Common Stock and
options to purchase 713 shares of Western Common Stock.
(5) Executive Officer and Director.
(6) Director.
(7) Mr. Brown beneficially owns 894 shares of Western Common Stock and options
to purchase 588 shares of Western Common Stock.
(8) Mr. Rose beneficially owns 18,886 shares of Western Common Stock and
warrants to purchase 10,759 shares of Western Common Stock.
(9) Mr. Wagner beneficially owns 11,954 shares of Western Common Stock and
options to purchase 19,608 shares of Western Common Stock.
(10) E. Lynn Caswell is a former Chief Executive Officer and former Director of
Western.
(11) Mr. McKay holds 527,325 shares of Western Common Stock as Trustee of the
Robert McKay Living Trust dated August 7, 1995; 111,111 shares of Western
Common Stock as Trustee of the McKay Charitable Remainder Trust dated March
1, 1994; and 75,946 shares of Western Common Stock as general partner of
McKay Partnership. He beneficially owns options to purchase 6,667 shares of
Western Common Stock.
(12) Mr. Jacoby beneficially owns 4,638 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. He also holds 208,178 shares of
Western Common Stock as Trustee of the William Jacoby Family Trust.
(13) Mr. Stuenkel beneficially owns 42 shares of Western Common Stock jointly
with his wife; 537 shares of Western Common Stock held in a IRA account;
4,433 shares of Western Common Stock subject to a PAYSOP; 537 shares of
Western Common Stock that are held by his wife in an IRA account; and
options to purchase 27,917 shares of Western Common Stock. He also holds
22,000 shares of Western Common Stock as Trustee of the Stuenkel Family
Trust.
(14) Mr. Digange beneficially owns 7,130 shares and options to purchase 713
shares of Western Common Stock.
(15) Mr. Hahn, an executive officer of Western, beneficially owns 2,278 shares
and options to purchase 5,294 shares of Western Common Stock.
54
<PAGE>
(16) Mr. Beisswenger holds 14,233 shares of Western Common Stock jointly with
Helene E. Beisswenger Trust as Trustees of the Harold A. Beisswenger Family
Trust.
(17) Mr. Hartwig beneficially owns 9,112 shares of Western Common Stock held in
an IRA account. He also holds 40,967 shares of Western Common Stock jointly
with M.C. Hartwig as Trustees of the Hartwig Family Trust dated August 19,
1987.
(18) Mr. Greenbeck beneficially owns 33,445 shares of Western Common Stock. He
also holds 22,780 shares of Western Common Stock as a partner of Downey
Land Limited, a California Limited Partnership, and 7,620 shares of Western
Common Stock as Trustee of The Ben Mooschekian Trust.
(19) Mr. Wood beneficially owns 17,124 shares of Western Common Stock held in an
IRA account. He also holds 31,201 shares of Western Common Stock jointly
with Nadine G. Wood as Trustees of the D.E. Wood Family Trust.
(20) Does not include 11,122 shares beneficially owned by E. Lynn Caswell.
DISSENTERS' RIGHTS
If the principal terms of the Merger are approved by the Shareholders,
holders of Western Common Stock and SMB Common Stock who elect to dissent from
the approval of the principal terms of the Merger may be entitled to have their
shares purchased in accordance with Chapter 13 of the CGCL. See "SUMMARY--
Dissenters' Rights" and "THE MERGER--Dissenters' Rights" for a discussion of
Dissenters' Rights and a description of the procedures that must be followed to
perfect such rights. IN ORDER FOR A WESTERN SHAREHOLDER TO EXERCISE DISSENTERS'
RIGHTS, A NOTICE OF SUCH SHAREHOLDER'S INTENTION TO EXERCISE HIS OR HER
DISSENTERS' RIGHTS AS PROVIDED IN THE CGCL MUST BE SENT BY SUCH SHAREHOLDER AND
RECEIVED BY WESTERN ON OR BEFORE THE DATE OF THE WESTERN SPECIAL MEETING, AND
SUCH SHAREHOLDER MUST VOTE AGAINST THE APPROVAL OF THE PRINCIPAL TERMS OF THE
MERGER. FAILURE TO SEND SUCH NOTICE AND TO VOTE AGAINST THE PRINCIPAL TERMS OF
THE MERGER WILL RESULT IN A WAIVER OF SUCH SHAREHOLDER'S DISSENTERS' RIGHTS.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR WESTERN'S 1998 ANNUAL MEETING
Western Shareholders may submit proposals for shareholder action at the 1998
annual meeting of Western Shareholders if they do so in accordance with
applicable regulations of the Commission. Any such proposals must be submitted
to the Secretary of Western no later than January 16, 1998 in order to be
considered for inclusion in Western's 1998 proxy materials.
55
<PAGE>
THE SPECIAL MEETING OF SMB SHAREHOLDERS
GENERAL
This Joint Proxy Statement-Prospectus is furnished in connection with the
solicitation by the SMB Board of proxies representing SMB Common Stock to be
voted at the SMB Special Meeting to be held on December 23, 1997, and at any
postponement or adjournment thereof. This Joint Proxy Statement-Prospectus and
accompanying proxy card are first being mailed to SMB Shareholders on or about
November 24, 1997.
MATTERS TO BE CONSIDERED AT THE SMB SPECIAL MEETING
The purpose of the SMB Special Meeting is to (a) consider and vote upon the
principal terms of the Merger and (b) transact such other business as may
properly come before the SMB Special Meeting or any adjournments or
postponements thereof.
THE SMB RECORD DATE
The SMB Board has fixed the close of business on November 17, 1997 as the
record date (the "SMB Record Date") for the determination of the SMB
Shareholders entitled to receive notice of, and to vote at, the SMB Special
Meeting. Only holders of record of shares of SMB Common Stock at the close of
business on the SMB Record Date will be entitled to notice of, and to vote at,
the SMB Special Meeting and any postponements or adjournments thereof. On the
SMB Record Date, 7,077,332 shares of SMB Common Stock were issued and
outstanding.
VOTES REQUIRED AND VOTING OF PROXIES
In advance of the SMB Special Meeting, the SMB Board will appoint one or
three persons as inspectors of the election, whose duties will be those set
forth in Section 707 of the CGCL, among which are determining the shares
represented at the meeting, determining the existence of a quorum, determining
the authenticity, validity and effect of proxies, and counting and tabulating
all votes or consents as to all matters presented to the SMB Shareholders. A
majority of all shares of SMB Common Stock entitled to vote, represented in
person or by proxy, constitutes a quorum. Abstentions and broker non-votes will
each be included in the determination of the number of shares present; however,
they will not be counted as votes in favor of the principal terms of the Merger.
Each share of SMB Common Stock held of record will be entitled to one vote upon
each matter properly submitted to the SMB Shareholders at the SMB Special
Meeting and any postponement or adjournment thereof.
The affirmative vote of the holders of at least a majority of the total
number of outstanding shares of SMB Common Stock entitled to vote at the SMB
Special Meeting is required to approve 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.
Each share of SMB Common Stock represented by a proxy properly executed and
received by SMB in time to be voted at the SMB Special Meeting and not revoked
will be voted in accordance with the instructions indicated on such proxy and,
if no instructions are indicated, will be voted "FOR" the proposal to approve
the principal terms of the Merger at the SMB Special Meeting or any adjournment
or postponement thereof. All proxies voted "FOR" such matters, including proxies
on which no instructions are indicated, may, at the discretion of the
proxy-holder, be voted "FOR" a motion to adjourn or postpone the SMB Special
Meeting to another time and/or place for the purpose of soliciting additional
proxies or otherwise. Any proxy that is voted against approval of the principal
terms of the Merger or on which the relevant SMB Shareholder specifically
abstains from voting with respect to such approval will not be voted in favor of
any such adjournment or postponement.
The SMB Board is not currently aware of any business to be acted upon at the
SMB Special Meeting other than as described herein. If, however, other matters
are properly brought before the SMB Special Meeting, persons appointed as
proxies will have discretion to vote or act thereon in their best judgment.
56
<PAGE>
Certain SMB Shareholders, all of whom are directors of SMB, holding
approximately 26.5% of SMB Common Stock outstanding on the SMB Record Date have
agreed, among other things, to vote "FOR" the adoption and approval of the
Merger Agreement and the Merger. See "THE SHAREHOLDER AGREEMENTS." Western has
agreed that neither it nor any of its affiliates will acquire more than 5% of
the outstanding SMB Common Stock prior to the Effective Time. As of the SMB
Record Date, Western held no shares of SMB Common Stock. If Western were to
acquire shares of SMB Common Stock (other than shares acquired in a fiduciary or
agency capacity or in satisfaction of a debt previously contracted) prior to the
Effective Time, then the consideration paid for such shares of SMB Common Stock
would be counted in calculating the percentage of the total consideration
received by SMB Shareholders in the Merger that is cash for purposes of
determining whether the Reorganization Condition has been met.
If a quorum is not obtained, or fewer shares of SMB 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 SMB
Special Meeting will be postponed or adjourned for the purpose of allowing
additional time to obtain additional proxies or votes, and at any subsequent
reconvening of the SMB Special Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
SMB Special Meeting (except for any proxies that have theretofore effectively
been revoked or withdrawn).
SOLICITATION OF PROXIES
SMB has engaged D.F. King to assist in solicitating proxies in connection
with the SMB Special Meeting. The fee to be paid by SMB is $3,000 plus an
additional fee of $3.00 for each telephone contact with an SMB Shareholder. SMB
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 SMB. In
addition to solicitation by mail, directors, officers and employees of SMB and
its subsidiaries may solicit proxies from SMB Shareholders personally or by
telephone or telegram without additional remuneration therefor. SMB also will
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. SMB will bear the
cost of solicitation of proxies from its own shareholders.
REVOCABILITY OF PROXIES
The presence of an SMB Shareholder at the SMB Special Meeting (or at any
postponement or adjournment thereof) will not automatically revoke such SMB
Shareholder's proxy. However, an SMB Shareholder may revoke a proxy at any time
prior to its exercise by (a) delivery to the Secretary of SMB of a written
notice of revocation prior to or at the SMB Special Meeting (or, if the SMB
Special Meeting is adjourned or postponed, prior to or at the time the adjourned
or postponed meeting is actually held); (b) delivery to the Secretary of SMB
prior to or at the SMB Special Meeting (or, if the SMB Special Meeting is
adjourned or postponed, prior to or at the time the adjourned or postponed
meeting is actually held) of a duly executed proxy bearing a later date; or (c)
attending the SMB Special Meeting (or, if the SMB Special Meeting is adjourned
or postponed, by attending the adjourned or postponed meeting) and voting in
person thereat. Any written revocation of proxy or other related communications
should be addressed to Dario Quiroga, Senior Vice President, Cashier, Chief
Financial Officer and Secretary, Santa Monica Bank, 1251 Fourth Street, Santa
Monica, California 90401.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND SMB MANAGEMENT
As of the SMB Record Date, the directors and officers of SMB beneficially
held, in the aggregate, the ability to direct the voting with respect to
1,939,829 shares of SMB Common Stock, comprising approximately 27.4% of the
voting power of the SMB Common Stock outstanding. The directors and executive
officers of SMB have informed SMB that they intend to vote their shares of SMB
Common Stock for the approval of the principal terms of the Merger.
57
<PAGE>
The following table reflects as of the SMB Record Date the beneficial
ownership of SMB Common Stock, including stock options that will become
exercisable within 60 days, by SMB's directors, executive officers and
shareholders known to SMB to be holding more than 5% of such stock, and by SMB's
directors and officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) CLASS (2)
- ------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Aubrey L. Austin(3)(4) ............................................ 24,049 0.34%
c/o Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Dan T. Atkins (5)(6) .............................................. 30,000 0.42%
7909 Corte Nobleza
Bakersfield, CA 93309
Doris J. Carver (7)(8) ............................................ 981,690 13.87%
c/o Santa Monica Bank
Trust Department
1251 Fourth Street
Santa Monica, CA 90401
W. Paul Carver (9)(10) ............................................ 848,742 11.99%
c/o Santa Monica Bank
Trust Department
1251 Fourth Street
Santa Monica, CA 90401
Joe Crail (7)(11) ................................................. 1,300 0.02%
c/o Western Mutual Insurance
525 Broadway
Santa Monica, CA 90401
Willard L. Cummings, Jr. (7)(12) .................................. 11,256 0.16%
1530 Santa Monica Boulevard
Santa Monica, CA 90404
Donald Dickerson(7)(13) ........................................... 2,345 0.02%
1908 Santa Monica Blvd., Suite 3
Santa Monica, CA 90404
Pablo Ercilla(14)(15) ............................................. 1,021 0.01%
c/o Santa Monica Bank
1237 Fourth Street
Santa Monica, CA 90401
William Fritzsche(7)(16) .......................................... 1,500 0.02%
722 Ocampo Drive
Pacific Palisades, CA 90272
John Garacochea (7)(17) ........................................... 3,843 0.05%
c/o Pioneer Boulangerie
512 Rose Avenue
Venice, CA 90291
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) CLASS (2)
- ------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Jeffrey Alan Hahn(18)(19) ......................................... 1,580 0.02%
c/o Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Ron Makela (18)(20) ............................................... 1,769 0.02%
c/o Santa Monica Bank
1237 Fourth Street
Santa Monica, CA 90401
Linda Mazarella(18)(21) ........................................... 1,950 0.03%
c/o Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Dorothy F. Menzies(7)(22) ......................................... 1,368 0.02%
c/o Carlthorp School
438 San Vicente Boulevard
Santa Monica, CA 90402
Dario Quiroga(23)(24) ............................................. 28,416 0.40%
c/o Santa Monica Bank
1237 Fourth Street
Santa Monica, CA 90401
Directors and Executive Officers as a group (15 persons)........... 1,939,829 27.41%
</TABLE>
- ------------------------
(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 SMB Record Date. Ownership
includes vested stock options and warrants exercisable within 60 days of
the SMB Record Date. Except as disclosed in notes 4 through 24, all shares
held by directors, executive officers and shareholders are with their sole
investment power.
(2) 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 SMB Record Date are deemed outstanding for the purposes of computing
the percentage of SMB 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.
(3) Director, President and Chief Executive Officer.
(4) Mr. Austin beneficially owns 23,000 shares of SMB Common Stock as Trustee
of a revocable trust and 1,049 shares of SMB Common Stock as Custodian for
his daughter, Lauren Austin.
(5) Executive Vice President.
(6) Mr. Atkins beneficially owns 30,000 shares of SMB Common Stock that are
held in an IRA rollover.
(7) Director.
(8) Mrs. Carver holds 931,967 shares as Trustee of the Aubrey E. Austin, Jr.
and Doris J. Austin Revocable Trust dated November 3, 1987. She also holds
33,401 shares as Trustee of irrevocable trusts
59
<PAGE>
created for the benefit of her daughters, Janet and Jean Austin, and 16,322
shares as Trustee of the Trust under the will of her father, Herman
Klabunde.
(9) Chairman of the Board.
(10) Mr. Carver holds 812,995 shares as Trustee of the Audrey Austin Carver
Revocable Trust dated April 18, 1985, and 4,282 shares as Trustee of the
Wendell Paul Carver 1990 Trust dated October 19, 1990. He also hold 22,750
shares as Trustee of the Susan Jane Blankenship Trust created under the
Audrey Austin Carver Revocable Trust dated April 18, 1985 and 9,915 shares
as Trustee of the Susan Jane Blankenship Trust created under the Audrey
Austin Carver Irrevocable Trust dated March 31, 1983.
(11) Mr. Crail beneficially owns 800 shares of SMB Common Stock that are held in
an IRA.
(12) Mr. Cummings beneficially owns 3,500 shares of SMB Common Stock held by his
wife as Trustee and 7,756 shares of SMB Common Stock that are held by him
as Trustee.
(13) Mr. Dickerson beneficially owns 2,345 shares of SMB Common Stock that are
held in a profit sharing plan.
(14) Controller.
(15) Mr. Ercilla beneficially owns 1,021 shares of SMB Common Stock that are
held as Custodian for Paul A. Ercilla Golding.
(16) Mr. Fritzsche beneficially owns 1,500 shares of SMB Common Stock that are
held as Trustee in a family trust.
(17) Mr. Garacochea beneficially owns 1,750 shares of SMB Common Stock that are
held jointly with his wife, 172 shares of SMB Common Stock that are held by
his wife, and 1,300 shares of SMB Common Stock that are held in an IRA.
(18) Senior Vice President.
(19) Mr. Hahn beneficially owns 1,080 shares of SMB Common Stock that are held
in an IRA.
(20) Mr. Makela beneficially owns 1,769 shares of SMB Common Stock that are held
jointly with his wife.
(21) Ms. Mazarella beneficially owns 1,950 shares of SMB Common Stock that are
held jointly with her husband.
(22) Ms. Menzies beneficially owns 1,000 shares of SMB Common Stock that are
held jointly with her husband.
(23) Senior Vice President, Cashier, Chief Financial Officer and Secretary.
(24) Mr. Quiroga beneficially owns 17,900 shares of SMB Common Stock that are
held jointly with his wife, 8,895 shares of SMB Common Stock that are held
jointly with his father, 1,448 shares of SMB Common Stock that are held as
Custodian for daughters, 129 shares of SMB Common Stock that are held as
Custodian for one daughter, and 44 shares of SMB Common Stock that are held
by his wife jointly with her parents.
DISSENTERS' RIGHTS
If the principal terms of the Merger are approved by the Shareholders,
holders of Western Common Stock and SMB Common Stock who elect to dissent from
the approval of the principal terms of the Merger may be entitled to have their
shares purchased in accordance with Chapter 13 of the CGCL. IN ORDER FOR AN SMB
SHAREHOLDER TO EXERCISE DISSENTERS' RIGHTS, A NOTICE OF SUCH SHAREHOLDER'S
INTENTION TO EXERCISE HIS OR HER DISSENTERS' RIGHTS AS PROVIDED IN THE CGCL MUST
BE SENT BY SUCH SHAREHOLDER AND RECEIVED BY SMB ON OR BEFORE THE DATE OF THE SMB
SPECIAL MEETING, AND ANY SUCH SHAREHOLDER MUST VOTE AGAINST THE APPROVAL OF THE
PRINCIPAL TERMS OF THE MERGER. FAILURE TO SEND SUCH NOTICE AND TO VOTE AGAINST
THE PRINCIPAL TERMS OF THE MERGER WILL RESULT IN A WAIVER OF SUCH SHAREHOLDER'S
DISSENTERS' RIGHTS. See
60
<PAGE>
"SUMMARY--Dissenters' Rights" and "THE MERGER--Dissenters' Rights" for a
discussion of Dissenters' Rights and a description of the procedures that must
be followed to perfect such rights.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR SMB'S 1998 ANNUAL MEETING
SMB Shareholders may submit proposals for shareholder action at the 1998
annual meeting of SMB Shareholders if they do so in accordance with applicable
regulations of the Commission. Any such proposals must be submitted to the
Secretary of SMB no later than December 8, 1997 in order to be considered for
inclusion in SMB's 1998 proxy materials.
FIP LITIGATION
In December 1995, 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 on or prior to May 5, 1996,
subject to satisfaction of certain closing conditions.
FIP received confirmation from the Federal Reserve Board dated April 12,
1996 that no regulatory approval was required for the purchase of additional
shares of common stock of CCB. 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 of common
stock of CCB subsequent to receipt by FIP of the Federal Reserve Board
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 additional shares of common stock of CCB
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 9% interest, plus FIP's
legal, accounting and due diligence expenses. On June 28, 1996, CCB informed FIP
that its rights to purchase additional shares had expired under the terms of the
parties' agreement and declined either to amend the agreement or 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 an additional 266,659 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. FIP's complaint does not specify which company's stock it
believes it currently has a right of refusal to purchase, or whether the number
of shares it believes it has a right, or right of first refusal, to purchase is
subject to adjustment as a result of the CCB Merger.
61
<PAGE>
On September 19, 1997, CCB, NBSC and Western filed an answer to the
complaint. Western Management believes that FIP's claims are without merit and
that FIP has no contractual right or right of first refusal to purchase any
additional Western Common Stock.
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 subsidiary, Western Bank, and
SMB each conducts general banking operations in Western Los Angeles County
(Santa Monica Bay Area and West Los Angeles). In serving individuals, small
businesses and mid-market corporations, each historically has focused on a
community-based approach to banking. Management of each of Western and SMB has
been cognizant of the rapidly changing structure of the banking market in
Southern California and Los Angeles County, 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 County during the
recent recession. As is the case throughout the United States, the managements
of Western and SMB 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.
In order to compete effectively with the larger financial institutions that
Western Management believed would result from the various consolidations and
mergers in the industry locally, Western Management saw a need to expand
prudently and recognized the opportunity to build a larger regional, independent
financial institution in the Los Angeles County market. Accordingly, as a part
of its effort to achieve long-term stable profitability, Western sought a strong
partner with which to join forces and achieve greater market share in Los
Angeles County and in Southern California.
SMB Management perceived the same challenges and opportunities as SMB
emerged from the difficulties of the recent recession. The pace of consolidation
in California, already rapid, appeared to be accelerating and larger
institutions were attempting to increase their share of the market served by
SMB. At the same time, community banks were combining and providing greater
competition. SMB Management examined prospects for internal growth, growth by
acquisition of one or more financial institutions and the possibility of a
merger with a strong partner that shared a common vision and was focused on
markets demographically similar or identical to those served by SMB.
For much of the last ten years, SMB Management had received unsolicited
expressions of interest from other institutions wishing to acquire SMB. Those
unsolicited expressions of interest uniformly had been rejected. As the pace of
consolidation in California picked up in 1995 and thereafter, the number and
intensity of such inquiries increased. Several institutions were particularly
persistent. SMB received unsolicited inquiries from two institutions in
mid-1996. The high level of bank merger and acquisition activity in California
and the nature of those inquiries led SMB Management to reexamine SMB's position
with respect to possible acquisitions. In that connection, SMB consulted with
Arthur Andersen LLP on a variety of issues, including its business plan and
possible variations to that plan. After carefully reviewing its business plan
and considering the consultation provided by Arthur Andersen LLP, SMB Management
concluded in late 1996 that the two unsolicited inquiries were not at price
levels that required any modification of SMB's determination that it was in the
best interests of the SMB Shareholders that SMB remain independent and implement
its business plan.
62
<PAGE>
Throughout 1996, the principals at BPI, in their capacity as the financial
advisor to Western, held discussions with a number of Southern California-based
institutions with respect to potential business combinations. The institutions
contacted were primarily 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 SMB as
a potential acquisition target because of its loan generating capabilities, low
cost deposit base, trust business, and because of the potential operational
costs savings that could be garnered from combining the institutions'
duplicative operational functions.
Western was one of the institutions that initiated the unsolicited inquiries
in mid-1996. Western's inquiries were made by John M. Eggemeyer of BPI who met
several times with Aubrey L. Austin, President and Chief Executive Officer of
SMB. Mr. Eggemeyer also spoke with Mr. and Mrs. Carver, Directors of SMB, who,
directly or as fiduciaries, control approximately 26% of the SMB Common Stock.
In addition, in mid-1996, Mr. Austin met twice with a representative from the
other institution making unsolicited inquiries. On September 11, 1996, Mr.
Eggemeyer met with Mr. Austin and suggested a pooling-of-interests acquisition
based on a fixed exchange ratio valuing a share of SMB Common Stock at $17.42
based on the price of Western Common Stock on that day. Thereafter, Mr.
Eggemeyer had several discussions with SMB Management and Arthur Andersen LLP,
SMB's independent accountants, and another discussion with the Carvers, but was
eventually advised that SMB was not interested in a proposal based on a $17.42
price. In response, Mr. Eggemeyer indicated that Western would make an offer
that would value a share of SMB Common Stock at a higher price.
Accordingly, on January 9, 1997, Mr. Austin, the Carvers and Dan T. Atkins,
Executive Vice President of SMB, met with Mr. Eggemeyer and Matt Wagner, the
President of Western. At that meeting, Messrs. Eggemeyer and Wagner presented a
revised proposal for Western to acquire SMB in a merger based on a fixed
exchange ratio valuing a share of SMB Common Stock at $25.53 per share based on
the price of Western Common Stock on that day. The Carvers and Mr. Austin
indicated their belief that the price was too low and that any viable offer
needed to provide each SMB Shareholder with the option of receiving the purchase
price in cash.
After that meeting, SMB Management concluded it was necessary again, and
more formally, to reexamine the results that could be achieved for SMB
Shareholders by pursuing SMB's strategic plan and to compare those results with
results that might be achieved by modifying SMB's strategic plan or by being
acquired. SMB Management determined that additional assistance was required and
retained special counsel and an investment banking consultant to join its
shareholder value team. The team met throughout January and February 1997 to
consider, among other matters, the value of Western Common Stock because Western
had a limited history of operations and Western Common Stock had a limited
trading market. The team also reviewed accounting, investment banking and legal
issues.
In furtherance of this effort, management personnel of SMB and Western met
several times in late February and Arthur Andersen LLP discussed with Western
Management accounting and financial issues. The team continued to meet during
February and early March and, on March 11, 1997, concluded that the continuing
trend of bank consolidations coupled with Western's proposal required that SMB
Management carefully review with the SMB Board SMB's strategic options,
including both remaining independent and the possible acquisition of or by
another institution. Additional meetings of the managements of SMB and Western
and of the SMB team as well as meetings with Arthur Andersen LLP took place in
March and April 1997.
On April 29, 1997, Mr. Austin received a telephone call expressing
continuing interest from a representative of the other institution that had made
unsolicited inquiries in mid-1996. No discussion ensued, and there were no
further contacts.
On May 9, 1997, the SMB Board held a special meeting at which it discussed
various methods of enhancing shareholder value. Members of the team reported on
SMB's strategic plan (and potential
63
<PAGE>
improvements that could be made to it) as well as on the history and status of
the discussions with Western. The SMB Board held another special meeting on May
28, 1997. At that meeting, the SMB Board continued to explore its options for
enhancing shareholder value. The SMB Board also instructed Mr. Austin to advise
Western that discussions would cease unless Western could agree to offer SMB
Shareholders the option to receive at least $28.00 in cash.
On May 29, 1997, Mr. Austin met with Messrs. Eggemeyer and Wagner. He
briefed them on the SMB Board's view of the status of the negotiations and on
the importance to the SMB Board of the $28.00 per share cash price. During the
discussions, Mr. Austin indicated that he thought that the SMB Board would be
willing to consider the possibility of a business combination if Western would
ensure that each SMB Shareholder would be able to receive, at his or her option,
$28.00 per share in cash or an equivalent value in Western Common Stock, that
the SMB presence would be maintained in the Santa Monica community by keeping
the name Santa Monica Bank. Mr. Wagner stated that he was prepared to recommend
those terms to the Western Board provided that due diligence could be concluded
and a definitive purchase agreement entered into within sixty days.
The SMB Board held a special meeting on June 9, 1997. At that meeting, Mr.
Austin reviewed the status of SMB's business plan and its strategic options as
well as the status of the discussions with Western. He also reported that
Western had conditionally agreed to a proposal embodying the points discussed
above.
At a special meeting on June 25, 1997 the SMB Board accepted the
recommendation of a special committee appointed to select an investment banking
advisor, and approved the retention of Montgomery.
On July 9, 1997, SMB received from Western a written preliminary nonbinding
indication of interest in the form of a preliminary term sheet proposing to
purchase all of the shares of SMB Common Stock for $28.00 per share cash,
subject to certain other terms and conditions.
On July 16, 1997, the special committee met with representatives of
Montgomery and discussed with those representatives strategic alternatives for
SMB and possible outcomes of those alternatives.
On July 21, 1997, Western delivered an initial draft of the Merger Agreement
based upon earlier conceptual discussions between lawyers for Western and SMB.
A special meeting of the SMB Board was held on July 23, 1997.
Representatives of Montgomery were present. The SMB Board discussed with
representatives of Montgomery the strategic alternatives available to SMB. With
the assistance of legal counsel, the SMB Board carefully reviewed the initial
draft of the Merger Agreement.
During the next week, extended discussions were held between the managements
of and counsel for SMB and Western. The draft Merger Agreement was revised
several times as the parties negotiated over various issues, including a stock
option agreement, breakup fees, SMB Shareholders' right to receive Western
Common Stock in lieu of cash, whether the exchange ratio for Western Common
Stock would be fixed or adjustable, and if adjustable whether there would be a
minimum and maximum ratio, the pricing mechanism for Western Common Stock and
the Shareholder Agreements. General agreement was reached on a number of these
points, including the fixed Conversion Number.
The Western Board held a meeting on July 29, 1997, at which the proposed
Merger was considered in detail with Western's senior management and BPI,
including the consideration to be paid by Western and the related transactions.
All members of the Western Board were present at the meeting. At such meeting,
the Western Board unanimously approved the Merger Agreement and the various
matters and related agreements contemplated thereby and authorized Western
Management to take all action reasonably necessary to effect the Merger.
Several issues were still open when the SMB Board held a special meeting on
July 30, 1997, to discuss the entire transaction and the then-current draft of
the Merger Agreement. At that meeting,
64
<PAGE>
Messrs. Eggemeyer and Wagner spoke to the SMB Board and presented their vision
for the future of a combined Western and SMB. The various provisions of the
Merger Agreement, particularly those that were still at issue, were discussed at
length with counsel and representatives of Montgomery. The Montgomery
representatives presented a review of key economic data and, based upon certain
assumptions as to the contents of the Merger Agreement, advised the SMB Board
that the cash consideration and the stock consideration to be received by SMB
Shareholders pursuant to the draft Merger Agreement each were fair to the SMB
Shareholders from a financial point of view as of July 30, 1997. See "--Opinion
of Financial Advisors--SMB." After additional telephonic negotiations with
Western's representatives, agreement on all points was reached. The SMB Board
then approved the Merger and authorized the execution of a definitive agreement
with the terms and conditions later embodied in the Merger Agreement.
Immediately after its execution and delivery, the Merger Agreement was publicly
announced.
In addition, as an inducement to Western entering into the Merger Agreement,
certain directors of SMB entered into Shareholder Agreements with Western,
pursuant to which they committed to vote their respective shares in favor of the
Merger and against certain other transactions. Such directors of SMB each also
agreed not to compete with Western for specified periods of either one year or
two 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 successors or assigns
remain engaged in the business of commercial banking. Also, Western Bank and
Aubrey L. Austin are currently negotiating the terms of an employment agreement
to be effective upon consummation of the Merger.
The managements of Western and SMB believe that the two institutions
complement each other in their community-based approaches to banking and in
terms of their markets, both geographic and demographic. Consequently both
managements perceive opportunities for increased operating efficiencies through
combination and believe that, by combining forces, they will be able more
effectively to compete and successfully to take advantage of banking
opportunities in the rapidly evolving Los Angeles and Southern California
markets. See "RISK FACTORS--Ability to Integrate the Operations of Western and
SMB; Rapid Growth."
STRUCTURE OF THE MERGER
The Merger Agreement provides for the merger of SMB with Western Bank or,
under the circumstances described in the following paragraph, for the merger of
a newly-formed wholly-owned subsidiary of Western into SMB, which will promptly
thereafter be merged into Western Bank, with Western Bank being the Surviving
Corporation in either event and operating under the name "Santa Monica Bank." As
more fully described below in "THE MERGER AGREEMENT," in connection with the
Merger, each share of SMB Common Stock issued and outstanding at the Effective
Time (other than (a) shares that have not been voted in favor of approval of the
principal terms of the Merger and with respect to which Dissenters' Rights 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, at the option of the SMB Shareholder holding such share of SMB
Common Stock, either the Cash Consideration or, subject to the limitations set
forth in the Merger Agreement with respect to proration, fractional shares and
the possibility of an all-cash merger, the Stock Consideration. With the
exception of shares for which Dissenters' Rights have been perfected, each share
of Western Common Stock outstanding immediately prior to the Effective Time will
remain outstanding after the Merger as one share of Western Common Stock.
The Merger Agreement provides that SMB will merge with a wholly-owned
subsidiary of Western, and SMB Shareholders will receive as consideration from
Western either cash or Western Common Stock or both, depending on the elections
made by SMB Shareholders as to the type of consideration to be received. The
Merger Agreement provides that, if the SMB Shareholders and the Western
Shareholders approve the principal terms of the Merger Agreement, and subject to
receipt of regulatory approvals and other customary closing conditions, then (i)
SMB will merge into Western Bank, with Western Bank being
65
<PAGE>
the Survivor, provided that the number of SMB Shareholders electing to receive
cash as consideration in the transaction is not so great as to prevent the
transaction from qualifying as a Reorganization, so that the SMB Shareholders as
a result of the receipt of shares of Western Common Stock in exchange for some
or all of their shares of SMB Common Stock will not recognize any gain or loss
for tax purposes, and (ii) if the number of SMB Shareholders electing to receive
Cash Consideration is so great as to prevent the transaction from qualifying as
a Reorganization, then a newly-formed wholly-owned subsidiary of Western will
merge into SMB, with SMB being the Survivor. In the event that the Merger takes
the form of the transaction described in (ii) above, Western has agreed that
promptly after the Merger it will cause SMB to merge into Western Bank, so that
in either case, the Surviving Corporation will be Western Bank, which will
change its name to "Santa Monica Bank." See "--Certain Federal Income Tax
Consequences" and "THE MERGER AGREEMENT--The Merger."
Shortly after the Effective Time, shares of SMB Common Stock as to which a
valid election to receive the Cash Consideration has been made, will be
converted into the right to receive $28 in cash, and shares of SMB Common Stock
as to which such election has not been made will be converted into the right to
receive 0.875 shares of Western Common Stock, subject to the limitations
described above and elsewhere herein. See "THE MERGER AGREEMENT--Election
Procedures."
Because the value of the Western Common Stock to be received depends on its
market price, the 40% valuation to determine whether the Reorganization
Condition is satisfied cannot be calculated until the Cut-Off Date. If on the
Cut-Off Date the Reorganization Condition is not satisfied, the Merger will be
an all-cash merger in which every SMB Shareholder will receive $28 per share of
SMB Common Stock in cash regardless of such SMB Shareholder's election with
respect to his or her shares of SMB Common Stock, and the Merger will be
effected by merging a newly-formed wholly-owned subsidiary of Western into SMB.
Western currently owns no shares of SMB Common Stock. If Western were to
acquire shares of SMB Common Stock (other than shares acquired in a fiduciary or
agency capacity or in satisfaction of a debt previously contracted) prior to the
Effective Time, then the consideration paid for such shares of SMB Common Stock
would be counted in calculating the percentage of the total consideration
received by SMB Shareholders in the Merger that is cash for purposes of
determining whether the Reorganization Condition has been met. In the Merger
Agreement, Western has agreed that, prior to the earlier of (i) immediately
prior to the Effective Time and (ii) the termination of the Merger Agreement in
accordance with its terms, Western and its affiliates will not, directly or
indirectly, acquire more than 5% of the shares of SMB Common Stock (other than
shares acquired in a fiduciary capacity or in satisfaction of a debt previously
contracted). See "THE MERGER AGREEMENT--Certain Covenants--ACQUISITION OF SMB
COMMON STOCK BY WESTERN."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
WESTERN
The Western Board has unanimously approved the principal terms of the Merger
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. The Western Board believes that the Merger will enable Western
Shareholders to realize significant value on their investment and also enable
them to participate in opportunities for growth that the Western Board believes
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 the following
factors, which the Western Board deemed to be all the material factors at the
time it approved the principal terms of the Merger, from both a short-term and
long-term perspective:
66
<PAGE>
(a) The potential to leverage management, data processing and
operations, the expansion of products through acquisition of trust
operations, an increased consolidated lending limit and additional customer
convenience due to additional branches, which Western 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 SMB, which Western Management believes, based on the examination
of SMB's business, financial condition, results of operations and prospects,
will help to control risks normally associated with a merger;
(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;
and
(g) The compatibility of the respective businesses and management
philosophies of Western and SMB.
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 AS IN THE BEST INTERESTS OF WESTERN AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT WESTERN SHAREHOLDERS APPROVE THE PRINCIPAL TERMS OF
THE MERGER.
SMB
The SMB Board has unanimously approved the Merger and the Merger Agreement
and unanimously recommends that SMB Shareholders vote "FOR" the approval of the
principal terms of the Merger. In reaching its determination to approve the
Merger, the SMB Board analyzed SMB's alternatives for enhancement of SMB
Shareholder value, including SMB's prospects under several assumptions so as to
be able to compare the value of an SMB share with the Cash Consideration and the
Stock Consideration as well as with comparable transactions. At the same time,
the SMB Board also reviewed the history of Western and the prospects of Western
if the Merger were consummated. The factors that were examined as part of this
analysis, which the SMB Board deemed to be all the material factors at the time
of its analysis, were the following:
(a) Data showing SMB's performance in and share of the markets in which
SMB competes, such as for deposits, loans, trust services, etc.;
(b) The increasing competition in SMB's markets from both existing and
potential competitors, some of whom have far greater assets and resources,
in part as a result of the consolidation taking place in the banking
industry;
67
<PAGE>
(c) The efficacy of SMB's strategic plan under current competitive
conditions and actions which would increase financial performance and
shareholder value over the period of its projection;
(d) An examination of the special values inherent in the SMB franchise
including its strong position in Santa Monica and West Los Angeles, a
well-known name as implemented by its popular bus advertising program,
strong capital, the quality of SMB's loan portfolio, a strong deposit base,
data processing capabilities with excess capacity and a trust business
(unusual for a community bank in the Southern California area);
(e) The consolidation of the banking industry nationally and in
California;
(f) A review with legal counsel and investment banking and accounting
consultants of all significant aspects of a draft of the Merger Agreement;
(g) A review with SMB's investment banking consultants of the Stock
Consideration in order to understand its trading market and how the Western
Common Stock might be viewed in the market;
(h) Based on discussions between Western Management and SMB Management
and SMB's investment banking consultants, an analysis of all aspects of
Western including its past financial performance, its markets and its status
in those markets, the demographics of the Western markets including a
comparison with the demographics of SMB's market, Western Management and its
effectiveness, the compatibility of Western's strategic plan with that of
SMB and the ability of the combined organization to realize substantial
operating efficiencies which would increase performance and, presumably,
shareholder value by reviewing projections for Western on a stand alone
basis, for SMB on a stand alone basis and for the combined organization;
(i) A review of potential benefits for shareholders of a larger
organization with greater resources, increased operating efficiencies, the
ability to utilize trust department capacity over a larger base, an
increased lending limit and a stronger market position in West Los Angeles;
(j) The value to SMB Shareholders of being able to choose to receive the
Stock Consideration or, alternatively, the Cash Consideration;
(k) A comparison of the Western offer with reported transactions,
nationally and in California, by financial institutions with similar
characteristics; and
(l) Discussions with representatives of Montgomery regarding strategic
alternatives available to SMB and the opinion of Montgomery that, as of July
30, 1997, and based upon, and subject to, the matters stated in that
opinion, the Cash Consideration and Stock Consideration were each fair, from
a financial point of view, to the SMB Shareholders.
The foregoing discussion of material factors considered by the SMB Board is
not intended to be exhaustive but does set forth the principal factors
considered by the SMB Board. The SMB Board collectively reached the unanimous
conclusion to approve the Merger in light not only of the factors described
above but of such other factors as each Board member felt was appropriate. The
SMB Board did not assign relative or specific weights to any of the factors
described above and individual directors may have weighed such factors
differently.
FOR THE REASONS SET FORTH ABOVE THE SMB BOARD HAS UNANIMOUSLY APPROVED THE
MERGER AS IN THE BEST INTERESTS OF SMB AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SMB SHAREHOLDERS APPROVE THE PRINCIPAL TERMS OF THE MERGER.
68
<PAGE>
OPINIONS OF FINANCIAL ADVISORS
WESTERN
Pursuant to an engagement letter dated July 31, 1997, Western engaged Piper
Jaffray 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. Piper Jaffray previously has
acted as financial advisor to the Western Board in connection with Western's
acquisition of SC Bancorp. 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. In the ordinary course of its business,
Piper Jaffray has acted as a market maker for Western Common Stock and may
continue to do so in the future.
Piper Jaffray delivered to the Western Board on September 17, 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 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 (the "Piper
Opinion"). A copy of the Piper Opinion is attached to this Joint Proxy
Statement-Prospectus as Appendix C and is incorporated herein by reference.
Piper Jaffray has consented, which consent is included as an exhibit to the
Registration Statement of which this Joint Proxy Statement-Prospectus is a part,
to the filing of the Piper Opinion and to the references to its firm in this
Joint Proxy Statement-Prospectus. The consent does not admit that Piper Jaffray
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.
Although 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 SMB 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 proposed consideration to be paid
in connection with the Merger, 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 Securities Act and the rules and regulations
promulgated thereunder.
Piper Jaffray was not advised by Western, SMB or their respective legal
counsel concerning the probable outcome of, or estimated damages that might
arise from, any pending or threatened litigation, possible unasserted claims or
other contingent liabilities, to which Western or SMB or their affiliates was a
party or may be subject and undertook no independent analysis 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.
69
<PAGE>
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 SMB 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 SMB furnished by the managements of Western and
SMB, respectively, (iii) certain internal financial planning information for SMB
furnished by SMB Management and revised by Western, certain internal financial
planning information for Western, furnished by Western Management, and certain
pro forma internal financial planning information for SMB and Western furnished
by Western Management, (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 SMB and (vii) certain financial and securities data of
SMB and companies deemed similar to SMB or representative of the business sector
in which SMB operates. In addition, Piper Jaffray engaged in discussions with
members of the managements of SMB and Western concerning the respective
financial condition, current operating results and business outlook of SMB and
Western, including the prospects for the combined companies and any potential
operating efficiencies and synergies that 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 the managements of Western and SMB
that the information provided by Western and SMB 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 Western Management of the amount and timing
of potential cost savings, nonrecurring acquisition costs and other synergies
realizable as a result of the Merger. Piper Jaffray assumed that, if greater
than 60% of the total consideration received by SMB Shareholders was comprised
of cash, the Merger would be an all-cash transaction and, whether or not the
Merger is an all-cash transaction, it would be accounted for as a purchase under
generally accepted accounting principles ("GAAP"). 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 SMB 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 SMB 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 dates 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
September 17, 1997. In delivering the Piper Opinion to the Western Board as of
September 17, 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 SMB Common Stock, including stock
price and volume comparisons for the period ended September 12, 1997. Piper
Jaffray also utilized the stock trading information in its analyses of the per
share purchase prices and aggregate transaction values based on the Conversion
Number and other terms set forth in the Merger Agreement, as applied to various
scenarios that might result from elections of the shareholders of SMB to accept
different levels of Cash Consideration or Stock Consideration.
70
<PAGE>
PRO FORMA ANALYSIS. Piper Jaffray analyzed the hypothetical pro forma
effects of the Merger on Western's earnings per share and tangible book values
per share for the years ending December 31, 1998, 1999 and 2000. Piper Jaffray
analyzed these effects based on two scenarios-- the payment of all cash in the
Merger (the "All-Cash Scenario") and the payment of 50% of the consideration in
cash and 50% in Western Common Stock (the "50% Stock Scenario"). In these
analyses, 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 SMB's earnings and
projected synergies as well as certain other pro forma changes. These analyses
were completed on the basis of earnings per share computed according to GAAP,
cash earnings per share and tangible book values, using projections for SMB
provided by SMB Management and revised by Western Management. The projected
earnings per share and 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. The analyses were based on an assumed Conversion
Number of 0.875 shares of Western Common Stock for each share of SMB's Common
Stock for the Stock Consideration, and $28 per share for the Cash Consideration.
The All-Cash Scenario analyses indicated that the Merger would have a dilutive
effect on Western's projected earnings per share in 1998, 1999 and 2000 on a
GAAP basis and an accretive effect on Western's projected earnings per share in
1998, 1999 and 2000 on a cash basis. Both of these All-Cash Scenario analyses
took into account the projected synergies relating to the Merger. The All-Cash
Scenario analyses also indicated that, without such synergies, the Merger would
have a dilutive effect on Western's GAAP earnings per share for 1998, 1999 and
2000 and an accretive effect on Western's cash earnings per share for 1998,
1999, and 2000. The analyses also indicated that the Merger under the All-Cash
Scenario would have a dilutive effect on Western's tangible book value per share
in 1998, 1999 and 2000 whether or not the expected synergies relating to the
Merger are taken into account. The 50% Stock Scenario analyses indicated that,
taking into account the projected synergies relating to the Merger, the Merger
would have a dilutive effect on Western's projected earnings per share in 1998,
1999 and 2000 on a GAAP basis and an accretive effect on Western's projected
earnings per share in 1998, 1999 and 2000 on a cash basis. The 50% Stock
Scenario analyses also indicated that, without such synergies, the Merger would
have a dilutive effect for 1998, 1999 and 2000 on a GAAP basis. Further, the 50%
Stock Scenario analyses indicated that, on a cash basis, without synergies, the
Merger would be neither accretive nor dilutive in 1998, and would be dilutive in
1999 and 2000. The analyses for the 50% Stock Scenario also indicated that the
Merger would have a dilutive effect on Western's tangible book value per share
in 1998, 1999 and 2000 whether or not the expected synergies relating to the
Merger are taken into account.
DISCOUNTED IMPLIED DIVIDEND ANALYSIS. Using a discounted implied dividend
analysis, Piper Jaffray calculated a range of theoretical per share values for
SMB based on the net present value of (i) SMB's implied annual dividend income,
subject to a constraint of maintaining a minimum ratio of equity to assets of
6%, and (ii) a terminal value for SMB in 2002 calculated based upon a multiple
of net income. The projected financial data for SMB for 1998 through 2002
utilized by Piper Jaffray in this analysis was furnished by SMB management and
revised by Western Management. Piper Jaffray calculated the range of net present
values per share for SMB based on a range of discount rates of 12% to 16% and a
range of terminal value multiples of forecasted 2002 earnings of 14.0x to 18.0x.
This analysis yielded a range of estimated present values per share for SMB of
approximately $29.09 to $39.55 (taking into account the expected synergies
relating to the Merger) and approximately $21.17 to $28.16 (without such
synergies).
71
<PAGE>
COMPARABLE MERGER AND ACQUISITION ANALYSIS. Piper Jaffray reviewed selected
transactions involving acquired banks located in California with total assets
between $100 million and $1.5 billion deemed comparable to SMB that have been
completed from January 1, 1996 to September 12, 1997 and whereby the target was
100% 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 fifteen 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 SMB's comparable ratios. The comparable transaction
group's mean and median tangible equity to tangible assets ratios of 9.6% and
9.6%, and a range of 6.7% to 14.3%, were compared with SMB's ratio of 11.5%; the
mean and median latest 12 months return on average assets ratio of 0.7% and
0.9%, and range of -1.0% to 2.0%, were compared with SMB's ratio of 1.8%; the
mean and median latest 12 months return on average equity ratios of 7.5% and
10.9%, and a range of -9.3% to 18.7%, were compared with SMB's ratio of 15.5%;
and the mean and median non-performing assets to total assets ratios of 2.2% and
2.1%, and a range of 0.3% to 4.2%, were compared with SMB's ratio of 1.1%; the
mean and median equity value to latest 12 months net income multiples of 20.7x
and 19.6x, and a range of 16.2x to 31.9x, were compared with SMB's multiple of
20.8x; the mean and median equity value to latest 12 months cash net income
multiples of 19.2x and 17.7x, and a range of 14.7x to 29.6x, were compared with
SMB's multiple of 20.8x; the mean and median equity value to tangible book value
multiples of 2.0x and 1.9x, and a range of 1.1x to 3.6x, were compared with
SMB's multiple of 2.6x.
PREMIUM ANALYSIS. Piper Jaffray reviewed publicly available information for
selected completed transactions from January 1, 1996 to September 12, 1997
involving publicly traded banks located in California that had total assets
greater than $100 million and less than $1.5 billion. Piper Jaffray selected
eleven transactions that 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 SMB Shareholders. The comparable transaction group's mean and median
premiums of 25.5% and 15.9% above the trading price on the day prior to
announcement, and a range of 1.4% to 91.0%, were compared to a 14.3% premium to
be paid to SMB Shareholders; the mean and median premiums of 37.2% and 29.2%
above the trading price one month prior to the announcement, and a range of 8.9%
to 117.6%, were compared to a 32.5% premium to be paid to SMB Shareholders; and
the mean and median premiums of 49.7% and 37.9% above the trading price three
months prior to the announcement, and a range of 25.2% to 131.3%, were compared
to the 68.4% premium to be paid to SMB Shareholders.
COMPARABLE PUBLIC COMPANY ANALYSIS. Piper Jaffray reviewed information
relating to nine publicly traded banks generally operating in southern
California with total assets between $200 million and $2.0 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% and 1.2%, and a range of 1.1% to 1.7%, compared with SMB's return
on average assets of 1.8%; mean and median return on average equity ratios of
15.7% and 16.1%, and a range of 10.5% to 19.3%, compared with SMB's return on
average equity of 15.5%; mean and median asset growth of 19.3% and 14.2%, and a
range of 3.1% to 53.2%, compared with SMB's asset growth of 10.2%; mean and
median dividend yield of 1.0% and 1.0%, and a range of 0.0% to 2.1%, compared
with SMB's dividend yield of 1.5%; mean and median common equity to total assets
ratios of 8.3% and 8.0%, and a range of 6.8% to 10.8%, compared with SMB's ratio
of 11.5%; mean and median net loans to deposits ratios of 66.5% and 64.0%, and a
range of 48.1% to 82.7%, compared with SMB's ratio of 66.1%; mean and median
deposits to assets ratios of 88.9% and 90.1%, and a range of 83.5% to 92.6%,
compared with SMB's ratio of 87.8%; mean and median non-performing loans to net
loans ratios of 2.2% and 1.6%, and a range of 0.4% to 5.1%, compared with SMB's
ratio of 0.5%; mean and median reserves to net loans ratio of 1.7% and 1.8%, and
range of 0.6% to 2.5%, compared with SMB's ratio of 2.1%; mean and median price
to last 12 months earnings per share multiples of 18.0x and 17.6x, and a range
of 14.6x to
72
<PAGE>
27.3x, compared with a multiple for SMB of 20.8x, based upon assumed Merger
Consideration of $28 per shares of SMB Common Stock; mean and median price to
latest 12 months cash earnings per share multiples of 17.7x and 16.3x, and a
range of 14.4x to 27.3x, compared with a multiple for SMB of 20.8x, based on an
assumed Merger Consideration of $28 per share of SMB Common Stock; mean and
median price to estimated 1997 earnings per share multiples of 16.7x and 17.1x,
and a range of 12.4x to 21.6x, compared with a multiple for SMB of 19.3x; mean
and median price to estimated 1998 earnings per share of 14.7x and 14.3x, and a
range of 12.4x to 17.2x, compared with a multiple for SMB of 17.0x, based on an
assumed Merger Consideration of $28 per share of SMB Common Stock; and mean and
median price to tangible book value multiples of 2.7x and 2.5x, and a range of
1.8x to 3.6x, compared with a multiple for SMB of 2.6x, based on an assumed
Merger Consideration of $28 per share of SMB Common Stock.
In reaching its conclusions as to the fairness to the Western Shareholders
of the consideration to be paid by Western in the Merger 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, SMB or the Merger. Accordingly, an
analysis of the results is not mathematical; rather, 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.
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 also has
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.
SMB
GENERAL. Pursuant to an engagement letter dated July 2, 1997 (the
"Montgomery Engagement Letter"), SMB engaged Montgomery to assist SMB in
analyzing strategic alternatives available to SMB. In the Montgomery Engagement
Letter, Montgomery agreed to undertake a comprehensive study and analysis of the
business operations, financial condition and prospects of SMB and a review and
evaluation of SMB's strategic plan and of SMB's strategic alternatives. At the
request of the Company, Montgomery considered the Western proposal as one of
those strategic alternatives. Montgomery and SMB also agreed that Montgomery
would, if requested, develop and implement those strategic alternatives, assist
SMB in evaluating and negotiating any proposal by a third party to acquire SMB,
render a fairness opinion as of certain specified dates and solicit and
negotiate with potential acquirors. SMB contemplated that the additional
optional services would be requested if the SMB Board concluded, based upon the
results of its deliberations after reviewing Montgomery's study and analysis of
SMB, that such services would enhance shareholder value. Of the additional
services, SMB has requested only that Montgomery assist SMB in analyzing
Western's proposal and negotiating with Western and that Montgomery deliver
fairness opinions as of July 30, 1997, and the date of this Joint Proxy
Statement-Prospectus. A copy of Montgomery's opinion dated as of the date of
this Joint Proxy Statement-Prospectus is attached as Appendix B. It should be
read in its entirety.
73
<PAGE>
Montgomery is an investment banking firm and, as part of its investment
banking activities, is regularly engaged in advising commercial banking
institutions with respect to strategic alternatives including acquisitions of
and by such institutions, in the valuation of businesses, in negotiated
underwritings, in private placements and in valuations for corporate and other
purposes. A special committee of SMB Board members interviewed six investment
banking firms as to such matters as experience, knowledge of the California
banking scene and proposed staffing of the assignment. The special committee
recommended, and the SMB Board approved, the selection of Montgomery to provide
the services described above on the basis of its experience and expertise in
analyzing commercial banking firms and in advising commercial banking
institutions, particularly in California, with respect to strategic options and
in transactions similar to the Merger.
At a meeting of the SMB Board on July 30, 1997, Montgomery delivered its
oral opinion that the Cash Consideration and the Stock Consideration were each
fair to SMB Shareholders from a financial point of view, as of that date. The
amount of such consideration was determined pursuant to negotiations between SMB
and Western and not pursuant to the recommendations of Montgomery. Montgomery's
oral opinion was subsequently confirmed in writing as of such date. Montgomery
also delivered a written fairness opinion as of the date of this Joint Proxy
Statement-Prospectus reconfirming its conclusions, as of that date.
THE FULL TEXT OF MONTGOMERY'S WRITTEN OPINION TO THE SMB BOARD, DATED THE
DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, AND LIMITATIONS OF THE REVIEW BY MONTGOMERY, IS
ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. THE
FOLLOWING SUMMARY OF MONTGOMERY'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION. MONTGOMERY HAS CONSENTED, WHICH
CONSENT IS INCLUDED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS
JOINT PROXY STATEMENT-PROSPECTUS IS A PART, TO THE FILING OF MONTGOMERY'S
WRITTEN OPINION, AND TO THE REFERENCES TO ITS FIRM IN THIS JOINT PROXY
STATEMENT-PROSPECTUS. SMB SHAREHOLDERS ARE URGED TO AND SHOULD READ SUCH OPINION
CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING ITS OPINIONS AND CONSENTING TO THE
INCLUSION OF ITS WRITTEN OPINION AS AN EXHIBIT TO THE REGISTRATION STATEMENT,
MONTGOMERY 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 MONTGOMERY ADMIT THAT IT IS
AN EXPERT WITH RESPECT TO THE REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY
STATEMENT-PROSPECTUS IS PART WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED IN
THE SECURITIES ACT. MONTGOMERY'S OPINIONS ARE ADDRESSED TO THE SMB BOARD, COVER
ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY SMB SHAREHOLDERS FROM A
FINANCIAL POINT OF VIEW AS OF THE DATE OF EACH OPINION AND DO NOT CONSTITUTE A
RECOMMENDATION TO ANY SMB SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT
THE SMB SPECIAL MEETING.
In connection with its opinions, Montgomery, among other things: (i)
reviewed certain publicly available financial and other data with respect to SMB
and Western, including the consolidated financial statements for recent years
and interim periods to June 30, 1997, and certain other relevant financial and
operating data relating to SMB and Western made available to Montgomery from
published sources and from the internal records of SMB and Western; (ii)
reviewed the financial terms and conditions of the July 29, 1997 draft of the
Merger Agreement; (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, SMB Common Stock and
Western Common Stock; (iv) compared SMB and Western from a financial point of
view with certain other companies in the banking industry which Montgomery
deemed to be relevant; (v) considered the financial terms, to the extent
publicly available, of selected recent business combinations of companies in the
banking industry which Montgomery deemed to be comparable, in whole or in part,
to the Merger; (vi) reviewed and discussed with representatives of the
managements of SMB and Western certain information (furnished to Montgomery by
SMB and Western) of a business and financial nature regarding SMB and Western,
including financial forecasts and related assumptions of SMB and Western; (vii)
made inquiries regarding and discussed the Merger and the draft Merger Agreement
and other matters related thereto with SMB's counsel; and (viii) performed such
other analyses and examinations as Montgomery deemed appropriate.
74
<PAGE>
In connection with Montgomery's review, Montgomery did not assume any
obligation independently to verify the foregoing information and relied on its
being accurate and complete in all material respects. With respect to the
financial forecasts for SMB and Western provided to Montgomery by their
respective managements, upon their advice and with SMB's consent, Montgomery
assumed for purposes of its opinions that the forecasts were reasonably prepared
on bases reflecting the best available estimates and judgments of their
respective managements at the time of preparation as to the future financial
performance of SMB and Western and that it was reasonable for Montgomery to rely
on such forecasts in forming its opinions. Montgomery also assumed that there
were no material changes in SMB's or Western's assets, financial condition,
results of operations, business or prospects since the respective dates of their
last financial statements made available to Montgomery. Montgomery relied on
advice of counsel as to all legal matters with respect to SMB, the Merger and
the draft Merger Agreement. Montgomery assumed that the Merger will be
consummated in a manner that complies in all respects with the applicable
provisions of the Securities Act, the Exchange Act and all other applicable
federal and state statutes, rules and regulations. Montgomery is not an expert
in the evaluation of loan portfolios for purposes of assessing the adequacy of
the allowances for losses with respect thereto and assumed, with SMB's consent,
that such allowances for each of SMB and Western were in the aggregate adequate
to cover such losses. In addition, Montgomery did not assume responsibility for
reviewing any individual credit files, or making an independent evaluation,
appraisal or physical inspection of any of the assets or liabilities (contingent
or otherwise) of SMB or Western, nor was Montgomery furnished with any such
appraisals. Western informed Montgomery, and Montgomery assumed with SMB's
consent, that the Merger will be recorded as a purchase under generally accepted
accounting principles. Finally, each of Montgomery's opinions was based on
economic, monetary and market and other conditions as in effect on, and the
information made available to Montgomery as of, the respective date of such
opinions.
Montgomery further assumed that the Merger would be consummated in
accordance with the terms described in the July 30, 1997 draft of the Merger
Agreement, without any further amendments thereto, and without waiver by SMB of
any of the conditions to its obligations thereunder.
Set forth below is a brief summary of the report presented by Montgomery to
the SMB Board on July 30, 1997, in connection with its opinion of that date. For
purposes of the report, Montgomery assumed the accuracy of the SMB balance sheet
figures as of June 30, 1997, 7,077,332 shares of SMB Common Stock outstanding
and 6,912 options outstanding with an average exercise price of $21.123 and
consideration (the "Western Offer") for all of such SMB shares consisting of
Cash Consideration of $28.00 per share of SMB Common Stock and Stock
Consideration of 0.875 shares of Western Common Stock per share of SMB Common
Stock (assuming Western Common Stock had the $32.00 price it had on July 30,
1997), the day before the Merger was announced. The value of the Stock
Consideration which is based upon a fixed exchange ratio of 0.875 shares of
Western Common Stock for each share of SMB Common Stock, will vary with the
price of Western Common Stock.
ANALYSIS OF SELECTED TRANSACTIONS. Montgomery reviewed the consideration
paid in selected categories of bank transactions. Specifically, Montgomery
reviewed bank transactions from January 1, 1992 to July 16, 1997 involving (i)
mergers in California and (ii) national bank acquisitions valued at between $100
million and $300 million. For each transaction, Montgomery analyzed data
illustrating, among other things, the ratios of announced purchase price to book
value, announced purchase price to tangible book value, announced purchase price
to last twelve months' ("LTM") earnings per share ("EPS"), announced purchase
price as a percentage of deposits and the premium (i.e., announced purchase
price in excess of tangible book value) as a percentage of core deposits.
75
<PAGE>
A summary of the median multiples in the analysis is as follows:
<TABLE>
<CAPTION>
PRICE TO PRICE AS A PREMIUM AS A
PRICE TO TANGIBLE PRICE TO PERCENTAGE OF PERCENTAGE OF
TRANSACTION PARAMETERS BOOK BOOK LTM EPS DEPOSITS CORE DEPOSITS
- -------------------------------------------------------- ----------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA MERGERS
1996-1997 (37 transactions)............................. 1.78x 1.79x 16.70x 17.94% 8.97%
1992-1997 (83 transactions)............................. 1.62x 1.64x 17.03x 16.77% 6.45%
NATIONAL MERGERS OF DEAL VALUE BETWEEN $100 MM AND $300
MM
1996-1997 (75 transactions)............................. 2.11x 2.25x 16.95x 24.88% 16.36%
1992-1997 (25 transactions)............................. 2.01x 2.12x 16.46x 20.16% 17.07%
</TABLE>
A summary of the results of Montgomery's analysis concerning the Merger is
as follows:
<TABLE>
<CAPTION>
PRICE TO PRICE AS A PREMIUM AS A
PRICE TO TANGIBLE PRICE TO PERCENTAGE OF PERCENTAGE OF
BOOK BOOK LTM EPS DEPOSITS CORE DEPOSITS
----------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
WESTERN OFFER........................................... 2.56x 2.56x 18.33x 33.55% 21.52%
</TABLE>
Montgomery examined the 41 national bank acquisitions announced since
January 1, 1992 with purchase prices between $100 million and $300 million
(where pricing information was available) to analyze premiums paid compared to
the stock price of the bank being acquired at various times prior to the
announcement of such acquisition. These figures produced: (i) a median premium
to the stock price of such banks one month prior to announcement of 29.23%; (ii)
a median premium to the stock price of such banks six days prior to announcement
of 29.07%; and (iii) a median premium to the stock price of such banks the day
prior to announcement of 21.55%. In comparison, the Western Offer exceeded the
price of SMB Common Stock one month prior to the announcement by 32.54%, six
days prior to the announcement by 24.79% and one day prior to the announcement
by 14.29%.
CONTRIBUTION ANALYSIS. Based on an exchange ratio of 0.875 shares of
Western Common Stock for each share of SMB Common Stock and assuming a 100%
stock transaction, SMB Shareholders would own approximately 35% of the combined
companies based on the number of shares of common stock of the two companies
which were outstanding at July 30, 1997 (adjusted for announced mergers). To
compare the ownership percentage of the combined companies to the relative
contribution made to the combined companies, Montgomery analyzed the
contribution of each of SMB and Western to, among other things, total assets,
total equity, total loans, and total deposits as of June 30, 1997; second
quarter net interest income; 1997 estimated net income; 1997 estimated cash
earnings; and 1998 estimated cash earnings. This analysis showed, among other
things, that based on pro forma combined balance sheets for SMB and Western at
June 30, 1997, SMB would have contributed 33% of the total assets, 39% of the
total equity, 31% of the total loans and 33% of the total deposits. Based on pro
forma combined income statements for SMB and Western for the second quarter of
1997, SMB would have contributed 33% of the net interest income. The pro forma
projected income statement for the period ending December 31, 1997 showed that
SMB would contribute 43% of the net income and 38% of the cash earnings. The pro
forma projected income statement for the period ending December 31, 1998 showed
that SMB would contribute 29% of the cash earnings.
DILUTION ANALYSIS. Using earnings estimates for both SMB (provided by SMB
Management) and for Western (provided by Western Management), Montgomery
compared estimated reported EPS ("Reported EPS") and estimated cash EPS ("Cash
EPS") of Western Common Stock on a stand-alone basis to the Reported EPS and
Cash EPS of the common stock for the pro forma combined companies for the
calendar years 1997, 1998, 1999 and 2000. Montgomery noted that, after giving
effect to goodwill
76
<PAGE>
amortization charges, (i) the Merger would be dilutive to Western's Reported EPS
in all four years, and (ii) the Merger would be accretive to Western's Cash EPS
in all four years. These estimates were used for purposes of this analysis only
and are not necessarily indicative of expected results or plans of Western, SMB
or the combined companies.
COMPARABLE COMPANY ANALYSIS. Montgomery performed a comparable company
analysis based on the eighteen publicly traded California independent banks from
Montgomery's Western Bank Monitor publication. Montgomery analyzed, among other
things, various trading multiples including price to book value, price to
tangible book value, price to LTM earnings, price to 1997 estimated EPS, price
to 1998 estimated EPS, price to 1997 estimated cash EPS, price to 1998 estimated
cash EPS, price as a percentage of assets, price as a percentage of deposits and
premium as a percentage of core deposits. Earnings estimates used in performing
such analysis were the consensus of Wall Street investment banks. Montgomery
compared the Western Offer multiples to the above multiples, and the results
were as follows (based on July 29, 1997 stock prices):
<TABLE>
<CAPTION>
PRICE TO PRICE TO PRICE TO PRICE TO PRICE TO
BOOK TANGIBLE BOOK LTM EPS 1997E EPS 1998E EPS
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COMPARABLE MEDIAN......................................... 2.18x 2.36x 16.89x 15.54x 13.46x
WESTERN OFFER PRICE....................................... 2.56x 2.56x 18.33x 23.40x 21.37x
</TABLE>
<TABLE>
<CAPTION>
PRICE TO PRICE TO PRICE AS A PRICE AS A PREMIUM AS A
1997E CASH 1998E CASH PERCENTAGE PERCENTAGE OF PERCENTAGE OF
EPS EPS OF ASSETS DEPOSITS CORE DEPOSITS
------------- ------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
COMPARABLE MEDIAN............................... 14.66x 12.80x 20.19% 23.14% 15.93%
WESTERN OFFER PRICE............................. 23.40x 21.37x 29.46% 33.55% 21.52%
</TABLE>
No company or transaction used as a comparison in the analysis described
under the headings "Analysis of Selected Transactions" or "Comparable Company
Analysis" is identical to SMB, Western or the Merger. Accordingly, an analysis
of the results of the foregoing is not simply mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies, differences in the transactions and
other factors that could affect the public trading value of the companies and
transactions to which SMB, Western and the Merger were compared.
The summary set forth above does not purport to be a complete description of
the presentation by Montgomery to the SMB Board or of the analyses performed by
Montgomery. The preparation of a fairness opinion is not necessarily susceptible
to partial analysis or summary description. Montgomery believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting a portion of its analyses and factors, without considering all of its
analyses and all the factors, would create an incomplete view of the process
underlying the presentation to the SMB Board and performed by Montgomery in
connection with rendering its opinions. In addition, Montgomery may have given
various analyses more or less weight than other analyses and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Montgomery's view of the actual value of SMB or the
combined companies. The fact that any specific analysis has been referred to in
the summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of SMB or Western. The
analyses performed by Montgomery are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Montgomery's analysis of the fairness of the Merger Consideration, from a
financial point of view, to SMB Shareholders and were provided to the SMB Board
in connection with the delivery of Montgomery's July 30, 1997 opinion. The
analyses do not purport
77
<PAGE>
to be appraisals or to reflect the prices at which a company might be actually
sold or the prices at which any securities may trade at the present time or any
time in the future. The projections used in Montgomery's analyses are based on
numerous variables and assumptions which are inherently unpredictable and must
be considered not certain of occurrence as projected. Accordingly, actual
results could vary significantly from those set forth in such projections.
Pursuant to the Montgomery Engagement Letter, SMB paid Montgomery a retainer
fee of $50,000 upon its engagement, a fee of $200,000 for its analysis of SMB's
strategic alternatives and a fee of $200,000 upon delivery of its July 30, 1997
fairness opinion. An additional $100,000 is due upon the mailing of this Joint
Proxy Statement-Prospectus. Montgomery will receive $350,000 upon the closing of
the Merger and, if SMB requests Montgomery to deliver a fairness opinion upon
the closing of the Merger, $150,000 upon delivery of such opinion. SMB has also
agreed to reimburse Montgomery for its reasonable out-of-pocket expenses,
including any fees and disbursements of Montgomery's legal counsel and other
experts retained by Montgomery. SMB has also agreed to indemnify Montgomery, its
affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws.
In the ordinary course of its business, Montgomery actively trades equity
securities of Western for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW MAY NOT BE APPLICABLE TO
CERTAIN CLASSES OF TAXPAYERS, INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS,
FINANCIAL INSTITUTIONS, TAX EXEMPT ORGANIZATIONS OR TRUSTS, FOREIGN PERSONS,
PERSONS WHO HOLD SHARES OF SMB COMMON STOCK AS PART OF A STRADDLE OR CONVERSION
TRANSACTION AND PERSONS WHO ACQUIRED SHARES OF SMB COMMON STOCK PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR RIGHTS OR OTHERWISE AS COMPENSATION. SMB
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
TAX OPINIONS
It is intended that, unless the Reorganization Condition is not satisfied,
the Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code. Consummation of the Merger as a reorganization is
conditioned upon receipt by Western of confirmation, immediately prior to the
Effective Time, of the opinion of Sullivan & Cromwell, and receipt by SMB of
confirmation, immediately prior to the Effective Time, of the opinion of
O'Melveny & Myers LLP, which opinions were received 30 days after execution of
the Merger Agreement, substantially to the effect that, for federal income tax
purposes: (i) the Merger will be treated as a reorganization within the meaning
of Section 368(a) of the Code, and (ii) each of Western, Western Bank and SMB
will be a party to that reorganization within the meaning of Section 368(b) of
the Code.
In the event that the condition to the obligations of the parties pursuant
to the Merger Agreement that the parties receive the Tax Opinions is not
satisfied (except if the failure to obtain such opinions is due solely to the
failure to satisfy the Reorganization Condition), the parties either will
terminate the Merger Agreement for the failure of such condition or they will
waive such condition and will resolicit the vote of the Shareholders to approve
the principal terms of the Merger without the condition that the Tax Opinions be
received by the parties. In connection with such resolicitation, the
Shareholders will be provided with an updated discussion of the federal income
tax consequences that may be applicable.
The Tax Opinions will not be binding on the Internal Revenue Service (the
"IRS"), and there can be no assurance that the IRS will not contest the
conclusions expressed therein. The Tax Opinions will be based in part upon
certain factual assumptions and upon certain representations made, and
certificates
78
<PAGE>
delivered, by Western, Western Bank and SMB, which representations and
certificates Sullivan & Cromwell and O'Melveny & Myers LLP will assume to be
true, correct and complete. If such representations or certificates are
inaccurate, the Tax Opinions could be adversely affected.
TAX CONSEQUENCES OF THE CASH/STOCK MERGER
GENERAL. The following summary sets forth certain anticipated material
federal income tax consequences of the Merger to SMB shareholders. The tax
treatment of each SMB Shareholder will depend in part upon such shareholder's
particular situation and the consideration received by such shareholder pursuant
to the Merger. This summary is based on the provisions of the Code, the Treasury
Regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as in effect as of the date hereof. Such laws,
regulations or interpretations may differ at the Effective Time, and relevant
facts also may differ.
EXCHANGE OF SMB COMMON STOCK SOLELY FOR WESTERN COMMON STOCK. No gain or
loss will be recognized by an SMB Shareholder who receives solely Western Common
Stock for such SMB Shareholder's shares of SMB Common Stock (except to the
extent such shareholder receives cash in lieu of a fractional share interest in
Western Common Stock).
Such an SMB Shareholder's aggregate tax basis in the Western Common Stock
received pursuant to the Merger will equal such shareholder's aggregate tax
basis in the shares of SMB Common Stock exchanged therefor, reduced by any
amount allocable to a fractional share interest of Western Common Stock for
which cash is received. The holding period of Western Common Stock received
pursuant to the Merger will include the holding period of the shares of SMB
Common Stock exchanged therefor, provided that such shares were held as a
capital asset as of the Effective Date.
EXCHANGE OF SMB COMMON STOCK FOR WESTERN COMMON STOCK AND CASH. An SMB
Shareholder who receives both Western Common Stock and cash (other than cash
received in lieu of a fractional share interest in Western Common Stock) will
recognize gain, if any, to the extent of the lesser of:
(i) the excess of (A) the sum of the fair market value of the Western
Common Stock received (including the fair market value of any fractional
share interest in Western Common Stock for which cash is received) and the
amount of cash received (other than cash received in lieu of such fractional
share interest) over (B) the SMB Shareholder's adjusted federal income tax
basis for the shares of SMB Common Stock exchanged; and
(ii) the amount of cash received by such SMB Shareholder (other than
cash received in lieu of such fractional share interest).
An SMB Shareholder who receives both Western Common Stock and cash in exchange
for SMB Common Stock will not be permitted to recognize loss on such exchange.
If the shares of SMB Common Stock exchanged in the Merger were held as
capital assets at the Effective Time, any such gain will be treated as capital
gain (which will be long-term capital gain if the shares of SMB Common Stock
exchanged were held for more than one year), unless the receipt of cash (other
than cash received in lieu of a fractional share interest) has the effect of a
distribution of a dividend within the meaning of Section 356(a)(2) of the Code,
in which case such gain will be treated as a dividend to the extent of such
shareholder's ratable share of the undistributed accumulated earnings and
profits of SMB or possibly of Western. Under recently-enacted legislation,
long-term capital gain of an individual is generally subject to a maximum
capital gains rate of 28% for capital assets held for more than one year. The
rate is reduced to 20% for capital assets held for more than 18 months.
Following is a brief discussion of such potential tax treatment; however, SMB
Shareholders should consult their own tax advisors as to the possibility that
all or a portion of any cash received in exchange for their SMB Common Stock
will be treated as a dividend.
79
<PAGE>
The Stock redemption provisions of Section 302 of the Code apply in
determining whether cash received by an SMB Shareholder pursuant to the Merger
has the effect of a distribution of a dividend under Section 356(a)(2) of the
Code (the "Hypothetical Redemption Analysis"). Under the Hypothetical Redemption
Analysis, an SMB Shareholder will be treated as if the portion of the shares of
SMB Common Stock exchanged for cash in the Merger had been instead exchanged for
shares of Western Common Stock (the "Hypothetical Shares"), followed immediately
by a redemption of the Hypothetical Shares by Western for cash. Under the
principles of Section 302 of the Code, an SMB Shareholder will recognize capital
gain rather than dividend income with respect to the cash received if the
hypothetical redemption is "not essentially equivalent to a dividend" or is
"substantially disproportionate" with respect to such SMB Shareholder. In
applying the principles of Section 302, the constructive ownership rules of
Section 318 of the Code will apply in comparing an SMB Shareholder's ownership
interest in Western both immediately after the Merger (but before the
hypothetical redemption) and after the hypothetical redemption.
Whether the hypothetical redemption by Western of the Hypothetical Shares
for cash is "not essentially equivalent to a dividend" with respect to an SMB
Shareholder will depend upon such shareholder's particular circumstances.
However, the hypothetical redemption must, in any event, result in "meaningful
reduction" in such SMB Shareholder's percentage ownership of Western stock. In
determining whether the hypothetical redemption by Western results in a
meaningful reduction in an SMB Shareholder's percentage ownership of Western
stock, and therefore, does not have the effect of a distribution of a dividend,
an SMB Shareholder should compare his or her share interest in Western
(including interests owned actually, hypothetically and constructively)
immediately after the Merger (but before the hypothetical redemption) to his or
her share interest after the hypothetical redemption. The IRS has indicated, in
Revenue Ruling 76-385, that a shareholder in a publicly-held corporation whose
relative stock interest in the corporation is minimal and who exercises no
"control" over corporate affairs is generally treated as having had a meaningful
reduction in his or her stock after a redemption transaction if his or her
percentage stock ownership in the corporation has been reduced to any extent,
taking into account the shareholder's actual and constructive ownership before
and after the redemption. In Revenue Ruling 76-385, a reduction from .0001118%
to .0001081% was found to be a meaningful reduction in stockholdings.
The hypothetical redemption transaction would be "substantially
disproportionate," and therefore, would not have the effect of a distribution of
a dividend with respect to an SMB Shareholder who owns less than 50% of the
voting power of the outstanding Western Common Stock if the percentage of
Western Common Stock actually and constructively owned by such shareholder
immediately after the hypothetical redemption is less than 80% of the percentage
of Western Common Stock actually, hypothetically and constructively owned by the
SMB Shareholder immediately before the hypothetical redemption.
Such SMB Shareholder's aggregate tax basis in the Western Common Stock
received pursuant to the Merger will equal such shareholder's aggregate tax
basis in the shares of SMB Common Stock exchanged therefor, reduced by any
amount allocable to a fractional share interest of Western Common Stock for
which cash is received and by the amount of any Cash Consideration received, and
increased by the amount of gain, if any, recognized by such shareholder in the
Merger (including any portion of such gain that is treated as a dividend). The
holding period of Western Common Stock received will include the holding period
of the shares of SMB Common Stock exchanged therefor, provided that such shares
of SMB Common Stock were held as a capital asset as of the Effective Date. SMB
Shareholders should consult their own tax advisors concerning the determination
of their basis and holding period in any particular share of Western Common
Stock since several methods of determination may be available.
EXCHANGE OF SMB COMMON STOCK SOLELY FOR CASH. An SMB Shareholder who
receives solely cash in exchange for such shareholder's shares of Western Common
Stock may be treated as (i) having sold such shares of SMB Common Stock to
Western, (ii) having received, in exchange for such shares of SMB Common Stock,
stock of Western which was deemed to have been redeemed by Western, or (iii) as
having such shares of SMB Common Stock deemed to have been redeemed by SMB. In
the event of sale treatment, such shareholder would recognize gain or loss in an
amount equal to the difference between the
80
<PAGE>
amount of cash received and the shareholder's aggregate adjusted federal income
tax basis for such shares of SMB Common Stock. In the event of redemption
treatment, such deemed redemption would be subject to Section 302 of the Code,
with the result that such shareholder would be treated as having sold his or her
shares and would recognize gain or loss in a like amount if the deemed
redemption is in "complete redemption" of all of such shareholder's stock in the
redeeming corporation, is "substantially disproportionate" with respect to such
shareholder or is "not essentially equivalent to a dividend." In making such a
determination under Section 302, the constructive ownership rules of Section 318
of the Code will apply in comparing an SMB Shareholder's ownership interest in
the redeeming corporation both immediately before and after the Merger. Gain or
loss realized on a sale of such shares of SMB Common Stock will be capital gain
or loss if such shares of SMB Common Stock were held as capital assets at the
Effective Time, and will be long-term capital gain or loss if such shares of SMB
Common Stock were held for more than one year. Under recently-enacted
legislation, long-term capital gain of an individual is generally subject to a
maximum capital gains rate of 28% for capital assets held for more than one
year. The rate is reduced to 20% for capital assets held for more than 18
months. If sale treatment does not apply to a deemed redemption, the cash
received by such a shareholder will be treated as a dividend to the extent of
the redeeming corporation's accumulated and current earnings and profits. SMB
Shareholders should consult their own tax advisors as to the possibility that
all or a portion of any cash received in exchange for their shares of SMB Common
Stock will be treated as a dividend.
FRACTIONAL SHARES OF WESTERN COMMON STOCK. No fractional shares of Western
Common Stock will be issued in the Merger. An SMB Shareholder who receives cash
in lieu of such a fractional share will be treated as having received such
fractional share pursuant to the Merger and then as having exchanged such
fractional share for cash in a redemption by Western subject to Section 302 of
the Code. Such a deemed redemption will be treated as a sale of the fractional
share, provided that it is not "essentially equivalent to a dividend." See
"--Exchange of SMB Common Stock for Western Common Stock and Cash." If the
Western Common Stock represents a capital asset in the hands of the shareholder,
the shareholder will generally recognize capital gain or loss on such a deemed
redemption of the fractional share in an amount determined by the difference
between the amount of cash received therefor and the shareholder's tax basis in
the fractional share. Any such capital gain or loss will be long-term if the SMB
Common Stock exchanged was held for more than one year. Under recently-enacted
legislation, long-term capital gain of an individual is generally subject to a
maximum capital gains rate of 28% for capital assets held for more than one
year. The rate is reduced to 20% for capital assets held for more than 18
months.
TAX CONSEQUENCES OF THE ALL-CASH MERGER
In the event the Merger is effected as an all-cash merger, SMB Shareholders
will recognize gain or loss in an amount equal to the difference between the
amount of cash received and the shareholder's aggregate adjusted basis in the
SMB Common Stock held by such holder. Gain or loss realized on a sale of such
shares of SMB Common Stock will be capital gain or loss if such shares of SMB
Common Stock were held as capital assets at the Effective Time, and will be
long-term capital gain or loss if such shares of SMB Common Stock were held for
more than one year. Under recently-enacted legislation, long-term capital gain
of an individual is generally subject to a maximum capital gains rate of 28% for
capital assets held for more than one year. The rate is reduced to 20% for
capital assets held for more than 18 months.
BACKUP WITHHOLDING
Unless an exemption applied under applicable law and regulations, the
Exchange Agent will be required to withhold 31% of any cash payments to which a
non-corporate shareholder or the payee is entitled pursuant to the Merger unless
the shareholder or other payee provides its taxpayer identification number
(social security number, employer identification number or individual taxpayer
identification number) and certifies that such number is correct. Each
shareholder and, if applicable, each other payee must provide the information
and certification necessary to avoid backup withholding, unless an applicable
exemption exists and is established in a manner satisfactory to Western and the
Exchange Agent.
81
<PAGE>
REGULATORY APPROVALS
FEDERAL DEPOSIT INSURANCE CORPORATION AND FEDERAL RESERVE BOARD APPROVAL
Consummation of the Merger is subject to receipt of the prior approval of
the FDIC under the Bank Merger Act, 12 U.S.C. Section 1828(c) (the "BMA"). The
BMA requires that the FDIC take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The BMA prohibits the
FDIC from approving the Merger (i) if such transaction would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or (ii) if the effect of such transaction in any section of the country
may be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner be a restraint of trade, unless the relevant
regulatory agency finds that the anti-competitive effects of such merger are
clearly outweighed by the public interest and by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served.
The Merger is also subject to prior approval by the Federal Reserve Board
under Section 3 of the BHCA or a waiver of such requirement in accordance with
regulations adopted by the Federal Reserve Board under the BHCA. If an
application is required under the BHCA, the Federal Reserve Board will 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 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.
Each of the FDIC and 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
FDIC and the Federal Reserve Board must also assess the records of the
depository institution subsidiaries of Western and SMB under the Community
Reinvestment Act of 1977, as amended (the "CRA"). The CRA requires that the FDIC
and 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. Each of NBSC, Western Bank, SC Bank and SMB has
a CRA rating of "satisfactory."
Under the BMA and the BHCA, the Merger may not be consummated until the
thirtieth day following the date of FDIC or Federal Reserve Board approval, as
the case may be, or such earlier date as may be determined by the FDIC or the
Federal Reserve Board, as the case may be. If the United States Department of
Justice commenced an action challenging the Merger on antitrust grounds during
such waiting period, commencement of such action would stay the effectiveness of
the FDIC and Federal Reserve Board approvals, unless a court specifically orders
otherwise.
Western and SMB submitted an application seeking approval of the Merger and
related matters to the FDIC on September 25, 1997. Western and SMB sought a
waiver of jurisdiction from the Federal Reserve Board on September 25, 1997. It
is expected that the approval and waiver will be received prior to the Special
Meetings, but there can be no assurance that such approval and waiver will be
obtained.
CALIFORNIA COMMISSIONER OF FINANCIAL INSTITUTIONS APPROVAL
Since SMB and Western Bank are state-chartered banks, Western must obtain
approvals of the State Commissioner pursuant to the California Financial Code
prior to the consummation of the Merger. Western sought such approvals on
September 25, 1997 and November 19, 1997. It is expected that the
82
<PAGE>
approvals will be received prior to the Special Meetings, but there can be no
assurance that such approvals will be obtained.
The Merger cannot proceed in the absence of the regulatory approvals.
Western and SMB are not aware of any material governmental approvals or actions
that are required for consummation of the Merger, except as described above.
Western and SMB have agreed in the Merger Agreement to use reasonable best
efforts promptly to take all actions necessary, proper or advisable to
consummate the transactions contemplated by the Merger Agreement, including
using efforts to obtain all necessary approvals from all applicable governmental
entities, making all necessary registrations, applications and filings and
obtaining any contractual consents and regulatory approvals. However, there can
be no assurance that such regulatory approvals will be obtained, nor can there
be assurance as to the date of any such approval. There can also be no assurance
that any such approval will not contain a condition or requirement that causes
such approvals to fail to satisfy the conditions set forth in the Merger
Agreement and described below under "THE MERGER AGREEMENT--Conditions."
RESALE OF WESTERN COMMON STOCK
All shares of Western Common Stock received by SMB Shareholders in the
Merger will be freely transferrable, except that shares of Western Common Stock
received by Shareholders who are deemed to be "affiliates" (as defined for
purposes of Rule 145 under the Securities Act) of SMB as of the date of the SMB
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 SMB or Western
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.
SMB has agreed in the Merger Agreement to use its best efforts to obtain a
written agreement from each officer or director of SMB who is identified as a
possible "affiliate" (as defined for purposes of Rule 145 under the Securities
Act) of SMB providing that each 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. See "THE MERGER AGREEMENT--Exchange of Stock Certificates;
Dividends."
CERTAIN EFFECTS OF THE MERGER
Western Bank will be the Surviving Corporation following the Merger and the
name of Western Bank will be changed to "Santa Monica Bank." Once the Merger is
consummated and, if SMB is the Survivor in the Merger, upon the subsequent
combination of SMB and Western Bank, the trading of SMB Common Stock on the
American Stock Exchange will cease, and SMB will no longer be required to file
reports pursuant to the Exchange Act. It is anticipated that the management and
operation of Western Bank and SMB will be integrated after the Merger, but the
Merger is not expected to affect the day-to-day service provided to customers by
SMB, Western Bank, SC Bank or NBSC. However, SMB 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 SMB or to reflect
merger-related expenses and costs incurred by SMB. See "THE MERGER
AGREEMENT--Certain Covenants--CERTAIN POLICIES OF SMB."
Pursuant to the Merger Agreement, Aubrey L. Austin will be appointed to the
Western Board and the Board of Directors of the Surviving Corporation. Prior to
the Effective Time, the Western Board will adopt resolutions fixing the exact
number of directors at 14 and the Board of Directors of the Surviving
Corporation will adopt resolutions fixing the exact number of directors at 6 and
Mr. Austin will be appointed to fill the vacancy on each Board of Directors
created thereby. The Merger Agreement also provides that Aubrey L. Austin will
be the Chairman, President and Chief Executive Officer of the Surviving
Corporation. SMB will cause to be delivered to Western at the Effective Time the
resignations of the members of the SMB Board and of such officers as are agreed
to by Western and SMB in advance of
83
<PAGE>
the Effective Time. See "THE MERGER AGREEMENT--Conditions." In the event that
the Merger is not consummated as contemplated, all directors of SMB will
continue to serve as directors of SMB until the completion of their respective
terms and until their successors have been elected and duly qualified.
After the Merger, the Surviving Corporation will be headquartered at 1251
Fourth Street, Santa Monica, California 90401. The telephone number at such
offices will be (310) 394-9611.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL
In considering the recommendations of the Western Board and the SMB Board,
the Western Shareholders and the SMB Shareholders should be aware that certain
members of management of each of Western and SMB and of the Western Board and
the SMB Board have certain interests in the transactions contemplated by the
Merger Agreement that are in addition to the interests of shareholders generally
and that may create potential conflicts of interest. These interests include,
among others, provisions in the Merger Agreement relating to the indemnification
of SMB officers and directors; directors' and officers' liability insurance; the
appointment of Aubrey L. Austin to the Board of Directors of Western and the
Surviving Corporation as of the Effective Time; certain employment agreements
and employee benefits discussed below; and the beneficial ownership by John M.
Eggemeyer, a director and significant shareholder of Western, of 80% of BPI,
which provided financial advisory and consulting services in connection with the
Merger.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that for a period of six years after the
Effective Time, Western and Western Bank will indemnify each director and
officer of SMB, 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 and SMB's articles of incorporation or bylaws in effect on July 30, 1997.
Western also will advance expenses as incurred to the extent permitted under
California law and SMB's articles of incorporation and bylaws. In addition, for
a period of six years after the Effective Time, Western will use its reasonable
best efforts to cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by SMB, provided that
Western may substitute therefor policies of comparable coverage with respect to
claims arising from facts or events that occurred before the Effective Time. See
"THE MERGER AGREEMENT--Conditions--INDEMNIFICATION; DIRECTORS' AND OFFICERS'
INSURANCE."
APPOINTMENT OF DIRECTOR
The Merger Agreement provides that, as of the Effective Time, Aubrey L.
Austin will be appointed to the Western Board and the Board of Directors of the
Surviving Corporation and will be the Chairman, President and Chief Executive
Officer of the Surviving Corporation.
EMPLOYMENT AGREEMENTS
Aubrey L. Austin, Dario Quiroga, Senior Vice President, Cashier and Chief
Financial Officer of SMB, and Linda Mazarella, Senior Vice President of SMB
(each, individually, an "Employee"), each have entered into employee change in
control agreements with SMB, dated as of July 23, 1997 (the "Change in Control
Agreements"). Western and Western Bank will honor the Change in Control
Agreements in accordance with their terms.
By the terms of each Change in Control Agreement, if, within a certain
period (24 months in the case of Mr. Austin and 18 months in the case of Mr.
Quiroga and Ms. Mazarella) following the Effective Date of the Merger, the
Employee is terminated by the Surviving Corporation other than for cause,
disability or retirement, or the Employee terminates his or her employment for
good reason, then the Surviving Corporation will pay to the Employee his or her
salary and earned but unpaid benefits through the date of termination together
with an amount equal to two times the Employee's annual salary and bonus at the
greater of the rate in effect immediately prior to the date of termination and
the rate in effect immediately
84
<PAGE>
prior to the Effective Date of the Merger. In addition, the Surviving
Corporation will provide continued benefits to the Employee and his or her
dependents for a period terminating on the earliest of (i) three years after the
date of termination, (ii) the commencement date of equivalent benefits from a
new employer and (iii) the Employee's normal retirement date.
In the event of such termination, under the above formula the Surviving
Corporation will pay in the form of severance pay and benefits: (i)
approximately $622,251 to Mr. Austin in 24 equal monthly installments; (ii)
approximately $341,257 to Mr. Quiroga in 18 equal monthly installments; and
(iii) approximately $251,808 to Ms. Mazarella in 18 monthly installments.
If the Employee is terminated for cause by the Surviving Corporation, then
the Employee will be paid his or her base salary through the date of termination
at the rate in effect immediately prior to the time a notice of termination is
given, plus any benefits or awards that have been earned but not yet paid.
Under the Change in Control Agreements, termination by the Surviving
Corporation for cause generally means termination based on the willful failure
of the Employee to perform his or her duties with the Surviving Corporation.
Termination for good reason by the Employee generally means termination based on
an action by the Surviving Corporation that adversely changes the status of the
Employee as it existed before the change in control. The specific grounds for
termination for each Employee are set forth in the respective Change in Control
Agreements.
If the Employee is terminated after the expiration of the period of the
Employee's Change in Control Agreement, (24 months in the case of Mr. Austin and
18 months in the case of Mr. Quiroga and Ms. Mazarella), then the Employee no
longer will be entitled to receive a severance payment under the terms of the
Employee's Change in Control Agreement and the Employee's rights and benefits
will be governed by the employee policies and benefits then in effect with
Western or any separate agreement the Employee may have with Western.
Western and Mr. Austin currently are negotiating the terms of an employment
agreement to be effective upon consummation of the Merger, which is expected to
supersede Mr. Austin's Change in Control Agreement.
Western and Western Bank also will honor the consulting agreement of Dan T.
Atkins, Executive Vice President of SMB, in accordance with its terms. Mr.
Atkins' consulting agreement commences on January 1, 1998 and terminates on
December 31, 1998. During the term of the agreement, Mr. Atkins will make
himself available as an advisor and consultant to the Surviving Corporation, for
which services he will be paid an amount equal to his base salary for the year
1997, payable in 24 equal payments on the 15th and the last day of the month,
commencing on January 15, 1998 and ending on December 31, 1998. In addition, Mr.
Atkins will receive medical and dental benefits, use of an automobile and
reimbursement for out-of-pocket expenses. Mr. Atkins will receive the
approximate equivalent of $251,370 in the form of cash payments and benefits for
his availability as an advisor and consultant.
EMPLOYEE BENEFITS
Pursuant to the Merger Agreement, the SMB Employee Plans in effect on July
30, 1997 will remain in effect for a period of at least six months after the
Effective Time with respect to employees of SMB covered by such plans at the
Effective Time. Western will take such steps as may be required so that each
person employed by SMB prior to the Effective Time remains an employee of the
Surviving Corporation (each a "Continuing Employee") following the Effective
Time. Each Continuing Employee will be entitled to participate in the employee
benefit plans that are in effect generally for employees of Western's
subsidiaries from time to time (all such plans collectively, "Western Employee
Plans"), if such Continuing Employee shall be eligible (or, with respect to
discretionary Western Employee Plans, selected) for participation therein and
otherwise are not participating in a similar plan that continues to be
maintained by the Surviving Corporation. Continuing Employees will be eligible
to participate on the same basis as similarly situated employees of Western or
Western's subsidiaries. All such participation will be subject to such terms of
Western's Employee Plans as may be in effect from time to time. Western and
Western's subsidiaries will, solely for purposes of vesting and eligibility to
participate in Western's Employee Plans,
85
<PAGE>
recognize credit for each Continuing Employee's term of service with SMB. See
"THE MERGER AGREEMENT--Certain Covenants--EMPLOYEE BENEFITS."
OWNERSHIP OF BPI
BPI, an entity 80% 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 fees of
approximately $2,681,846 in connection with the acquisition of SMB by Western.
See "THE SPECIAL MEETING OF WESTERN SHAREHOLDERS--Security Ownership of Certain
Beneficial Owners and Western Management."
THE PRIVATE PLACEMENT
Also, in connection with the Private Placement, Joseph J. Digange, Mr.
Eggemeyer, B. Scott Hardt, William H. Jacoby, Robert L. McKay, John Rose, Hugh
S. Smith, Matthew P. Wagner and Dale Walter, who are directors and/or executive
officers of Western, and William J. Ruh, who is a principal of BPI, have entered
into Standby Agreements with Western, and Arnold C. Hahn, an executive officer
of Western, is expected to enter into a Standby Agreement with Western. Pursuant
to such Standby Agreements, if the Merger is consummated, such individuals will
purchase 80,150 Minimum Shares and will stand by to purchase up to 80,150
Standby Shares, in each case at a purchase price of $28 per share. See "THE
PRIVATE PLACEMENT."
RELATED TRANSACTIONS
Other than the Merger Agreement, the Shareholder Agreements, the employment
agreement that may be negotiated between Western Bank and Aubrey L. Austin, and
the transactions contemplated by and described in this Joint Proxy
Statement-Prospectus, Western and SMB do not know of any past, present or
proposed material contracts, arrangements or understandings between Western or
its affiliates, on the one hand, and SMB 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, 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. IN ORDER FOR AN SMB SHAREHOLDER TO EXERCISE DISSENTERS'
RIGHTS, A NOTICE OF SUCH SHAREHOLDER'S INTENTION TO EXERCISE HIS OR HER
DISSENTERS' RIGHTS AS PROVIDED IN THE CGCL MUST BE SENT BY SUCH SHAREHOLDER AND
RECEIVED BY SMB ON OR BEFORE THE DATE OF THE SMB SPECIAL MEETING, AND SUCH
SHAREHOLDER MUST VOTE AGAINST THE APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER.
FAILURE TO SEND SUCH NOTICE AND TO VOTE AGAINST THE PRINCIPAL TERMS OF THE
MERGER WILL RESULT IN A WAIVER OF SUCH SHAREHOLDER'S DISSENTERS' RIGHTS.
Any demands, notices, certificates or other documents delivered to SMB prior
to the Merger may be sent to Dario Quiroga, Senior Vice President, Cashier,
Chief Financial Officer and Secretary, Santa Monica Bank, 1251 Fourth Street,
Santa Monica, California 90401. Thereafter, they may be sent to Julius G.
Christensen, Executive Vice President, General Counsel and 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 Julius G. Christensen, Executive Vice President, General Counsel
and Secretary, Western Bancorp, 4100 Newport Place, Suite 900, Newport Beach,
California 92660.
If no instructions are indicated on proxies received by Western or SMB, 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
July 30, 1997 pursuant to Section 1301 of the CGCL (each, a
86
<PAGE>
"Demand") are made with respect to 5% or more of the outstanding shares of
Western Common Stock or the SMB Common Stock, as the case may be (before giving
effect to the Merger). Such Demands must be received by Western or SMB, as the
case may be, 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
5% or more of the outstanding shares of Western Common Stock or the SMB Common
Stock, as the case may be, on or before the date of the respective Special
Meeting, the Western Shareholders and the SMB 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 5% of the outstanding shares of Western Common Stock
or the SMB Common Stock, as the case may be. Consequently, if Demands are made
by holders of more than 5% of the Western Common Stock or the SMB Common Stock,
as the case may be, giving rise to Dissenters' Rights for the Western
Shareholders or the SMB 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 5% or more of the Western Common Stock or the SMB
Common Stock, as the case may be, and (iii) Western elects nonetheless to
proceed with the Merger, a holder of Western Common Stock or SMB 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 July 30, 1997 of
his or her 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 July 30, 1997; (b) be received by Western or SMB, as the case may
be, 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 that
the Dissenting Shareholder demands that Western or SMB, as the case may be,
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 July 30, 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 Western or SMB, as the case may be, 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 Western or SMB, as the
case may be, at its principal office or at the office of any transfer agent of
Western or SMB, as the case may be, within 30 days after the date on which
notice of approval of the Merger by the Western Shareholders or the SMB
Shareholders, as the case may be, was mailed to such Dissenting Shareholder.
If any Shareholder has Dissenters' Rights, Western or SMB, as the case may
be, will mail to each such shareholder a notice of the approval of the Merger by
the Western Shareholders or the SMB Shareholders, as the case may be, 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 Western or SMB, as the case may be, to represent the
fair market value as of July 30, 1997 of the Dissenting Shares; and (c) a brief
description of the procedure to be followed if the shareholder desires to
exercise his or her Dissenters' Rights under such sections. The statement of
price constitutes an offer by Western or SMB, as the case may be, to purchase
such Dissenting Shares.
If Western or SMB, as the case may be, denies that shares submitted to it as
Dissenting Shares are Dissenting Shares, or if Western or SMB, as the case may
be, and a Dissenting Shareholder fail to agree on
87
<PAGE>
the fair market value of the Dissenting Shares, either such Dissenting
Shareholder or Western or SMB, as the case may be, 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 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
Western or SMB, as the case may be, 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.
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 SMB 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, the Merger will be
accounted for as a purchase in accordance with generally accepted accounting
principles. Under purchase accounting, the assets and liabilities of SMB as of
the Effective Date will be recorded at their respective fair market values and
added to those of Western. Financial statements of Western issued after
consummation of the Merger would reflect such values. Financial statements of
Western issued before consummation of the Merger would not be restated to
reflect the acquired company's historical financial position or results of
operations; operating results of SMB would be included with those of Western
beginning on the date of consummation of the Merger. The unaudited pro forma
financial information relating to the Merger contained in this Joint Proxy
Statement-Prospectus has been prepared using the purchase accounting basis to
account for the Merger.
THE PRIVATE PLACEMENT
In order to raise the capital necessary to fund the payment of Cash
Consideration in the Merger, Western has entered into the Standby Agreements
with the Private Placement Investors, pursuant to which, if the Merger is
consummated, the Private Placement Investors have committed to purchase a
minimum of approximately 1,982,000 shares of Western Common Stock and to stand
by to purchase up to approximately 2,311,500 additional shares of Western Common
Stock if requested to do so by Western. The purchase price of the Private
Placement Shares is $28 per share, and Western will determine the exact number
of Private Placement Shares to be sold pursuant to the Standby Agreements after
the Election Deadline.
The Private Placement Investors have agreed to pay the purchase price prior
to the Effective Time, and the stock transfer agent will cause the Private
Placement Shares to be issued and delivered to the Private Placement Investors
at the Effective Time. The Private Placement Shares have not been registered
under the Securities Act; however, pursuant to the Standby Agreements, Western
has agreed to file under the Securities Act, no later than 120 days after the
Effective Date, subject to certain adjustments, a "shelf" registration statement
providing for the registration of the Private Placement Shares. Depending on the
number of Private Placement Shares that are issued by Western pursuant to the
Standby Agreements, the Private Placement Shares will constitute between 12.6%
and 28.8% of the outstanding shares of Western Common Stock (after giving effect
to the Merger).
88
<PAGE>
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 among Western, Western Bank and
SMB on July 30, 1997, and amended and restated as of November 20, 1997. Pursuant
to the Merger Agreement, at the Effective Time, SMB will merge with Western Bank
or, if the Reorganization Condition is not met, a wholly-owned de novo
subsidiary of Western will merge into SMB, after which time Western has agreed
to merge SMB into Western Bank. As a result of either transaction, Western Bank
will be the Surviving Corporation operating under the name "Santa Monica Bank."
The separate corporate existence of SMB will then cease. In connection with the
Merger, each share of SMB Common Stock issued and outstanding at the Effective
Time (other than (a) shares that have not been voted in favor of approval of the
principal terms of the Merger and with respect to which Dissenters' Rights 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, at the option of the SMB Shareholder holding such share of SMB
Common Stock, either the Cash Consideration or, subject to the limitations set
forth in the Merger Agreement, the Stock Consideration. With the exception of
shares for which Dissenters' Rights have been perfected, each share of Western
Common Stock outstanding immediately prior to the Effective Time will remain
outstanding after the Merger as one share of Western Common Stock.
Shortly after the Effective Time every SMB Shareholder who has elected to
receive cash for any of their shares of SMB Common Stock and who has completed
certain formalities (see "--Election Procedures") will receive an amount equal
to $28 multiplied by the number of shares for which they have elected to receive
cash. SMB Shareholders who do not elect to receive cash will receive 0.875
shares of Western Common Stock for each share of SMB Common Stock previously
held.
It is expected that the merger will be a reorganization within the meaning
of Section 368(a) of the Code. See "THE MERGER--Certain Federal Income Tax
Consequences."
It is a condition to the Reorganization (as previously defined) that at
least 40%, in value, of the total consideration received by SMB Shareholders be
in the form of Western Common Stock (the Reorganization Condition). Because the
value of the Western Common Stock to be received depends on its market price,
the 40% valuation cannot be calculated until the Cut-Off Date. If on the Cut-Off
Date the Reorganization Condition is not satisfied, then the Merger will be an
all-cash merger and every SMB Shareholder will receive $28 per share of SMB
Common Stock in cash. In addition, if the Reorganization Condition is not
satisfied, a newly-formed wholly-owned subsidiary of Western will merge into
SMB, which will be the Survivor, and, immediately thereafter, Western will cause
SMB to merge with and into Western Bank. These alternatives are structured in
order to meet the relevant requirements for favorable tax treatment under the
Code and the regulations promulgated by the IRS under the Code.
ELECTION PROCEDURES
Thirty-five days before the anticipated Effective Time (the "Mailing Date
"), U.S. Stock Transfer Corporation, acting in its capacity as Exchange Agent
(the "Exchange Agent"), will send to each SMB Shareholder who is a shareholder
of record immediately prior to such date an election form (the "Election Form")
and other appropriate transmittal materials permitting such holder to elect to
receive the Cash Consideration in the Merger in respect of all or some of such
SMB Shareholder's shares of SMB Common Stock (the "Cash Election Shares") (an
"Election"). Shares of SMB Common Stock that are not covered
89
<PAGE>
by an effective, properly completed Election Form will be deemed to be shares
with respect to which such holder has elected to receive the Stock Consideration
("Stock Election Shares").
THERE CAN BE NO ASSURANCE THAT HOLDERS OF STOCK ELECTION SHARES WILL RECEIVE
WESTERN COMMON STOCK WITH RESPECT TO ANY OR ALL SHARES OF SMB COMMON STOCK HELD
BY SUCH HOLDER. IF THE NUMBER OF SMB SHAREHOLDERS MAKING A CASH ELECTION IS SO
GREAT AS TO PREVENT A REORGANIZATION, AND WESTERN DOES NOT CHOOSE TO INCREASE
THE STOCK CONSIDERATION, WESTERN WILL NOT ISSUE ANY SHARES OF WESTERN COMMON
STOCK IN THE MERGER. SUBJECT TO POSSIBLE ADJUSTMENT AS DESCRIBED BELOW, WESTERN
HAS FIXED A MAXIMUM NUMBER OF SHARES OF WESTERN COMMON STOCK TO BE ISSUED IN THE
MERGER. IF THE ELECTION PROCESS RESULTS IN A NUMBER OF STOCK ELECTION SHARES
THAT WOULD OTHERWISE BE ENTITLED TO RECEIVE SHARES OF WESTERN COMMON STOCK IN
EXCESS OF THAT MAXIMUM NUMBER, THE PROCEDURES FOR ALLOCATING WESTERN COMMON
STOCK AND CASH, DESCRIBED BELOW UNDER "--ALLOCATION," WILL BE FOLLOWED BY THE
EXCHANGE AGENT.
To Make an Effective Cash Election, an SMB Shareholder must submit a
properly completed Election Form so that it is actually received by the Exchange
Agent at or prior to the Election Deadline (as defined below) in accordance with
the instructions on the Election Form. An Election Form will be properly
completed only if accompanied by certificates representing all shares of SMB
Common Stock covered thereby or an appropriate guarantee of delivery by an
eligible organization, as set forth in the instructions on the Election Form.
The "Election Deadline" is 5:00 p.m., Pacific standard time, on the 30th
calendar day following, but not including, the date of mailing of the Election
Form or such other date upon which Western and SMB mutually agree.
Any Election Form may be revoked or changed by written notice from the
person submitting such Election Form to the Exchange Agent, but to be effective
such notice must actually be received by the Exchange Agent on or prior to the
Election Deadline. In such circumstances, the certificate or certificates
representing SMB Common Stock covered by any revoked Election Form will be
returned to the person who submitted the Election Form to the Exchange Agent
upon written request to that effect from the holder who submitted the Election
Form. The Exchange Agent will have reasonable discretion to determine when any
election, modification or revocation is received and whether any such election,
modification or revocation has been properly made, and such determination will
be final.
As will be described in the Election Form, Western will make available
Election Forms upon written request to persons who become holders (or beneficial
owners) of SMB Common Stock between the Mailing Date and the close of business
on the business day prior to the Election Deadline.
ALLOCATION
Within five days after the Election Deadline, unless the Effective Time has
not yet occurred, in which case as soon thereafter as practicable, the Exchange
Agent will be required to effectuate the allocation among holders of SMB Common
Stock to receive Stock Consideration or Cash Consideration upon consummation of
the Merger in the manner described below.
If the number of Stock Election Shares is less than or equal to the number
of shares of SMB Common Stock that would be entitled to receive in the aggregate
the Stock Number, which is the maximum number of shares of Western Common Stock
that Western has agreed to issue in the Merger, then, unless the number of Stock
Election Shares is so low as to prevent a Reorganization (as previously
defined):
(i) all Stock Election Shares will be converted into the right to receive
the Stock Consideration; and
(ii) all Cash Election Shares will be converted into the right to receive
the Cash Consideration.
90
<PAGE>
If the number of Stock Election Shares is greater than the number of shares
of SMB Common Stock that would be entitled to receive in the aggregate the Stock
Number, then, unless Western chooses, at its sole discretion, to issue a greater
number of shares of Western Common Stock to SMB Shareholders than the Stock
Number:
(i) all Cash Election Shares will be converted into the right to receive the
Cash Consideration; and
(ii) the Exchange Agent shall designate the Designated Cash Shares (which
are the Stock Election Shares to be converted into Cash Election
Shares) on a pro-rata basis based on the aggregate number of Stock
Election Shares held by such SMB Shareholder for each SMB Shareholder
with respect to those shares of SMB Common Stock held by such SMB
Shareholder that are Stock Election Shares, so that the number of
shares of Western Common Stock that will be issued in the Merger equals
as closely as practicable the Stock Number, and any Designated Cash
Shares will be converted into the right to receive the Cash
Consideration. For example, if 60% of the holders of shares of SMB
Common Stock elect to receive Western Common Stock in the Merger, each
holder 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.
If the aggregate amount of Cash Consideration to be paid in the Merger
according to the allocation procedures set forth above plus the amount of any
other cash distributed to SMB Shareholders in the Merger (including cash in lieu
of fractional shares and cash distributed to Dissenting Shareholders of SMB, if
any) would exceed 60% of the total consideration paid by Western in the Merger
(valuing the Stock Consideration by reference to the closing price per share of
Western Common Stock as reported by Nasdaq on the date immediately prior to the
Effective Date), Western may, but is not obligated to, elect to increase the
Stock Consideration so that the aggregate amount of cash paid by Western in the
Merger is less than or equal to 60% of the total consideration paid by Western.
In such case, the conversion ratio reflecting the Stock Consideration to be
issued in exchange for each Stock Election Share will be increased so that the
Stock Election Shares in the aggregate will be converted into the right to
receive such increased number of shares of Western Common Stock that the value
of the shares of Western Common Stock issued in the Merger equals or exceeds 40%
of the total consideration paid by Western.
If Western does not elect to increase the Stock Consideration under such
circumstances, the Merger will not qualify as a Reorganization. Therefore, in
such event, notwithstanding anything to the contrary set forth in this Joint
Proxy Statement-Prospectus, each share of SMB Common Stock will be converted
into the right to receive the Cash Consideration, regardless of whether the
holder of such share has made an Election to receive Cash Consideration.
BECAUSE THE TAX CONSEQUENCES OF RECEIVING CASH CONSIDERATION OR STOCK
CONSIDERATION WILL DIFFER, SMB SHAREHOLDERS ARE URGED TO READ CAREFULLY THE
INFORMATION SET FORTH UNDER THE CAPTION "--CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." BECAUSE THE STOCK CONSIDERATION CAN FLUCTUATE IN VALUE, THE
ECONOMIC VALUE PER SHARE RECEIVED BY SMB SHAREHOLDERS WHO RECEIVE THE STOCK
CONSIDERATION MAY, AS OF THE DATE OF RECEIPT BY THEM, BE MORE OR LESS THAN THE
AMOUNT OF CASH CONSIDERATION PER SHARE RECEIVED BY SMB SHAREHOLDERS WHO RECEIVE
CASH CONSIDERATION.
The failure by an SMB Shareholder to submit timely a properly completed
Election Form will result in such shareholder being deemed to have elected to
receive Stock Consideration in the Merger. See "--Election Procedures." In the
event that no SMB Shareholder were to make an effective Election to receive Cash
Consideration in the Merger, if Western were to choose, at its sole discretion,
to issue such a greater number of shares of Western Common Stock to SMB
Shareholders than the Stock Number so that no cash (other than cash in lieu of
fractional shares and cash distributed to Dissenting Shareholders of SMB, if
any) would be paid in the Merger, then 100% of the total consideration (other
than cash in lieu of fractional shares) paid by Western in the Merger would
consist of shares of Western Common Stock.
91
<PAGE>
EFFECTIVE TIME AND EFFECTIVE DATE
On a date to be selected by Western after December 31, 1997, which will be
(i) no earlier than five days after the Election Deadline and (ii) within 30
days after the last to occur of the expiration of all applicable waiting periods
in connection with the approvals of governmental authorities unless such 30-day
period ends prior to January 1, 1998, the receipt of all approvals of
governmental authorities, unless such 30-day period ends prior to January 1,
1998 and the satisfaction or waiver of all other conditions to the consummation
of the Merger, or on such earlier or later date as may be agreed in writing by
the parties, an agreement of merger and related documents will be executed and
filed in accordance with the provisions and requirements of the CGCL. The Merger
will become effective upon such filing or such later time, if any, as of which
such filing is accepted by the California Secretary of State or at such time on
such later date as may be specified in such agreement of merger. The date of
such filing or such later effective date is herein called the "Effective Date."
The "Effective Time" of the Merger is the time of such filing, provided that the
filing is accepted by the California Secretary of State as of such filing time
or as is set forth in such agreement of merger.
EXCHANGE OF STOCK CERTIFICATES; DIVIDENDS
As of the Effective Time, Western will deposit, or will cause to be
deposited, with the Exchange Agent, the Merger Consideration, which will consist
of certificates representing the shares of Western Common Stock and cash to be
exchanged pursuant to the Merger Agreement for SMB Common Stock.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each SMB Shareholder who holds of record immediately prior to
the Effective Time shares of SMB Common Stock who did not return an Election
Form and share certificates to make a valid Cash Election as described in
"--Election Procedures" (excluding any shares canceled pursuant to the Merger
Agreement or Dissenting SMB Shares) a letter of transmittal (the "Letter of
Transmittal"), instructions for use in effecting the surrender of Certificates
in exchange for the Stock Consideration and cash in lieu of fractional shares
(or, if no Western Common Stock is to be issued in the Merger, cash) and, in the
case of holders of more than 5% of SMB 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 SMB 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 as
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 whole 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, the Cash Consideration, if
any, to be received by such SMB Shareholder pursuant to the allocation
procedures set forth above in "--Allocation" 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 SMB 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
92
<PAGE>
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.
SMB SHAREHOLDERS SHOULD NOT FORWARD SMB COMMON STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED ELECTION FORMS OR TRANSMITTAL FORMS. SMB
SHAREHOLDERS SHOULD NOT RETURN CERTIFICATES WITH THE ENCLOSED PROXY.
NO FRACTIONAL SHARES
No fractional shares of Western Common Stock will be issued in the Merger.
In lieu of the issuance of any fractional share of Western Common Stock that
would otherwise be issuable, a cash adjustment will be paid to SMB Shareholders
in an amount equal to such fractional proportion of the price of a share of
Western Common Stock as of the close of business on the day immediately prior to
the Effective Time.
CONDUCT OF THE BUSINESS OF SMB AND WESTERN PRIOR TO THE MERGER
Pursuant to the Merger Agreement, each of Western, Western Bank and SMB has
agreed that, during the period from the date of the Merger Agreement until the
Effective Time, except as permitted by the Merger Agreement, each of it and its
subsidiaries will (a) conduct its business in the usual, regular and ordinary
course of business consistent with past practice; (b) use its reasonable best
efforts to maintain and preserve intact its business organization, properties,
leases, employees and advantageous business relationships and retain the
services of its officers and key employees; (c) take no action that would
adversely affect or delay the ability of Western, Western Bank or SMB to obtain
any necessary approvals, consents or waivers of any governmental authority
required for the transactions contemplated by the Merger Agreement or to perform
its covenants and agreements on a timely basis under the Merger Agreement; and
(d) take no action that is reasonably likely to have a material adverse effect
on either Western, Western Bank or SMB.
In addition, SMB has agreed that, during the same period, it will not,
subject to certain exceptions, without the prior consent of Western, (a) incur
any indebtedness for borrowed money (other than federal funds borrowing) or
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other person; (b) (i) adjust, split, combine or
reclassify any capital stock, (ii) make, declare or pay any dividend or redeem
shares of its capital stock (except that SMB has declared and paid a dividend
for the third quarter of 1997, currently expects to declare and pay a dividend
for the fourth quarter of 1997 and may declare a dividend for the first quarter
of 1998) or (iii) grant any right to acquire capital stock or issue any
additional shares of capital stock except pursuant to the exercise of stock
options, warrants, awards and other rights outstanding as of the date of the
Merger Agreement; (c) dispose of any of its properties, leases or assets, or
cancel, release or assign any indebtedness, except (i) pursuant to agreements in
force as of the date of the Merger Agreement, or (ii) any such action or series
of related actions that result in a pre-tax loss of not more than $250,000; (d)
make any capital expenditures in amounts exceeding $200,000 individually or
$250,000 in the aggregate; (e) increase the compensation of employees or
directors, or make any other changes with respect to compensation, other than
(i) general increases in compensation for employees, (ii) bonuses accrued on
SMB's financial statements at and for the year ended December 31, 1997 or (iii)
in accordance with applicable law; (f) voluntarily accelerate the vesting of any
stock options or other compensation or benefit; (g) other than in individual
amounts not in excess of $250,000, make any investment, other than purchases of
direct obligations of the United States with maturities of three years or less,
or acquire business operations (with certain limited exceptions); (h) enter into
or terminate any contract or agreement, other than those involving less than
$250,000 in aggregate payments or value of goods or services provided; (i)
settle any claim, action or proceeding involving more than $250,000 or material
restrictions upon the operations of SMB; (j) in amounts more than $250,000,
waive or release any material right or collateral or compromise any extension of
credit or other debt or claim; (k) make or renew any extension of credit except
extensions of credit that SMB has a
93
<PAGE>
legally binding obligation to make; (l) change its method of accounting as in
effect at December 31, 1996; (m) engage in any merger, consolidation or other
similar transaction; or (n) amend its articles of incorporation or bylaws.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties relating to, among other things, (a) organization and similar
corporate matters; (b) the capital structure of each of SMB and Western and its
significant subsidiaries; (c) authorization, execution, delivery, performance
and enforceability of the Merger Agreement and related matters; (d) conflicts
under articles or bylaws, required consents or approvals, and violations of any
agreements or law; (e) documents filed with the Commission and the FDIC and the
accuracy of information contained therein; (f) absence of certain material
adverse events, changes, effects or undisclosed liabilities; (g) retirement and
other employee plans and matters relating to the Employee Retirement Income
Security Act of 1974, as amended; (h) litigation; (i) compliance with law,
including environmental compliance; (j) tax returns and audits; (k) ownership of
real property; (l) absence of regulatory actions; and (m) labor matters.
CERTAIN COVENANTS
ACQUISITION PROPOSALS
Pursuant to the Merger Agreement, SMB has agreed that none of it or any of
its officers and directors will, and that SMB will direct and use its reasonable
best efforts to cause its employees, agent and representatives not to, (i)
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 SMB Shareholders) with respect to a merger, consolidation or similar
transaction, other than pursuant to the Merger Agreement, involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, SMB (any such proposal or offer being referred to as an
"Acquisition Proposal") or (ii) except to the extent legally required for the
discharge by the SMB Board of its fiduciary duties as advised in writing by its
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.
SMB also has agreed, as of the date of the Merger Agreement, to immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted theretofore with respect to any of the
foregoing and to make all reasonable efforts to enforce any confidentiality
agreements to which it is a party. In addition, SMB will take the necessary
steps to inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations it has undertaken under the Merger Agreement
with respect to Acquisition Proposals. SMB also will notify Western 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, SMB.
CERTAIN POLICIES OF SMB
At or before the Effective Time, SMB will make such accounting entries or
adjustments as Western requests in order to implement its plans for SMB
following the Merger or to reflect merger-related expenses and costs; PROVIDED,
HOWEVER, that (a) SMB will not be required to take such action more than two
days prior to the Effective Time, (b) no such adjustment will require, based
upon consultation with counsel and accountants for SMB, any filing with any
governmental agency, or violate any law, rule or regulation applicable to SMB,
(c) no such adjustment will require any changes in net income or shareholders'
equity that will be required to be contained in any financial statement required
to be filed by SMB under the rules of the FDIC if SMB reasonably believes that
all of the conditions to the Merger set forth in the Merger Agreement will not
be either satisfied or waived; and further provided, that in any event no
accrual
94
<PAGE>
or reserve made by SMB pursuant to this covenant will constitute or be deemed to
be a breach or 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 has occurred. The recording of such adjustments will not be deemed to
imply any misstatement of previously furnished financial statements or
information and will not be construed as concurrence of SMB Management with any
such adjustments.
EMPLOYEE BENEFITS
Western, Western Bank and SMB have agreed that, unless otherwise mutually
determined or otherwise set forth in the Merger Agreement, the employee benefit
plans of SMB in effect at the date of the Merger Agreement (with certain
exceptions) will remain in effect for a period of at least six months after the
Effective Time with respect to persons covered by such plans at the Effective
Time. Western is presently investigating, with a consultant's assistance, the
types of benefits that should be made available to its employees and those of
its subsidiaries. Each Continued Employee will be eligible to participate on the
same basis as similarly situated employees of Western or Western Bank in
existing benefit plans of Western or Western Bank as well as such other and
additional benefit plans as will be determined by the Board of Directors of the
Surviving Corporation as a result of such investigation and study. All such
participation will be subject to the terms of Western's Employee Plans as may be
in effect from time to time. Western and Western Bank will, solely for purposes
of time of service, vesting and eligibility to participate in Western's Employee
Plans, recognize credit for each Continued Employee's term of service with SMB.
At the Effective Time, each outstanding and unexercised option granted by SMB to
purchase shares of SMB Common Stock will be adjusted so as to entitle the
grantee thereof to receive, in lieu of the share of SMB Common Stock that would
otherwise have been issuable upon the exercise thereof, an amount in cash
computed by multiplying (i) the difference between (x) the Cash Consideration
and (y) the per share exercise price applicable to such option by (ii) the
number of such shares of SMB Common Stock subject to such option.
Western and Western Bank will honor, to the extent set forth in the Merger
Agreement, all employment and severance agreements, in accordance with their
terms.
INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE
From and for a period of six years after the Effective Time, Western and
Western Bank have agreed to indemnify and hold harmless each director and
officer of SMB, determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time (including with respect
to the Merger Agreement or any of the transactions contemplated thereby),
whether asserted, claimed or arising prior to, at or after the Effective Time,
to the extent to which such Indemnified Parties were entitled under California
law and SMB's articles of incorporation or bylaws in effect on July 30, 1997,
and Western also will advance expenses as incurred to the extent permitted under
California law and SMB's articles of incorporation and bylaws.
Any Indemnified Party wishing to claim indemnification under the Merger
Agreement, upon learning of any such claim, action, suit, proceeding or
investigation, must as promptly as possible notify Western thereof, but the
failure so to notify will not relieve Western of any liability it may have to
such Indemnified Party if such failure does not materially prejudice Western. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (a) Western will have the right to
assume the defense thereof and Western will 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
95
<PAGE>
for the Indemnified Parties advises that there are issues that raise conflicts
of interest between Western and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and Western will pay the reasonable
fees and expenses of one such counsel for the Indemnified Parties in any
jurisdiction promptly as statements thereof are received unless the use of one
counsel for such Indemnified Parties would present such counsel with a conflict
of interest; (b) the Indemnified Parties will cooperate in the defense of any
such matter; and (c) Western will not be liable for any settlement effected
without its prior written consent. Notwithstanding the foregoing, Western will
not have any obligation under the Merger Agreement to any Indemnified Party when
and if a court of competent jurisdiction ultimately
determines, and such determination becomes final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
not permitted or is prohibited by applicable law.
Western also has agreed that for a period of six years after the Effective
Time, it will use its reasonable best efforts to cause to be maintained in
effect the policies of directors' and officers' liability insurance maintained
by SMB as of July 30, 1997 (provided that Western may substitute therefor
policies of comparable coverage with respect to claims arising from facts or
events that occurred before 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 annum in
excess of 200% of the amount of the annual premiums paid as of the date of the
Merger Agreement by SMB for such insurance (the "Maximum Amount"). If the amount
of the annual premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, Western will use all reasonable efforts to maintain
the most advantageous policies of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount. Notwithstanding the
foregoing, prior to the Effective Time, Western may request SMB to, and SMB
thereupon will, purchase insurance coverage, on such terms and conditions as
shall be acceptable to Western, extending for a period of six years SMB's
directors' and officers' liability insurance coverage in effect as of the date
of the Merger Agreement (covering past or future claims with respect to periods
before the Effective Time) and such coverage will satisfy Western's obligations
under the Merger Agreement.
If Western or any of its successors or assigns (a) shall consolidate with or
merger into any other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (b) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provision will be made to ensure that the successors and assigns of Western
assume the obligations described above.
NOTIFICATION OF CERTAIN MATTERS
Western and SMB each has agreed to give prompt notice to the other of: (a)
any notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received by it or any
of its subsidiaries subsequent to the date of the Merger Agreement and prior to
the Effective Time, under any contract material to the financial condition,
properties, businesses or results of operations of such party taken as a whole
to which such party or any subsidiary is a party or is subject; and (b) any
material adverse change in the condition (financial or other), properties,
assets, businesses, results of operations or prospects of it and its
subsidiaries taken as a whole or the occurrence of any event that, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in any such change. Each of SMB and Western will give prompt notice to
the other of any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by the Merger Agreement.
ACQUISITION OF SMB COMMON STOCK BY WESTERN
Western has agreed that prior to the earlier of (i) immediately prior to the
Effective Time and (ii) the termination of the Merger Agreement in accordance
with its terms, Western and its affiliates will not, directly or indirectly,
acquire more than 5% of the shares of SMB Common Stock (other than shares
96
<PAGE>
acquired in a fiduciary or agency capacity or in satisfaction of a debt
previously contracted). See "THE MERGER--Structure of the Merger."
SECURITIES ACT
As soon as practicable after the date of the SMB Special Meeting, SMB will
identify to Western all persons who SMB believes to be affiliates of SMB as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
("Affiliates"). SMB will use its best efforts to obtain a written agreement from
each person identified as an Affiliate who is an officer or director of SMB,
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. SMB will cause forms of such written agreement to be delivered
to each other person who SMB believes may be or become an Affiliate of Western
for purposes of enabling such persons to comply with the exchange procedures set
forth in the Merger Agreement.
CONDITIONS
The respective obligations of Western and SMB to consummate the Merger are
subject to certain conditions, including (a) the approval by the shareholders of
Western and SMB of the principal terms of the Merger; (b) receipt of approvals,
consents and waivers required by law in connection with the Merger and the other
transactions contemplated by the Merger Agreement, including approval by the
Federal Reserve Board and the FDIC (the parties having agreed that no such
approval, consent or waiver will be deemed to have been received if it includes
any condition or requirement that would result in a material adverse effect (as
defined) on Western or SMB or would reduce the economic benefits of the Merger
in so significant and adverse a manner for either party that such party would
not have entered into the Merger Agreement had such condition or requirement
been known to it); (c) the absence of any statute, rule, regulation, order,
injunction or decree being in effect and prohibiting or restricting the
consummation of the Merger or any other transaction contemplated by the Merger
Agreement; (d) the Registration Statement having become effective and there
being issued no stop order suspending the effectiveness of the Registration
Statement and no proceedings for that purpose initiated or threatened by the
Commission; and (e) except if the failure to obtain such opinions is due solely
to the circumstances described in Section 1.3(c)(iii) of the Merger Agreement,
receipt of the Tax Opinions by each of Western and SMB from its respective
special counsel.
The obligations of Western and Western Bank to consummate the Merger also
are subject to the fulfillment or waiver by Western prior to the Effective Time
of certain conditions, including the following: (a) the representations and
warranties of SMB being true and correct unless the failure so to be true and
correct is not likely to have a material adverse effect on SMB; (b) the
performance by SMB in all material respects of all covenants and agreements
contained in the Merger Agreement required to be performed by SMB before the
Effective Time; (c) receipt by Western of a customary "cold comfort" letter from
Arthur Andersen LLP with respect to certain financial statements and data of
SMB; (d) receipt by Western of written resignations, effective as of the
Effective Time, of each SMB Director and certain officers of SMB as agreed to by
Western and SMB; (e) receipt by Western, prior to the solicitation of
shareholder approval, of an opinion of Piper Jaffray confirming the fairness of
the terms of the Merger from a financial point of view; (f) receipt by Western
of a certificate of satisfaction of the Franchise Tax Board of the State of
California that all taxes imposed on SMB have been paid or secured; (g)
Dissenters' Rights having been exercised by no more than 5% of the outstanding
shares of SMB Common Stock or Western Common Stock, thereby satisfying the
Dissenters' Rights Condition; and (h) as of December 31, 1997, SMB's book value
will not be less than $77,900,000 and SMB's allowance for loan and lease losses
will not be less than $7,992,000. The Merger Agreement expressly provides that
the Dissenters' Rights Condition may be waived by Western in its sole discretion
either prior to or subsequent to the approval by the Western Shareholders and
the SMB Shareholders of the principal terms of the Merger.
97
<PAGE>
In addition, the obligation of SMB to consummate the Merger also is subject
to the fulfillment or waiver by SMB prior to the Effective Time of certain
conditions, including the following: (a) the representations and warranties of
Western being true and correct unless the failure so to be true and correct is
not likely to have a material adverse effect on Western; (b) the performance by
Western in all material respects of all covenants and agreements contained in
the Merger Agreement required to be performed before the Effective Time; (c)
receipt by SMB of a customary "cold comfort" letter from KPMG Peat Marwick LLP
with respect to certain financial statements and data of Western; (d) receipt by
SMB of an opinion of Sullivan & Cromwell, special counsel to Western, dated the
Effective Date, to the effect that the Western Common Stock being issued
pursuant to the Merger Agreement will be duly authorized, validly issued, fully
paid and non-assessable; (e) as of the Effective Time, Aubrey L. Austin will be
a member of the Board of Directors of Western and the Surviving Corporation and
will be the Chairman, President and Chief Executive Officer of the Surviving
Corporation; and (f) receipt by SMB, prior to the solicitation of shareholder
approval and the Effective Time, of an opinion of Montgomery confirming the
fairness of the terms of the Merger to the SMB Shareholders from a financial
point of view.
TERMINATION
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Date, either before or after its approval by the shareholders of
SMB and Western: (a) by the mutual consent of Western and SMB, if so determined
by their respective Boards; (b) by either of Western or SMB, if so determined by
its Board, by written notice to the other, in the event of (i) the failure of
the SMB Shareholders to approve the Merger at the SMB Special Meeting, (ii) the
failure of the Western Shareholders to approve the Merger 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 that is not
cured or not curable within 30 days after written notice of such breach is given
to the party committing such breach; (c) by either of Western or SMB, by written
notice to the other, if either (i) any approval, consent or waiver of a
governmental authority required to permit consummation of the Merger or any
transaction necessary to consummate the Merger 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 Merger
or any transaction necessary to consummate the Merger; (d) by either of Western
or SMB, by written notice to the other, if so determined by its Board, in the
event that the Merger is not consummated by February 28, 1998, unless the
failure so to 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; (e) by Western, by written notice to SMB, if SMB
takes or allows to be taken any action prohibited under the Merger Agreement in
connection with an Acquisition Proposal; or (f) by SMB, upon written notice to
Western prior to the approval by the SMB Shareholders of the Merger, if SMB
receives an Acquisition Proposal on terms and conditions that the SMB Board
determines, after receiving the written advice of its outside counsel, (i) that
to proceed with the Merger will violate the fiduciary duties of the SMB Board to
the SMB Shareholders and (ii) to accept such proposal. The Merger Agreement can
be amended without resoliciting the Shareholders to approve such amendment to
the extent that such amendment does not change any of the principal terms of the
Merger. If any such amendment changes a principal term of the Merger, Western
and SMB will resolicit approval of the Shareholders.
TERMINATION PAYMENT
If the Merger Agreement is terminated by SMB pursuant to a material breach
of any representation, warranty, covenant or agreement contained therein by
Western that is not cured or not curable within 30 days after written notice of
such breach is given to Western by SMB, Western will pay to SMB $5.0 million
plus all costs and expenses incurred by SMB in connection with the Merger, up to
$1.0 million. If the Merger Agreement is terminated by Western pursuant to a
material breach of any representation, warranty, covenant or agreement contained
therein by SMB that is not cured or not curable within 30 days after written
notice of such breach is given to SMB by Western, SMB shall pay to Western $3.0
million plus
98
<PAGE>
all costs and expenses incurred by Western in connection with the Merger, up to
$1.0 million, and if the Merger Agreement is terminated by Western under the
circumstances described in clauses (e) and (f) under "-- Termination" above, SMB
shall pay to Western $10.0 million plus all costs and expenses incurred by
Western in connection with the Merger, up to $1.0 million. The parties agree
that any termination payment made pursuant to the Merger Agreement will
represent a reasonable estimate of the minimum damage to the non-terminating
party and will not constitute a penalty.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such costs or expenses, except upon
termination of the Merger Agreement under certain circumstances. See
"--Termination Payment."
THE SHAREHOLDER AGREEMENTS
Western has entered into Shareholder Agreements with Aubrey L. Austin, W.
Paul Carver, Doris J. Carver, Joe Crail, Willard L. Cummings, Jr., Donald E.
Dickerson, William B. Fritzsche, John W. Garacochea, and Dorothy F. Menzies (the
"Party Shareholders"), each an SMB Shareholder and a director of SMB. The Party
Shareholders, holding in the aggregate shares representing approximately 26.5%
of the total voting power of SMB Common Stock as of the SMB Record Date, each
agreed, in consideration of the substantial expenses incurred by Western and
Western Bank in connection with the Merger Agreement and as a condition to
Western and Western Bank entering into the Merger Agreement, to vote or to cause
to be voted, or to execute a written consent with respect to, all of such Party
Shareholder's shares of SMB Common Stock (a) in favor of adoption and approval
of the Merger Agreement and the Merger at every meeting of SMB 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
SMB 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 SMB 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 or her shares of SMB Common
Stock during the term of the relevant Shareholder Agreement.
The Party Shareholders, other than Aubrey L. Austin, also agreed in the
Shareholder Agreements executed by them that at any time within a one- or
two-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 commercial bank, trust company,
savings bank or savings and loan association or any other entity the deposits of
which are insured by the FDIC in the counties of Los Angeles, Orange and San
Diego in the State of California so long as Western Bank or its successors or
assigns remain engaged in the business of a commercial bank.
The Shareholder Agreements will terminate upon the earlier to occur of the
Effective Time (except for the provisions described in the preceding paragraph
and certain other provisions of the Shareholder Agreements, which will survive
the Effective Time) and the date on which the Merger Agreement is terminated in
accordance with its terms.
99
<PAGE>
The Shareholder Agreements bind the actions of the signatories thereto only
in their capacity as SMB Shareholders. Those directors of SMB who signed
Shareholder Agreements are not and could not be contractually bound to abrogate
their fiduciary duties as directors of SMB. Accordingly, while such
shareholders/directors are, under the Shareholder Agreements executed by them,
contractually bound to vote as an SMB Shareholder in favor of the Merger and
against other Acquisition Proposals (should any be presented), their fiduciary
duties as SMB Directors nevertheless require them to act in their capacity as
directors in the best interest of SMB when they decided to approve the Merger.
In addition, such shareholders/directors will continue to be bound by their
fiduciary duties as SMB Directors with respect to any decisions they may take in
connection with the Merger or otherwise.
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 10,633,079
shares are issued and outstanding as of the Western Record Date and 5,000,000
shares of serial preferred stock, no par value (the "Western Preferred Stock"),
none of which is outstanding.
The Western Preferred Stock may be divided into such number of series as the
Western Board may determine. The Western Board is authorized to determine and
alter the rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Western Preferred Stock, and to fix the
number of shares of any series of Western Preferred Stock and the designation of
any such series of Western Preferred Stock. The Western Board, within the limits
and restrictions stated in any resolution or resolutions of the Western Board
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any series subsequent to the issue of shares of that
series.
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 may be voted
cumulatively if notice is given by a Western Shareholder to Western of the
intention to do so. Shares of Western Common Stock are not subject to
redemption, conversion or sinking fund provisions.
COMPARISON OF CORPORATE STRUCTURE
Both Western and SMB 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 SMB 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 SMB are discussed below.
VOTING RIGHTS
Both Western Shareholders and SMB 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
SMB
Holders of SMB Common Stock are entitled to receive dividends declared by
the SMB Board out of funds legally available therefor under the laws of the
State of California. Due to poor financial performance and regulatory order, SMB
ceased paying a dividend commencing in the fourth quarter of 1992 until
100
<PAGE>
it reinstituted payment of a dividend in the amount of $0.05 per share in the
second, third and fourth quarters of 1996 for a total of $0.15 per share for the
year 1996. The SMB Board declared an $0.08 per share dividend for the first
quarter of 1997, a $0.10 per share dividend for each of the second and third
quarters of 1997 and a $0.12 per share dividend for the fourth quarter of 1997.
In addition to the limitation on dividends under the laws of the State of
California, the SMB Board has established a policy that it will not declare cash
dividends in excess of the greater of 30% of the net income of SMB for its last
fiscal year after taxes and 30% of the net income of SMB for its current fiscal
year after taxes.
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 May 20, 1993. 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.
NUMBER OF DIRECTORS
The SMB bylaws provide that the authorized number of directors of SMB shall
be not less than nine and not more than 11. The SMB Board is divided into three
classes. Each year, an election shall be held to elect one of the three classes
of directors to serve for a term of three years.
The Western bylaws currently provide that the authorized number of directors
of Western shall not be less than nine nor more than 15 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%
of the outstanding shares entitled to vote on such amendment. Currently, the
actual number of directors of Western is 14.
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. Article Five of Western's restated articles of
incorporation provides for elimination of liability for monetary damages of its
directors, and Article 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 supplemental consolidated financial statements of Western Bancorp and
subsidiaries as of and for the year ended December 31, 1996, the Western Bancorp
supplemental consolidated balance sheet as of December 31, 1995, and the related
supplemental 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, reflecting the SCB Merger on a pooling-of-interests basis and
appearing in Western Bancorp's current report on Form 8-K, dated October 23,
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
101
<PAGE>
and auditing. Such report indicates that: (i) The 1996 consolidated financial
statements of CCB and SCB, the 1995 and 1994 consolidated financial statements
of Western Bancorp (formerly Monarch Bancorp), and the 1995 and 1994 separate
consolidated financial statements of CCB and SCB were audited by other auditors;
(ii) The supplemental consolidated financial statements give retroactive effect
to the acquisition of SCB on October 10, 1997, which has been accounted for as a
pooling-of-interests. Generally accepted accounting principles proscribe giving
effect to a consummated business combination accounted for by the
pooling-of-interests method in financial statements that do not include the date
of consummation. The supplemental consolidated financial statements do not
extend through the date of consummation. However, they will become the
historical consolidated financial statements of Western Bancorp and subsidiaries
after financial statements covering the date of consummation of the business
combination with SCB are issued; and (iii) The combination of the Western
Bancorp supplemental consolidated balance sheet as of December 31, 1995, and the
combination of the related supplemental 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, after restatement for the
pooling-of-interests transactions, 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 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 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 financial statements of SMB for the year ended December 31, 1996,
incorporated by reference in this Joint Proxy Statement-Prospectus 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 financial statements of SMB as of December 31, 1995 and for each of the
two years in the period ended December 31, 1995 incorporated in this Joint Proxy
Statement-Prospectus by reference from SMB's Annual Report on Form F-2 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.
102
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 30TH DAY OF JULY, 1997
AND AMENDED AND RESTATED
AS OF THE 20TH DAY OF NOVEMBER, 1997
BY AND AMONG
WESTERN BANCORP,
WESTERN BANK
AND
SANTA MONICA BANK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
RECITALS.................................................................................................. A-1
ARTICLE I. THE MERGERS
SECTION 1.1. Structure of the Merger................................................................ A-2
SECTION 1.2. Effect on Outstanding Shares........................................................... A-2
SECTION 1.3. Election Procedures; Allocation........................................................ A-3
SECTION 1.4. Exchange Procedures.................................................................... A-4
SECTION 1.5. Options................................................................................ A-6
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1 Conduct of Business Prior to the Effective Time........................................ A-6
SECTION 2.2 Forbearance............................................................................ A-6
SECTION 2.3 Cooperation............................................................................ A-8
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.......................................... A-8
SECTION 3.2 Representations and Warranties of Western.............................................. A-17
ARTICLE IV. COVENANTS
SECTION 4.1 Acquisition Proposals.................................................................. A-25
SECTION 4.2 Certain Policies of the Company........................................................ A-26
SECTION 4.3 Employee Benefits...................................................................... A-26
SECTION 4.4 Access and Information................................................................. A-26
SECTION 4.5 Certain Filings, Consents and Arrangements............................................. A-27
SECTION 4.6 Indemnification; Directors' and Officers' Insurance.................................... A-27
SECTION 4.7 Additional Agreements.................................................................. A-28
SECTION 4.8...... Publicity.............................................................................. A-28
SECTION 4.9 Registration Statement................................................................. A-28
SECTION 4.10 Shareholders' Meetings................................................................. A-29
SECTION 4.11 Notification of Certain Matters........................................................ A-29
SECTION 4.12 No Acquisitions of Company Common Stock................................................ A-29
SECTION 4.13 Securities Act......................................................................... A-29
SECTION 4.14 Tax-Free Reorganization Treatment...................................................... A-30
SECTION 4.15 Shareholder Agreements................................................................. A-30
SECTION 4.16 Director and Officer Resignations...................................................... A-30
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1 Conditions to All Parties' Obligations................................................. A-30
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
SECTION 5.2 Conditions to the Obligations of Western............................................... A-31
SECTION 5.3 Conditions to the Obligation of the Company............................................ A-32
ARTICLE VI. TERMINATION
SECTION 6.1 Termination............................................................................ A-32
SECTION 6.2 Effect of Termination.................................................................. A-33
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1 Effective Date and Effective Time...................................................... A-34
ARTICLE VIII. OTHER MATTERS
SECTION 8.1 Certain Definitions; Interpretation.................................................... A-34
SECTION 8.2 Survival............................................................................... A-34
SECTION 8.3 Waiver................................................................................. A-35
SECTION 8.4 Counterparts........................................................................... A-35
SECTION 8.5 Governing Law.......................................................................... A-35
SECTION 8.6 WAIVER OF JURY TRIAL................................................................... A-35
SECTION 8.7 Expenses............................................................................... A-35
SECTION 8.8 Notices................................................................................ A-35
SECTION 8.9 Entire Agreement; Etc.................................................................. A-36
SECTION 8.10 Assignment............................................................................. A-36
</TABLE>
- ii -
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of the 30th day of July, 1997, and
amended and restated as of the 20th day of November, 1997 (this "Plan"), by and
among Western Bancorp, a California corporation ("Western"), Western Bank, a
California banking corporation ("Western Bank"), and Santa Monica Bank, a
California banking corporation (the "Company").
RECITALS:
A. WESTERN. Western is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of California, with its
principal executive offices located in Newport Beach, California. As of the date
hereof, Western has (i) 100 million authorized shares of common stock, no par
value ("Western Common Stock"), of which no more than 7,514,155 shares were
outstanding as of the date hereof (including 444,044 shares to be issued upon
the completion of the exercise of certain options and warrants), (ii) 5 million
authorized shares of preferred stock, none of which were outstanding, and (iii)
no other class of capital stock authorized. Western is a bank holding company
duly registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHC Act").
B. WESTERN RIGHTS, ETC. Western does not have any shares of its capital
stock reserved for issuance, any outstanding option, call or commitment relating
to shares of its capital stock or any outstanding securities, obligations or
agreements convertible into or exchangeable for, or giving any person any right
(including, without limitation, preemptive rights) to subscribe for or acquire
from it, any shares of its capital stock (collectively, "Western Rights"),
except pursuant to the options, warrants, awards and other rights described on
Annex 1 (which includes details on the terms and conditions of any such Western
Rights, including the grantee, vesting periods and exercise prices of any
options and the exercise price of any warrants).
C. WESTERN BANK. Western Bank is a banking corporation duly incorporated,
validly existing and in good standing under the laws of the State of California,
with its principal executive offices located in Los Angeles, California. As of
the date hereof, Western owns all of the issued and outstanding common stock, no
par value, of Western Bank ("Western Bank Common Stock"), of which there were no
shares to be issued upon the completion of the exercise of options, warrants and
awards. Western Bank is a bank licensed by the California Commissioner of
Financial Institutions (the "Commissioner").
D. WESTERN BANK RIGHTS, ETC. Western Bank does not have any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to subscribe
for or acquire from it, any shares of its capital stock.
E. THE COMPANY. The Company is a banking corporation duly incorporated,
validly existing and in good standing under the laws of the State of California,
with its principal executive offices located in Santa Monica, California. As of
the date hereof, the Company has (i) 50,000,000 authorized shares of common
stock, par value $3.00 per share ("Company Common Stock"), of which no more than
7,077,332 shares were outstanding as of the date hereof (including 16,224 shares
to be issued upon the completion of the exercise of certain options, warrants
and awards) and (ii) no other class of capital stock authorized. The Company is
a bank licensed by the Commissioner.
F. COMPANY RIGHTS, ETC. The Company does not have any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to subscribe
for or acquire from it, any shares of its capital stock (collectively, "Company
Rights"), except pursuant to the options, warrants, awards and other rights
described on Annex 2 (which includes details on the terms and conditions of any
Company Rights, including the grantee, vesting periods and exercise prices of
any options).
A-1
<PAGE>
G. BOARD APPROVALS. The respective Boards of Directors of Western, Western
Bank and the Company have duly approved this Plan and have duly authorized its
execution and delivery.
H. INTENTION OF THE PARTIES. Except under the circumstances described in
Section 1.3(c)(iii) of this Plan, it is the intention of the parties to this
Plan that the Merger (as hereinafter defined) 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").
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Plan and prescribe the terms and conditions
hereof and the manner and basis of carrying it into effect, which shall be as
follows:
ARTICLE I. THE MERGERS
SECTION 1.1. STRUCTURE OF THE MERGER. (a) On the Effective Date (as
defined in Section 7.1), the Company will merge (the "Merger", which term shall
include the merger identified in Section 1.3(c)(iii)(B) unless the context
otherwise requires) with and into Western Bank, with Western Bank being the
surviving corporation (the "Surviving Corporation"), pursuant to the provisions
of, and with the effect provided in, the California General Corporation Law
("CGCL").
(b) At the Effective Time (as defined in Section 7.1), unless the merger
identified in Section 1.3(c)(iii)(B) occurs, the articles of incorporation and
by-laws of the Surviving Corporation shall be the articles of incorporation and
by-laws of Western Bank in effect immediately prior to the Effective Time,
except that the articles of incorporation shall provide that the name of the
Surviving Corporation shall be Santa Monica Bank. At the Effective Time, if the
merger identified in Section 1.3(c)(iii)(B) occurs, then the articles of
incorporation and by-laws of the Surviving Corporation shall be the articles of
incorporation and by-laws of the Company in effect immediately prior to the
Effective Time and the parties shall cause the articles of incorporation and
bylaws of the corporation resulting from the subsequent combination of the
Surviving Corporation and Western Bank (as contemplated in Section 1.3(c)(iii))
to be the articles of incorporation and by-laws of Western Bank immediately
prior to the Effective Time, except that the articles of incorporation shall
provide that the name of such resulting corporation shall be Santa Monica Bank.
(c) At the Effective Time, the directors and officers of the Surviving
Corporation shall be the directors and officers of Western Bank except that
Aubrey L. Austin shall be elected to the board of directors and shall be named
the Chairman, President and Chief Executive Officer of the Surviving
Corporation.
SECTION 1.2. EFFECT ON OUTSTANDING SHARES. (a) (i) By virtue of the
Merger, automatically and without any action on the part of the holder thereof,
each share of Company Common Stock issued and outstanding at the Effective Time
(other than (x) shares the holder of which, pursuant to any applicable law
providing for dissenters' or appraisal rights, is entitled to receive payment in
accordance with the provisions of any such law, such holder to have only the
rights provided in any such law (the "Dissenters' Shares"), and (y) shares held
directly or indirectly by Western, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) (the aggregate
number of all such shares being hereinafter referred to as the "Outstanding
Company Share Number") shall become and be converted into the right to receive,
at the election of each holder thereof, but subject to the election and
allocation procedures of this Section 1.2(a), the other provisions of this
Section 1.2 and Section 1.3, either:
(A) $28 in cash without interest (the "Cash Consideration"), or
(B) 0.875 shares of Western Common Stock (the "Conversion Number")
(as it may be increased as described in this Section 1.2(a), the "Stock
Consideration");
A-2
<PAGE>
provided that, subject to Section 1.3(c)(iv), no more than 50% of the
outstanding shares of Company Common Stock shall be converted into the right
to receive Stock Consideration (such number of shares of Company Common
Stock, the "Stock Number"), and provided further that, at any time prior to
the Company's Meeting, Western, at its sole option, may increase the Stock
Consideration, and thereafter in the event that the condition set forth in
Section 5.1(g) is not fulfilled or waived, Western, at its sole option, may
increase the Stock Consideration to the extent necessary to permit such
condition to be fulfilled.
(b) As of the Effective Time, each share of Company Common Stock held
directly or indirectly by Western, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted, shall be canceled
and retired and cease to exist, and no exchange or payment shall be made with
respect thereto. If Western effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction, after the date hereof and before the Effective Time, the Conversion
Number shall be appropriately adjusted.
(c) No fractional shares of Western Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Western Common Stock
pursuant to Section 1.2(a), a cash adjustment will be paid to holders in respect
of any fractional share of Western Common Stock that would otherwise be
issuable. The amount of such cash adjustment (the "Cash In Lieu") shall be equal
to such fractional proportion of the price of a share of Western Common Stock as
of the close of business on the day immediately prior to the Effective Time (the
"Value Date").
(d) The shares of Western Bank Common Stock issued and outstanding
immediately prior to the Effective Time shall remain outstanding and unchanged
after the Merger and shall thereafter constitute all of the issued and
outstanding shares of the capital stock of the Surviving Corporation.
SECTION 1.3. ELECTION PROCEDURES; ALLOCATION. (a) Subject to allocation
and proration in accordance with the provisions of this Section 1.3, each record
holder of shares of the Company Common Stock (other than Dissenters' Shares and
shares of Company Common Stock to be canceled in accordance with Section 1.2(b))
immediately prior to the Election Deadline (as defined below) will be entitled
to elect to receive Cash Consideration in respect of all or some of the shares
of Company Common Stock ("Cash Election Shares") formerly held by such record
holder. All such elections (each, an "Election") shall be made on a form
designed for that purpose by Western and reasonably acceptable to the Company
(an "Election Form"). Any shares of Company Common Stock (other than Dissenters'
Shares and shares of Company Common Stock to be canceled in accordance with
Section 1.2(b)) with respect to which the record holder thereof shall not, as of
the Election Deadline, have properly submitted to the Exchange Agent (as defined
below) a properly completed Election Form shall be deemed to be shares with
respect to which such holder has elected to receive the Stock Consideration
("Stock Election Shares"). A record holder acting in different capacities or
acting on behalf of other persons in any way shall be entitled to submit an
Election Form for each capacity in which such record holder so acts with respect
to each person for which it so acts.
(b) Not later than the 35th calendar day prior to the anticipated Effective
Date or such other date as the Parties may agree in writing (the "Mailing
Date"), Western shall mail an Election Form, together with appropriate
transmittal materials, to each holder of record of Company Common Stock
immediately prior to the Mailing Date. To be effective, an Election Form must be
properly completed, signed and actually received by the Exchange Agent not later
than 5:00 p.m., California time, on the 30th calendar day after the Mailing Date
(or such other time and date as Western and the Company may mutually agree)(the
"Election Deadline"), and accompanied by the certificates formerly representing
all the shares of Company Common Stock ("Certificates") as to which the Election
is being made (or an appropriate guarantee of delivery by an eligible
organization). Such bank or trust company as Western shall elect (which may be a
subsidiary of Western) shall act as exchange agent (the "Exchange Agent").
Western shall have reasonable discretion, which it may delegate in whole or in
part to the Exchange Agent, to determine whether Election
A-3
<PAGE>
Forms have been properly completed, signed and timely submitted or to disregard
defects in Election Forms; such decisions of Western (or of the Exchange Agent)
shall be conclusive and binding. Neither Western nor the Exchange Agent shall be
under any obligation to notify any person of any defect in an Election Form
submitted to the Exchange Agent. The Exchange Agent and Western shall also make
all computations contemplated by this Section 1.3, and all such computations
shall be conclusive and binding on the former holders of Company Common Stock
absent manifest error. Shares of Company Common Stock covered by an Election
Form which is not effective shall be treated as Stock Election Shares. Any
Election may be revoked or changed by the person submitting such Election Form
to the Exchange Agent by written notice to the Exchange Agent only if such
notice is actually received by the Exchange Agent on or prior to the Election
Deadline.
(c) Within 5 days after the Election Deadline, unless the Effective Time has
not yet occurred, in which case as soon thereafter as practicable, Western shall
cause the Exchange Agent to effect the allocation among the holders of Company
Common Stock of rights to receive Stock Consideration or Cash Consideration in
the Merger in accordance with the Election Forms as follows:
(i) If the number of Stock Election Shares (on the basis of Election
Forms received as of the Election Deadline) is less than the Stock Number,
subject to Section 1.3(c)(iii) below, (A) each Stock Election Share shall be
deemed to be converted into the right to receive the Stock Consideration and
(B) each Cash Election Share shall be deemed to be converted into the right
to receive the Cash Consideration.
(ii) Subject to Section 1.3(c)(iv) below, if the number of Stock
Election Shares is greater than the Stock Number, then (A) each Cash
Election Share shall be deemed to be converted into the right to receive
Cash Consideration and (B) Stock Election Shares shall be deemed converted
into Cash Election Shares, on a pro-rata basis for each record holder of
Company Common Stock with respect to those shares, if any, of such record
holder that are Stock Election Shares, so that the number of Stock Election
Shares not so converted shall equal as closely as practicable the Stock
Number; each such Stock Election Share so converted into a Cash Election
Share shall be deemed to be converted into the right to receive the Cash
Consideration and each Stock Election Share not so converted shall be deemed
to be converted into the right to receive the Stock Consideration.
(iii) Notwithstanding the foregoing, if the aggregate amount of Cash
Consideration to be paid in the Merger according to the allocation
procedures set forth above plus (i) the amount of Cash in Lieu distributed
to former holders of Company Common Stock in the Merger and (ii) amounts
paid or payable with respect to any Dissenters' Shares (the "Cash Amount")
would exceed 60% of the sum of the Cash Amount and the aggregate value of
the Stock Consideration (determined by reference to the closing price per
share of Western Common Stock, as reported on the NASDAQ National Market, on
the Value Date) to be delivered in the Merger, and Western does not elect to
increase the Stock Consideration to permit the condition set forth in
Section 5.1(g) to be fulfilled, such condition shall be waived and each
share of Company Common Stock shall be deemed to be converted into the right
to receive the Cash Consideration. In such event, (A) the covenant in
Section 4.14 shall be deemed waived by all parties hereto, (B) the Merger
shall be effected by the merger of a DE NOVO wholly-owned Subsidiary of
Western into the Company, with the Company being the Surviving Corporation
for all purposes herein, (C) the Effective Time shall be not later than 10
business days after the Election Deadline and (D) the agreement of merger to
be executed and filed on the Effective Date pursuant to Section 7.1 shall
reflect the foregoing. Promptly after such merger, the Surviving Corporation
shall combine with Western Bank, under the name Santa Monica Bank.
(iv) At the sole discretion of Western, the number of Stock Election
Shares may be greater than the Stock Number.
SECTION 1.4. EXCHANGE PROCEDURES. (a) As of the Effective Time, Western
shall deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of shares of Company
A-4
<PAGE>
Common Stock, for exchange in accordance with Section 1.3 and this Section 1.4,
the Cash Consideration, the Stock Consideration and the Cash In Lieu (such Cash
Consideration, Stock Consideration and Cash in Lieu, together with any dividends
or distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be paid pursuant to Sections 1.2 and 1.3 and deposited
pursuant to this Section 1.4 in exchange for outstanding shares of Company
Common Stock.
(b) The letter of transmittal which accompanies the Election Form (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent) shall be in a form and contain any other provisions as Western may
reasonably determine. Upon the proper surrender of a Certificate to the Exchange
Agent, together with a properly completed and duly executed letter of
transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor the Cash Consideration, Stock Consideration and/or Cash in
Lieu as provided herein 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. No interest will be paid or accrued on the Cash
Consideration or the Cash In Lieu and unpaid dividends and distributions, if
any, payable to holders of Certificates. In the event of a transfer of ownership
of any shares of Company Common Stock not registered in the transfer records of
the Company, a certificate representing the proper number of shares of Western
Common Stock and/or a check for the Cash Consideration or Cash In Lieu, may be
issued to the transferee if the Certificate representing such Company Common
Stock is presented to the Exchange Agent, accompanied by documents sufficient,
in the discretion of Western, (i) to evidence and effect such transfer and (ii)
to evidence that all applicable stock transfer taxes have been paid.
(c) Whenever a dividend or other distribution is declared by Western on
Western Common Stock, the record date for which is after the Effective Time, the
declaration shall include dividends or other distributions on all shares
issuable pursuant to this Plan; PROVIDED that no dividend or other distribution
declared or made on Western Common Stock shall be paid to the holder of any
Certificate with respect to the shares of Western Common Stock represented
thereby until the holder of such Certificate shall duly surrender such
Certificate in accordance with this Section 1.4. Following such surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Western Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions, having a record date after the Effective Time and a payment
date prior to surrender, payable with respect to such whole shares of Western
Common Stock and not yet paid and (ii) at the appropriate payment date, the
amount of dividends or other distributions, having 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 Western Common Stock.
(d) From and after the Effective Time, there shall be no transfers on the
stock transfer records of the Company of any shares of Company Common Stock that
were outstanding immediately prior to the Effective Time. If Certificates are
presented to Western or the Surviving Corporation after the Effective Time, they
shall be canceled and exchanged for the Stock Consideration, Cash Consideration
and/or Cash in Lieu as provided for in this Article I.
(e) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any Western Common Stock) that remains unclaimed by the
shareholders of the Company for six months after the Effective Time shall be
repaid by the Exchange Agent to Western. Any shareholders of the Company who
have not theretofore complied with this Section 1.3 shall thereafter look only
to Western for payment of the Cash Consideration, Stock Consideration, Cash In
Lieu and any unpaid dividends and distributions on the Western Common Stock
deliverable in respect of each share of Company Common Stock such stockholder
holds as determined pursuant to this Plan, in each case, without any interest
thereon. If outstanding certificates for shares of Company Common Stock are not
surrendered or the payment for them not claimed prior to the date on which such
payments would otherwise escheat to or become the property of any governmental
unit or agency, the unclaimed items shall, to the extent permitted by
A-5
<PAGE>
abandoned property and any other applicable law, become the property of Western
(and to the extent not in its possession shall be paid over to it), free and
clear of all claims or interest of any person previously entitled to such
claims. Notwithstanding the foregoing, none of Western, Western Bank, the
Exchange Agent or any other person shall be liable to any former holder of
Company Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event 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 Western, the
posting by such person of a bond in such amount as Western 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 Cash Consideration, the Stock Consideration and the
Cash In Lieu deliverable (and any unpaid dividends and distributions) in respect
thereof pursuant to this Plan.
SECTION 1.5. OPTIONS. At the Effective Time, each option granted by the
Company to purchase shares of Company Common Stock, which is outstanding and
unexercised immediately prior to the Effective Time, shall be adjusted so as to
entitle the grantee thereof to receive, in lieu of the share of Company Common
Stock that would otherwise have been issuable upon the exercise thereof, an
amount in cash computed by multiplying (i) the difference between (x) the Cash
Consideration and (y) the per share exercise price applicable to such option by
(ii) the number of such shares of Company Common Stock subject to such option.
The Company agrees to take or cause to be taken all action necessary under its
Stock Option Plan (the "Company Stock Option Plan") to provide for such
adjustment. As soon as practicable after the Effective Time (but in any event
prior to the seventh day after the Effective Time), Western will make the
payments required to be made to grantees of options under this Section 1.5.
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. Except as
expressly provided in this Plan, during the period from the date of this Plan to
the Effective Time, each of Western, Western Bank and the Company shall, and
shall cause each of its respective Subsidiaries to, (i) conduct its business in
the usual, regular and ordinary course of business consistent with past
practice, (ii) use its reasonable best efforts to maintain and preserve intact
its business organization, properties, leases, employees and advantageous
business relationships and retain the services of its officers and key
employees, (iii) take no action which would adversely affect or delay the
ability of Western, Western Bank or the Company 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 Plan and (iv) take no action that is reasonably likely
to have a Material Adverse Effect (as defined in Section 8.1 hereof) on either
Western, Western Bank or the Company.
SECTION 2.2 FORBEARANCE. During the period from the date of this Plan to
the Effective Time, the Company shall not, except in the ordinary course of
business consistent with past practices and in conformity with all applicable
policies and procedures and except as listed in the Company Disclosure Letter
(as defined in Section 3.1 hereof), without the prior consent of Western (it
being understood that, except as otherwise specified herein, for purposes of
this Section 2.2, a consent shall be deemed given if, within 3 business days
after a request for any such consent is made by the Company in the manner
prescribed by Section 8.8 hereof, Western does not object to the action for
which the consent is requested):
(a) incur any indebtedness for borrowed money (other than Federal Funds
borrowings) or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other person;
(b) except as contemplated in Schedule 2.2(b) hereto, adjust, split, combine
or reclassify any capital stock; make, declare or pay any dividend 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
A-6
<PAGE>
convertible into or exchangeable for any shares of its capital stock, or grant
any stock appreciation rights or grant, sell or issue to any individual,
corporation or other person any right or option to acquire, or securities
evidencing a right to convert into or acquire, any shares of its capital stock,
or issue any additional shares of capital stock except pursuant to the exercise
of stock options, warrants, awards and other rights outstanding as of the date
hereof as set forth on Annex 2 and on the terms in effect on the date hereof;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties, leases or assets to any person, or cancel, release or assign any
indebtedness of any such person, except (i) pursuant to contracts or agreements
in force as of the date of this Plan or (ii) any such action or series of
related actions which result in a pre-tax loss of not more than $250,000;
(d) make any capital expenditures in amounts exceeding $200,000 individually
or $250,000 in the aggregate;
(e) (i) increase in any manner the compensation or fringe benefits of any of
its employees or directors, or create or institute, or make any payments
pursuant to, any severance plan or package, or pay any pension or retirement
allowance not required by any existing plan or agreement to any such employees
or directors, or become a party to, amend or commit itself to or fund or
otherwise establish any trust or account related to any Employee Plan (as
defined in Section 3.1(p) hereof), with or for the benefit of any employee,
other than (A) general increases in compensation for employees, (B) bonuses
which have been accrued on the 1997 financial statements or (C) any amendment
required by applicable law (provided that any such amendment shall provide the
least increase to cost permitted under such applicable law), or (ii) voluntarily
accelerate the vesting of any stock options or other compensation or benefit;
(f) (i) other than in individual amounts not to exceed $250,000 or in
securities transactions as provided in (f)(ii) below, make any investment either
by contributions to capital, property transfers, or purchases of any property or
assets of any person, PROVIDED that the Company shall not make any acquisition
of business operations without Western's prior consent, or
(ii) other than purchases of direct obligations of the United States of
America or obligations of U.S. government agencies which are entitled to the
full faith and credit of the United States of America, in any case with a
remaining maturity at the time of purchase of three years or less, purchase
or acquire securities of any type; PROVIDED, HOWEVER, that, in the case of
investment securities, the Company may purchase investment securities in an
aggregate amount in excess of $250,000 only if, within one business day
after the Company requests that Western consent to the making of any such
purchase, Western has consented to the amount of such purchase in excess of
$250,000;
(g) enter into or terminate any contract or agreement, or make any change in
any of its leases or contracts, other than with respect to those involving
aggregate payments of less than, or the provision of goods or services with a
market value of less than, $250,000;
(h) settle any claim, action or proceeding involving any liability of the
Company for money damages in excess of $250,000 or material restrictions upon
the operations of the Company;
(i) in amounts more than $250,000, waive or release any material right or
collateral or cancel or compromise any extension of credit or other debt or
claim; PROVIDED, HOWEVER, that the Company may take any such action if, within
two business days after it requests in writing (which request shall include
information and analyses sufficient for Western to assess the proposed action)
that Western consent to the taking of such action, Western has approved such
request in writing or has not responded in writing to such request;
(j) make, renegotiate, renew, increase, extend or purchase any loan, lease
(credit equivalent), advance, credit enhancement or other extension of credit,
or make any commitment in respect of any of the foregoing, except any loans or
advances (provided that the Company shall seek authorization for any
A-7
<PAGE>
loan or advance in excess of $3,000,000) as to which the Company has a legally
binding obligation to make such loan or advance as of the date hereof and a
description of which has been provided by the Company in writing to Western
prior to the execution of this Plan;
(k) except as contemplated by Section 4.2 hereof, change its method of
accounting as in effect at December 31, 1996, except as required by changes in
generally accepted accounting principles as concurred in by the Company's
independent auditors;
(l) subject to the provisions of Section 6.1(f), engage in any merger,
consolidation or other similar transaction with, or acquire a significant
portion of the capital stock or assets of, any other corporate or other entity
except in connection with foreclosures and collections on secured interests;
(m) amend its articles of incorporation or its by-laws; or
(n) agree to, or make any commitment to, take any of the actions prohibited
by this Section 2.2.
SECTION 2.3. COOPERATION. (a) Each of Western, Western Bank and the
Company shall cooperate with each other in completing the transactions
contemplated hereby and shall not take, cause to be taken or agree or make any
commitment to take any action: (i) that would cause any of the representations
or warranties of it that are set forth in Article III hereof not to be true and
correct, or (ii) that is inconsistent with or prohibited by Sections 2.1 or 2.2.
(b) Without limiting the generality of the foregoing, each of Western and
the Company shall have the right to have one of its representatives present at
all loan committee meetings or meetings of similar purpose of the other party or
the other party's Subsidiaries, and each party shall give notice to the other
party of any such meeting at least one business day prior to such meeting. In
addition, Aubrey L. Austin shall have the right to attend all meetings of the
board of directors of Western and Western Bank, and Matthew P. Wagner or his
designee shall have the right to attend all meetings of the Company's board of
directors, and each party shall give notice to the other party of any such
meeting at least one business day prior to such meeting.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Western and Western Bank that, except as to the
matters disclosed in a letter of the Company delivered to Western and Western
Bank on or prior to the date hereof, which disclosures shall be deemed to be
made with respect to any applicable representation notwithstanding the specific
section references therein (the "Company Disclosure Letter"):
(a) RECITALS TRUE. The facts set forth in the Recitals of this Plan with
respect to the Company are true and correct.
(b) CAPITAL STOCK. All outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and (subject to
applicable California Law) non-assessable and are not subject to any preemptive
rights.
(c) DUE ORGANIZATION AND QUALIFICATION. The Company is duly organized,
validly existing and in good standing under the laws of State of California, is
a member of the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation (the "FDIC") and all of its deposits are subject to assessment by
the BIF.
(d) CORPORATE AUTHORITY. The Company has the corporate power and
authority, and is duly qualified in all jurisdictions (except for such
qualifications the absence of which, in the aggregate, would not have a Material
Adverse Effect on the Company) where such qualification is required, to carry on
its business as it is now being conducted and to own all its properties and
assets, and it has all federal, state, local and
A-8
<PAGE>
foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted.
(e) SUBSIDIARIES; SIGNIFICANT INVESTMENTS. The only Subsidiary of the
Company is SMB Development Company, an inactive California corporation in good
standing. The Company does not own any equity securities, any security
convertible or exchangeable into an equity security or any rights to acquire any
equity security, except as received in satisfaction of a debt previously
contracted in good faith.
(f) SHAREHOLDER APPROVALS.
(i) Subject to the receipt of required shareholder approval of the
principal terms of this Plan, this Plan and the transactions contemplated
herein have been duly authorized by all necessary corporate action of the
Company. In addition, the Company has received the oral opinion of
Montgomery Securities to the effect that the consideration to be received by
the shareholders of the Company in the Merger is fair to such shareholders
from a financial point of view and will receive a written opinion to that
effect, true and complete copies of which will be furnished to Western.
Subject to receipt of such shareholder approval, this Plan is a valid and
binding agreement of the Company 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 and to general equity principles.
(ii) The affirmative vote approving the principal terms of this Plan by
a majority of the outstanding shares of Company Common Stock entitled to
vote on this Plan is the only shareholder vote required by the Company for
approval of the Plan and consummation of the Merger and the other
transactions contemplated hereby.
(g) NO VIOLATIONS. The execution, delivery and performance of this Plan by
the Company do not, and the consummation of the transactions contemplated hereby
by the Company will not, constitute (i) 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 the Company (or any of its properties) is subject, or
enable any person to enjoin the Merger or the other transactions contemplated
hereby, (ii) a breach or violation of, or a default under, the articles of
incorporation or by-laws or similar organizational documents of the Company or
(iii) 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 the Company 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 the Company is a
party, or to which its 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 the Company of an amount not exceeding $250,000 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 Section 5.1(b) hereof, (ii) any such approval, consent or waiver
that already has been obtained, (iii) the FDIC, (iv) the Commissioner and (v)
any other approvals, consents or waivers the absence of which, individually or
in the aggregate, would not result in a Material Adverse Effect on the Company
or enable any person to enjoin the Merger.
A-9
<PAGE>
(h) COMPANY REPORTS.
(i) As of their respective dates, neither the Company's Annual Report on
Form F-2 for the fiscal year ended December 31, 1996, nor any other document
filed by the Company subsequent to December 31, 1996 under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), each in the form (including exhibits) filed with
the FDIC (collectively, the "Company Reports"), contained or will contain
any untrue statement of a Material fact or omitted or will omit 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 consolidated balance sheets contained or
incorporated by reference in the Company Reports (including in each case any
related notes and schedules) fairly presented in all Material respects the
financial position of the entity or entities to which it relates as of its
date and each of the consolidated statements of income, consolidated
statements of shareholders' equity and consolidated statement of cash flows
contained or incorporated by reference in the Company Reports (including in
each case any related notes and schedules) fairly presented in all Material
respects the results of operations, shareholders' equity 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 GAAP during the periods
involved, except as may be noted therein.
(ii) The Company has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, if any, that they were required to file since December 31, 1996
with (i) the Securities and Exchange Commission (the "SEC"), (ii) the FDIC,
(iii) the BIF, (iv) any state banking commission or other regulatory
authority (each, a "State Regulator") (such entities collectively, the
"Regulatory Agencies"), (v) the American Stock Exchange and (vi) any other
self-regulatory organization (an "SRO"), and all other Material reports and
statements required to be filed by them since December 31, 1996, including,
without limitation, any report or statement required to be filed pursuant to
the laws, rules or regulations of the United States, the FDIC, the BIF, any
State Regulator or any SRO, and have paid all fees and assessments due and
payable in connection therewith.
(i) ABSENCE OF UNDISCLOSED LIABILITIES AND CERTAIN CHANGES OR
EVENTS. Except as disclosed in the Company Reports, since December 31, 1996,
the Company has not incurred any Material liability, except in the ordinary
course of its business consistent with past practice. Since December 31, 1996,
there has not been any change in the business, assets, financial condition,
properties, results of operations or prospects (other than changes affecting
Southern California community banks in general) of the Company which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Material Adverse Effect on the Company (other than changes in (i) banking laws
or regulations, or interpretations thereof, that affect the banking industry
generally, (ii) the general level of interest rates or (iii) GAAP).
(j) GUARANTEES; SURETYSHIPS; CONTINGENT LIABILITIES. The Company
Disclosure Letter lists and briefly describes all guarantees, matters of
suretyship and similar contingent liabilities, other than loan commitments and
letters of credit issued in the ordinary course of business, of the Company.
(k) TAXES. All federal, state, local and foreign tax returns (including
information returns) required to be filed by or on behalf of the Company have
been timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all Material respects. All taxes shown on
such returns have been paid in full and adequate provision has been made for any
taxes for which returns have not yet been filed (in accordance with GAAP) on the
Company's balance sheets set forth in the Company Reports. There is no pending
audit examination, assessment or proposed assessment of a deficiency, or refund
litigation with respect to any taxes of the Company. All taxes, interest,
additions, and penalties due with respect to completed and settled examinations
or concluded litigation relating to it have been paid in full or adequate
A-10
<PAGE>
provision has been made for any such taxes (in accordance with generally
accepted accounting principles) on the Company's balance sheet as set forth in
the Company Reports. The Company has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect.
No liens or other security interests have been imposed on any assets of the
Company in connection with any failure (or alleged failure) to pay any tax. The
Company has timely withheld, and paid over to the relevant governmental
authority or other appropriate payee, all taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other person. The Company is not a party
to any tax allocation or sharing agreement, is not and has not been a member of
an affiliated group filing consolidated or combined tax returns and otherwise
has no liability for the taxes of any person (other than the Company). For
purposes of this paragraph (k), "taxes" includes all federal, state, local or
foreign income, gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment, withholding or
similar taxes imposed on the income, properties or operations of the Company,
together with any interest additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
(l) ABSENCE OF CLAIMS. As of the date hereof, there is no pending
litigation, controversy, claim, action or proceeding against the Company before
any court or governmental agency, and, to the best of the Company's knowledge
after reasonable inquiry, no such litigation, proceeding, controversy, claim or
action has been threatened or is contemplated. As of the Effective Time and
except as disclosed in the Company Disclosure Letter, there is no pending
litigation, controversy, claim, action or proceeding against the Company before
any court or governmental agency, which is reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on the Company or to hinder or
delay consummation of the transactions contemplated hereby and, to the best of
the Company's knowledge after reasonable inquiry, no such litigation,
proceeding, controversy, claim or action has been threatened or is contemplated.
(m) ABSENCE OF REGULATORY ACTIONS. The Company is not a party to any cease
and desist order, written agreement or memorandum of understanding with, nor a
party to any commitment letter or similar undertaking to, nor is the Company
subject to any order or directive by, or a recipient of any extraordinary
supervisory letter from, nor has the Company adopted any board resolutions at
the request of, federal or state governmental authorities charged with the
supervision or regulation of depository institutions or depositary institution
holding companies or engaged in the insurance of bank and/or savings and loan
deposits ("Government Regulators") nor has it been the recipient of any advice
from any Government Regulator that such Government Regulator 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.
(n) AGREEMENTS.
(i) Except for this Plan (and agreements entered into in connection with
the transactions contemplated hereby or those agreements copies of which
have been previously furnished to Western) and arrangements made in the
ordinary course of business, the Company is not bound by any material
contract (as defined in Item 601(b)(10) of Regulation S-K) to be performed
after the date hereof that has not been filed with or incorporated by
reference in the Company Reports. Except as disclosed in the Company Reports
filed prior to the date of this Plan, the Company is not a party to any oral
or written (A) consulting agreement (other than data processing, software
programming and licensing contracts entered into in the ordinary course of
business) not terminable on 30 days' or less notice involving the payment of
more than $200,000 per annum, in the case of any such agreement with an
individual, or $250,000 per annum, in the case of any other such agreement,
(B) agreement with any executive officer or other key employee of the
Company the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the
Company of
A-11
<PAGE>
the nature contemplated by this Plan and which provides for the payment of
in excess of $250,000, (C) agreement with respect to any executive officer
of the Company providing any term of employment or compensation guarantee
extending for a period longer than six months and for the payment of in
excess of $250,000 per annum, (D) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Plan or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Plan or (E) agreement containing covenants that limit
the ability of the Company 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, the Company (including any successor thereof) may carry on
its business (other than as may be required by law or any regulatory
agency).
(ii) The Company is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan
agreement or other agreement to which it is a party or by which it is bound
or to which any of its respective properties or assets is subject.
(o) LABOR MATTERS. The Company is not a party to, nor is it bound by, any
collective bargaining agreement, contract, or other agreement or understanding
with a labor union or labor organization, nor is the Company 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, other labor dispute or organizational
effort involving the Company pending or threatened.
(p) EMPLOYEE BENEFIT PLANS. The Company Disclosure Letter contains a
complete list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements, policies and arrangements, including, but not
limited to, "employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and all trust
agreements related thereto in respect to any present or former directors,
officers, or other employees of the Company (hereinafter referred to
collectively as the "Company Employee Plans"). (i) All of the Company Employee
Plans comply in all material respects with all applicable requirements of ERISA,
the Code and other applicable laws; the Company has not engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Company Employee Plan which could subject the Company to a
material tax or penalty under Section 4975 of the Code or Section 502(i) of
ERISA; and all contributions required to be made under the terms of any Company
Employee Plan have been timely made or have been reflected on the Company's
balance sheet; (ii) no liability to the Pension Benefit Guaranty Corporation
(the "PBGC") has been or is expected by the Company to be incurred with respect
to any Company Employee Plan which is subject to Title IV of ERISA (a "Company
Pension Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA) currently or formerly maintained by the Company or
any entity (a "Company ERISA Affiliate") which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (a "Company
ERISA Affiliate Plan"); and no proceedings have been instituted to terminate any
Company Pension Plan or Company ERISA Affiliate Plan and no condition exists
that presents a material risk of the institution of such proceedings; (iii) no
Company Pension Plan or Company ERISA Affiliate Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA (whether or not waived)) as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each Company Pension Plan and
Company ERISA Affiliate Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such Company
Pension Plan or Company ERISA Affiliate Plan as of the end of the most recent
plan year with respect to the respective Company Pension Plan or Company ERISA
Affiliate Plan ending prior to the date hereof, calculated on the basis of the
actuarial assumptions used in the most recent actuarial valuation for such
Company
A-12
<PAGE>
Pension Plan or Company ERISA Affiliate Plan prior to the date hereof, and there
has been no material change in the financial condition of any such Company
Pension Plan or Company ERISA Affiliate Plan since the last day of the most
recent plan year; and no notice of a "reportable event" (as defined in Section
4043 of ERISA) for which the 30-day reporting requirement has not been waived
has been required to be filed for any Company Pension Plan or Company ERISA
Affiliate Plan within the 12-month period ending on the date hereof; (iv) the
Company has not provided and is not required to provide, security to any Company
Pension Plan or to any Company ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code; (v) neither the Company nor any Company ERISA Affiliate
has contributed to any "multiemployer plan", as defined in Section 3(37) of
ERISA, on or after September 26, 1980; (vi) each Company Employee Plan which is
an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) has
received a favorable determination letter from the Internal Revenue Service
deeming such plan to be qualified (a "Qualified Plan"), under Section 401(a) of
the Code, or has requested such a determination letter within the applicable
remedial amendment period under Section 401(b) of the Code; and the Company is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter; (vii) each Qualified Plan which is an "employee
stock ownership plan" (as defined in Section 4975(e)(7) of the Code) has
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the Code and the regulations thereunder; all Company Employee Plans covering
foreign participants comply in all material respects with applicable local law,
and there are no material unfunded liabilities with respect to any Company
Employee Plan which covers foreign employees; (viii) there is no pending or, to
the Company's knowledge, threatened litigation, administrative action or
proceeding relating to any Company Employee Plan other than claims for benefits
for which the plan administrative procedures have not been exhausted and
"qualified domestic relations orders" as defined in Section 414(p) of the Code;
(ix) there has been no announcement or commitment by the Company to create an
additional Company Employee Plan, or to amend a Company Employee Plan except for
amendments required by applicable law which do not increase the cost of such
Company Employee Plan; and the Company does not have any obligations for retiree
health and life benefits under any Company Employee Plan except as set forth in
the Company Disclosure Letter; (x) with respect to the Company, except as
specifically identified in the Company Disclosure Letter, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any payment or series of payments by the Company to
any person which is an "excess parachute payment" (as defined in Section 280G of
the Code) under any Company Employee Plan, increase or secure (by way of a trust
or other vehicle) any benefits payable under any Company Employee Plan, or
accelerate the time of payment or vesting of any such benefit, and (xi) with
respect to each Company Employee Plan, the Company has supplied to Western a
true and correct copy, if applicable, of (A) the two most recent annual reports
on the applicable form of the Form 5500 series filed with the Internal Revenue
Service (the "IRS"), (B) such Company Employee Plan, including amendments
thereto, (C) each trust agreement and insurance contract relating to such
Company Employee Plan, including amendments thereto, (D) the most recent summary
plan description for such Company Employee Plan, including amendments thereto,
if the Company Employee Plan is subject to Title I of ERISA, (E) the most recent
actuarial report or valuation if such Company Employee Plan is a Company Pension
Plan, (F) the most recent determination letter issued by the IRS if such Company
Employee Plan is a Qualified Plan and (G) the most recent financial statements
and auditor's report.
(q) REAL PROPERTY. (i) The Company Disclosure Letter contains a complete
and correct list of (A) all real property or premises owned on the date hereof,
in whole or in part by the Company and all indebtedness secured by any
encumbrance thereon, and (B) all real property or premises leased in whole or in
part by the Company and together with a list of all applicable leases and the
name of the lessor. None of such premises or properties have been condemned or
otherwise taken by any public authority and no condemnation or taking is
threatened or contemplated and none thereof is subject to any claim, contract or
law which might affect its use or value for the purposes now made of it. None of
the premises or properties of the Company is subject to any current or potential
interests of third parties or other
A-13
<PAGE>
restrictions or limitations that would impair or be inconsistent in any material
respect with the current use of such property by the Company.
(ii) Each of the leases referred to in the Company Disclosure Letter is
valid and existing and in full force and effect, and no party thereto is in
default and no notice of a claim of default by any party has been delivered
to the Company or is now pending, and there does not exist any event that
with notice or the passing of time, or both, would constitute a default or
excuse performance by any party thereto, provided that with respect to
matters relating to any party other than the Company the foregoing
representation is based on the knowledge of the Company.
(r) TITLE. The Company has good title to its 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) except (1)
statutory liens not yet delinquent which are being contested in good faith by
appropriate proceedings, and liens for taxes not yet due, (2) pledges of assets
in the ordinary course of business to secure public deposits, (3) for those
assets and properties disposed of for fair value in the ordinary course of
business since the date of the Company's Annual Report on Form F-2 for the year
ended December 31, 1996 and (4) defects and irregularities of title and
encumbrances that do not materially impair the use thereof for the purposes for
which they are held.
(s) KNOWLEDGE AS TO CONDITIONS. As of the date hereof, the Company knows
of no reason why the approvals, consents and waivers of governmental authorities
referred to in Section 5.1(b) should not be obtained without the imposition of
any condition of the type referred to in the provisos thereto.
(t) COMPLIANCE WITH LAWS. Since December 31, 1994, the Company has
complied in all Material respects with all applicable laws except for any
noncompliance with any such laws which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company or enable any Person to enjoin
the Merger. Except such as would not have a Material Adverse Effect on the
Company, the Company has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its business as it is
presently conducted. All such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of the
Company, no suspension or cancellation of any of them is threatened.
(u) FEES. Other than in respect of financial advisory services performed
for the Company by Montgomery Securities and Roger Kuppinger, in amounts and
pursuant to an agreement previously disclosed to Western, none of the Company or
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, and no broker or finder has acted directly
or indirectly for the Company, in connection with the Plan or the transactions
contemplated hereby.
(v) ENVIRONMENTAL MATTERS. (i) the Company has complied in all material
respects at all times with all applicable Environmental Laws; (ii) none of the
properties (including buildings or any other structures) currently owned or
operated by the Company ("Company Properties") have been contaminated with, or
have had any release of, any Hazardous Substance (as defined below); (iii) to
the Company's knowledge, none of the properties formerly owned or operated by
the Company have been contaminated with Hazardous Substances during such period
of ownership or operation; (iv) to the Company's knowledge, the Company is not
subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) the Company has not received any notice, demand
letter, claim or request for information alleging that the Company may be in
violation of or subject to liability under any Environmental Law (as defined
below); (vi) the Company is not subject to any orders, decrees, injunctions or
other agreements with any governmental authority or any third party relating to
Hazardous Substances or any Environmental Law; (vii) there are no circumstances
or conditions involving the Company that could reasonably be expected to result
in any claims, liability, investigations, suits or costs or result in
restrictions
A-14
<PAGE>
on the ownership, use, or transfer of any Company Property pursuant to any
Environmental Law; (viii) none of the Company Properties contain any underground
storage tanks, asbestos-containing material, lead products, or polychlorinated
biphenyls; (ix) to the knowledge of the Company none of the Company Properties
have ever been operated in the past as a gas station, automotive repair or
supply business, metalworking operation, industrial facility or as a drycleaner;
(x) the Company has not engaged in any activity involving the generation, use,
handling or disposal of any Hazardous Substances other than ordinary and routine
office operations and maintenance; (xi) the Company has not participated in the
management of any borrower or other third party, including entities in which it
may hold a security, fiduciary or other interest, that, to the Company's
knowledge, engages in activities involving Hazardous Substances to an extent
that it could be deemed an "owner" or "operator" of such entity under any
Environmental Law; and (xii) to the Company's knowledge, the Company has
delivered to Western copies of all environmental reports, studies, sampling
data, permits, government filings and other environmental information in its
possession relating to the Company or any of its current or former properties or
operations.
As used herein, the term "ENVIRONMENTAL LAW" means any federal, state or
local law, regulation, order, decree, permit, authorization, opinion, common law
or agency requirement relating to: (A) the protection or restoration of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "HAZARDOUS SUBSTANCE" means any substance in any
concentration that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is or may be
the subject of regulatory action by any government authority pursuant to any
Environmental Law.
(w) ALLOWANCE. The allowance for possible loan and lease losses shown on
the Company's unaudited balance sheet as of June 30, 1997 was, and the allowance
for possible loan losses shown on the balance sheets in Company Reports for
periods ending after the date of this Plan will be, adequate, as of the date
thereof, under generally accepted accounting principles applicable to banks. The
Company has disclosed to Western in writing prior to the date hereof the amounts
of all loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of the Company that as of June 30, 1997
have been classified as "Other Assets Specially Mentioned," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets" or words of
similar import. The Other Real Estate Owned ("OREO") included in any
non-performing assets of the Company is carried net of reserves at the lower of
cost or market value, less applicable selling costs, based on independent
appraisals consistent with applicable regulatory requirements.
(x) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in the
Company's Quarterly Report on Form F-4 for the quarter ended June 30, 1997 or
the Company's Annual Report on Form F-2 for the year ended December 31, 1996, no
officer or director of the Company, or any "associate" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act) of any such officer or
director, has any Material interest in any Material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
the Company.
(y) INSURANCE. The Company is currently insured, and since December 31,
1994, has been insured, for reasonable amounts with financially sound and
reputable insurance companies, against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. All of the insurance policies and bonds maintained by the Company
are in full force and effect, the Company is not in default thereunder and all
Material claims thereunder have been filed in due and timely fashion. Since
December 31, 1994, no claim by the Company on or in respect of an insurance
policy or bond has been declined or refused by the relevant insurer or insurers.
In the best judgment of the
A-15
<PAGE>
Company's management, such insurance coverage is adequate and will be available
in the future under terms and conditions substantially similar to those in
effect on the date hereof. Between the date hereof and the Effective Time, the
Company will maintain the levels of insurance coverage in effect on the date
hereof and will submit all potential claims existing prior to the Effective Time
to its insurance carrier on or before the Effective Time. The Company Disclosure
Letter lists all insurance policies maintained by or for the benefit of the
Company or its directors, officers, employees or agents, specifying the (i) type
of policy, (ii) policy limits and (iii) self insurance amounts.
(z) INVESTMENT SECURITIES. Except for pledges to secure public and trust
deposits and reverse repurchase agreements entered into in arm's-length
transactions pursuant to normal commercial terms and conditions and other
pledges required by law, none of the investments reflected in the consolidated
balance sheet of the Company included in the Company's Report on Form F-4 for
the quarter ended June 30, 1997, and none of the Material investments made by it
since December 31, 1996, is subject to any restriction (contractual, statutory
or otherwise) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
(aa) DERIVATIVES. The Company is not 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.
(bb) REGISTRATION OBLIGATIONS. The Company is not under any obligation,
contingent or otherwise, to register any of its securities under the Securities
Act of 1933, as amended (the "Securities Act").
(cc) BOOKS AND RECORDS. The books and records of the Company have been,
and are being, maintained in accordance with applicable legal and accounting
requirements and reflect in all Material respects the substance of events and
transactions that should be included therein.
(dd) CORPORATE DOCUMENTS. The Company has delivered to Western true and
complete copies of its amended articles of incorporation and amended by-laws.
(ee) COMPANY ACTION. The Board of Directors of the Company has adopted
resolutions recommending that the principal terms of this Plan be approved by
the shareholders of the Company and directing that this Plan be submitted for
consideration by the Company's shareholders at the Company's Meeting (as defined
below).
(ff) INDEMNIFICATION. The Company is not a party to any indemnification
agreement with any of its present or future directors, officers, employees,
individual agents or other individuals who serve or served in any other capacity
with any other enterprise at the request of the Company (a "Covered Person"),
and to the knowledge of the Company, there are no claims for which any Covered
Person would be entitled to indemnification under Section 4.6 hereof if such
provisions were deemed to be in effect.
(gg) LOANS. Each loan reflected as an asset on the Company's consolidated
balance sheet as of June 30, 1997 and each balance sheet date subsequent thereto
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles, and (iii) to the knowledge of the Company, will not
be subject to any defenses which may be asserted against the Company. All loans
and extensions of credit that have been made by the Company and that are subject
to Sections 22(h), 23A and 23B of the Federal Reserve Act comply therewith.
(hh) FAIR LENDING; COMMUNITY REINVESTMENT ACT. As of the date hereof, with
the exception of routine investigation of consumer complaints, the Company has
not been advised that it is or may be in violation of the Equal Credit
Opportunity Act or the Fair Housing Act or any similar federal or state statute.
The Company received a CRA rating of "satisfactory" in its most recent CRA
examination.
A-16
<PAGE>
(ii) TRUST BUSINESS. Except as set forth in the Company Disclosure Letter
or such violations which individually or in the aggregate would not give rise to
a Material Adverse Effect, to the knowledge of the Company (i) each of the
relationships between the Company and another Person which constitute part of
the business conducted by the Trust Department of the Company (whether the
Company acts or has acted as trustee, agent, fiscal agent, escrow agent,
custodian or in another similar capacity) (the "Trust Relationships") is
governed by a written agreement, contract, indenture, instrument of trust or
other similar document (the "Trust Instruments") and all of the Trust
Instruments that are presently in effect are in the possession of the Company
and have been made, or are, available to Western and no Trust Instrument has
been amended except by an instrument in writing; (ii) each Trust Relationship
has been conducted, operated and managed by the Company in accordance with the
terms of the governing Trust Instrument and applicable law.
(jj) NO OMISSION OF MATERIAL FACT. No representation or warranty by the
Company in this Plan, including the Annexes hereto, the disclosure letters and
schedules to be delivered herewith or the Proxy Statement filed in connection
with the Meeting, contains any untrue statement of Material fact, or omits to
state a Material fact necessary to make the statements or facts contained herein
or therein not misleading. None of the information regarding the Company or the
transactions contemplated hereby supplied or to be supplied by the Company for
inclusion in any documents or filings to be filed with any regulatory authority
in connection with the transactions contemplated hereby will contain any untrue
statement of Material fact, or omit to state a Material fact necessary to make
the statements or facts contained therein not misleading.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF WESTERN. Western represents
and warrants to the Company that, except as to the matters disclosed in a letter
of Western delivered to the Company on or prior to the date hereof, which
disclosures shall be deemed to be made with respect to any applicable
representation notwithstanding the specific section references therein (the
"Western Disclosure Letter"):
(a) RECITALS TRUE. The facts set forth in the Recitals of this Plan with
respect to Western and Western Bank are true and correct.
(b) CAPITAL STOCK. All outstanding shares of capital stock of Western and
its Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X) have
been duly authorized and validly issued, are fully paid and (subject to 12
U.S.C. Section55 in the case of a national bank Subsidiary and any similar state
statute in the case of a Subsidiary that is a state-chartered bank)
non-assessable and are not subject to any preemptive rights.
(c) OMITTED.
(d) CORPORATE AUTHORITY. Each of Western and its Significant Subsidiaries
has the corporate power and authority, and is duly qualified in all
jurisdictions (except for such qualifications the absence of which, in the
aggregate, would not have a Material Adverse Effect on Western) where such
qualification is required, to carry on its business as it is now being conducted
and to own all its properties and assets, and it has all federal, state, local
and foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted.
(e) SHAREHOLDER APPROVALS.
(i) Subject to the receipt of required shareholder approval of the
principal terms of this Plan, this Plan and the transactions contemplated
herein have been duly authorized by all necessary corporate action of
Western and Western Bank. Subject to receipt of such shareholder approval,
this Plan is and will be a valid and binding agreement of Western and
Western Bank enforceable against each of them 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 and to general equity principles.
A-17
<PAGE>
(ii) The affirmative vote approving the principal terms of this Plan by
a majority of the outstanding shares of Western Common Stock entitled to
vote on this Plan and the affirmative vote approving the principal terms of
this Plan by a majority of the outstanding shares of Western Bank Common
Stock entitled to vote on this plan are the only shareholder votes required
by Western and Western Bank for approval of this Plan and consummation of
the Merger and the other transactions contemplated hereby.
(f) NO VIOLATIONS. The execution, delivery and performance of this Plan by
Western and Western Bank do not, and the consummation of the transactions
contemplated hereby by Western and Western Bank will not, constitute (i) 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 Western or any
of its Subsidiaries (or any of their respective properties) is subject, which
breach, violation or default would have a Material Adverse Effect on Western or
Western Bank, or enable any person to enjoin the Merger or the other
transactions contemplated hereby, (ii) a breach or violation of, or a default
under, the articles of incorporation or by-laws or similar organizational
documents of Western or any of its Subsidiaries or (iii) 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 Western 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 Western 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 Western or
any of its Subsidiaries of any amount not exceeding $250,000 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 Section 5.1(b) hereof, (ii) any such approval, consent or waiver
that already has been obtained, (iii) the FDIC, (iv) the Commissioner and (v)
any other approvals, consents or waivers the absence of which, individually or
in the aggregate, would not result in a Material Adverse Effect on Western or
enable any person to enjoin the Merger.
(g) WESTERN REPORTS.
(i) As of their respective dates, neither Western's Annual Report on
Form 10-KSB/A for the fiscal year ended December 31, 1996, nor any other
document filed by Western subsequent to December 31, 1996 under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, each in the form
(including exhibits) filed with the SEC (collectively, the "Western
Reports"), contained or will contain any untrue statement of a Material fact
or omitted or will omit 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
consolidated balance sheets or statements of condition contained or
incorporated by reference in Western Reports (including in each case any
related notes and schedules) fairly presented in all Material respects the
financial position of the entity or entities to which it relates as of its
date and each of the consolidated statements of income, consolidated
statements of changes in shareholders' equity and consolidated statements of
cash flows contained or incorporated by reference in Western Reports
(including in each case any related notes and schedules) fairly presented in
all Material respects the results of operations, shareholders' equity 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 GAAP during
the periods involved, except as may be noted therein.
A-18
<PAGE>
(ii) Western and each of its Subsidiaries have each timely filed all
reports, registrations and statements, together with any amendments required
to be made with respect thereto, if any, that they were required to file
since December 31, 1996 with the Regulatory Agencies, the National
Association of Securities Dealers, Inc. and any other SRO, and all other
Material reports and statements required to be filed by them since December
31, 1996, including, without limitation, any report or statement required to
be filed pursuant to the laws, rules or regulations of the United States,
the Federal Reserve Board, the FDIC, the BIF, the OCC, any State Regulator
or any SRO, and have paid all fees and assessments due and payable in
connection therewith.
(h) ABSENCE OF CERTAIN UNDISCLOSED LIABILITIES AND CERTAIN CHANGES OR
EVENTS. Except as disclosed in the Western Reports, since December 31, 1996,
neither Western nor any of its Significant Subsidiaries has incurred any
Material liability, except in the ordinary course of its business consistent
with past practice. Since June 30, 1997, there has not been any change in the
business, assets, financial condition, properties, results of operations or
prospects (other than changes affecting Southern California community banks in
general) of Western or any of its Significant Subsidiaries which, individually
or in the aggregate, has had, or is reasonably likely to have, a Material
Adverse Effect on Western (other than changes in (i) banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally, (ii) the general level of interest rates or (iii) GAAP).
(i) GUARANTEES; SURETYSHIPS; CONTINGENT LIABILITIES. The Western
Disclosure Letter lists and briefly describes all guarantees, matters of
suretyship and similar contingent liabilities, other than loan commitments and
letters of credit issued in the ordinary course of business, of Western and its
Subsidiaries.
(j) TAXES. All federal, state, local, and foreign tax returns (including
information returns) required to be filed by or on behalf of Western or any of
its Subsidiaries have been timely filed or requests for extensions have been
timely filed and any such extension shall have been granted and not have
expired, and all such filed returns are complete and accurate in all Material
respects. All taxes shown on such returns have been paid in full and adequate
provision has been made for any taxes for which returns have not yet been filed
(in accordance with GAAP) on Western's balance sheets set forth in Western
Reports. There is no pending audit examination, assessment or proposed
assessment of a deficiency, or refund litigation with respect to any taxes of
Western or any of its Subsidiaries. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation relating to it have been paid in full or adequate provision has been
made for any such taxes (in accordance with generally accepted accounting
principles) on Western's balance sheet as set forth in the Western Reports.
Neither Western nor any of its Subsidiaries has executed an extension or waiver
of any statute of limitations on the assessment or collection of any tax due
that is currently in effect.
No liens or other security interests have been imposed on any assets of
Western or any of its Subsidiaries in connection with any failure (or alleged
failure) to pay any tax. Western and each of its Subsidiaries have timely
withheld, and paid over to the relevant governmental authority or other
appropriate payee, all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other person. Neither Western nor any Subsidiary is a
party to any tax allocation or sharing agreement, is or has been a member of an
affiliated group filing consolidated or combined tax returns (other than a group
the common parent of which is or was Western) or otherwise has any liability for
the taxes of any person (other than Western or any of its Subsidiaries). For
purposes of this paragraph (j), "taxes" includes all federal, state, local or
foreign income, gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment, withholding or
similar taxes imposed on the income, properties or operations of Western or any
of its Subsidiaries, together with any interest additions or penalties with
respect thereto and any interest in respect of such additions or penalties.
(k) ABSENCE OF CLAIMS. As of the date hereof, there is no pending
litigation, controversy, claim, action or proceeding against Western or any of
its Subsidiaries before any court or governmental agency,
A-19
<PAGE>
and, to the best of Western's knowledge after reasonable inquiry, no such
litigation, proceeding, controversy, claim or action has been threatened or is
contemplated. As of the Effective Time and except as disclosed in the Western
Disclosure Letter, there is no pending litigation, controversy, claim, action or
proceeding against Western or any of its Subsidiaries before any court or
governmental agency, which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Western or to hinder or delay
consummation of the transactions contemplated hereby and, to the best of
Western's knowledge after reasonable inquiry, no such litigation, proceeding,
controversy, claim or action has been threatened or is contemplated.
(l) ABSENCE OF REGULATORY ACTIONS. Neither Western 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, Government Regulators nor has it been the recipient of any
advice from any Government Regulator that such Government Regulator 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.
(m) AGREEMENTS.
(i) Except for this Plan (and agreements entered into in connection with
the transactions contemplated hereby or those agreements copies of which
have been previously furnished to Company) and arrangements made in the
ordinary course of business, Western and its Subsidiaries are not bound by
any Material contract (as defined in Item 601(b)(10) of Regulation S-K) to
be performed after the date hereof that has not been filed with or
incorporated by reference in the Western Reports. Except as disclosed in the
Western Reports filed prior to the date of this Plan, neither Western nor
any of its Subsidiaries is a party to an oral or written (A) consulting
agreement (other than data processing, software programming and licensing
contracts entered into in the ordinary course of business) not terminable on
30 days' or less notice involving the payment of more than $200,000 per
annum, in the case of any such agreement with an individual, or $250,000 per
annum, in the case of any other such agreement, (B) agreement with any
executive officer or other key employee of Western or any of its
Subsidiaries the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Western
or any of its Subsidiaries of the nature contemplated by this Plan and which
provides for the payment of in excess of $250,000, (C) agreement with
respect to any executive officer of Western or any of its Subsidiaries
providing any term of employment or compensation guarantee extending for a
period longer than six months and for the payment of in excess of $250,000
per annum, (D) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Plan or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Plan or (E) agreement containing covenants that limit the ability of Western
or any of its Subsidiaries 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, Western (including any successor thereof) or any of its
Subsidiaries may carry on its business (other than as may be required by law
or any regulatory agency).
(ii) Neither Western nor any of its Subsidiaries is in default under or
in violation of any provision of any note, bond, indenture, mortgage, deed
of trust, loan agreement or other agreement to which it is a party or by
which it is bound or to which any of its respective properties or assets is
subject.
(n) LABOR MATTERS. Neither Western nor any of its Subsidiaries is a party
to, or is bound by, any collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization, nor is
Western or any of its Subsidiaries the subject of any proceeding asserting that
it has
A-20
<PAGE>
committed an unfair labor practice or seeking to compel it or any such
Subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike, other labor dispute or organizational
effort involving Western or any of its Subsidiaries pending or threatened.
(o) EMPLOYEE BENEFIT PLANS. The Western Disclosure Letter contains a
complete list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements, policies and arrangements, including, but not
limited to, "employee benefit plans", as defined in Section 3(3) of ERISA and
all trust agreements related thereto in respect to any present or former
directors, officers, or other employees of Western or any of its Subsidiaries
(hereinafter referred to collectively as the "Western Employee Plans"). (i) All
of the Western Employee Plans comply in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws; neither
Western nor any of its Subsidiaries has engaged in a "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) with respect to
any Western Employee Plan which could subject Western or any Subsidiary to a
material tax or penalty under Section 4975 of the Code or Section 502(i) of
ERISA; and all contributions required to be made under the terms of any Western
Employee Plan have been timely made or have been reflected on Western's balance
sheet; (ii) no liability to the PBGC has been or is expected by Western or any
of its Subsidiaries to be incurred with respect to any Western Employee Plan
which is subject to Title IV of ERISA (a "Western Pension Plan"), or with
respect to any "single-employer plan" (as defined in Section 4001(a)(15) of
ERISA) currently or formerly maintained by Western or any entity (a "Western
ERISA Affiliate") which is considered one employer with Western under Section
4001 of ERISA or Section 414 of the Code (an "Western ERISA Affiliate Plan");
and no proceedings have been instituted to terminate any Western Pension Plan or
Western ERISA Affiliate Plan and no condition exists that presents a material
risk of the institution of such proceedings; (iii) no Western Pension Plan or
Western ERISA Affiliate Plan had an "accumulated funding deficiency" (as defined
in Section 302 of ERISA (whether or not waived)) as of the last day of the end
of the most recent plan year ending prior to the date hereof; the fair market
value of the assets of each Western Pension Plan and Western ERISA Affiliate
Plan exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such Western Pension Plan or Western ERISA
Affiliate Plan as of the end of the most recent plan year with respect to the
respective Western Pension Plan or Western ERISA Affiliate Plan ending prior to
the date hereof, calculated on the basis of the actuarial assumptions used in
the most recent actuarial valuation for such Western Pension Plan or Western
ERISA Affiliate Plan prior to the date hereof, and there has been no material
change in the financial condition of any such Western Pension Plan or Western
ERISA Affiliate Plan since the last day of the most recent plan year; and no
notice of a "reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been required to be
filed for any Western Pension Plan or Western ERISA Affiliate Plan within the
12-month period ending on the date hereof; (iv) neither Western nor any
Subsidiary of Western has provided or is required to provide, security to any
Western Pension Plan or to any Western ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code; (v) neither Western, its Subsidiaries, nor any Western
ERISA Affiliate has contributed to any "multiemployer plan", as defined in
Section 3(37) of ERISA, on or after September 26, 1980; (vi) each Employee Plan
of Western or any of its Subsidiaries which is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) has received a favorable
determination letter from the Internal Revenue Service deeming such plan to be a
Qualified Plan or has requested such a determination letter within the
applicable remedial amendment period under Section 401(b) of the Code; and
neither Western nor its Subsidiaries are aware of any circumstances likely to
result in revocation of any such favorable determination letter; (vii) each
Qualified Plan which is an "employee stock ownership plan" (as defined in
Section 4975(e)(7) of the Code) has satisfied all of the applicable requirements
of Sections 409 and 4975(e)(7) of the Code and the regulations thereunder; all
Western Employee Plans covering foreign participants comply in all material
respects with applicable local law, and there are no material unfunded
liabilities with respect to any Western Employee Plan which covers foreign
employees; (viii) there is no pending or, to Western's knowledge, threatened
litigation,
A-21
<PAGE>
administrative action or proceeding relating to any Western Employee Plan; (ix)
there has been no announcement or commitment by Western or any Subsidiary of
Western to create an additional Western Employee Plan, or to amend a Western
Employee Plan except for amendments required by applicable law which do not
increase the cost of such Western Employee Plan; and Western and its
Subsidiaries do not have any obligations for retiree health and life benefits
under any Western Employee Plan except as set forth in the Western Disclosure
Letter, and there are no such Western Employee Plans that cannot be amended or
terminated without incurring any liability thereunder; (x) with respect to
Western or any of its Subsidiaries, except as specifically identified in the
Western Disclosure Letter, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
payment or series of payments by Western or any Subsidiary of Western to any
person which is an "excess parachute payment" (as defined in Section 280G of the
Code) under any Western Employee Plan, increase or secure (by way of a trust or
other vehicle) any benefits payable under any Western Employee Plan, or
accelerate the time of payment or vesting of any such benefit, and (xi) with
respect to each Western Employee Plan, Western has supplied to the Company a
true and correct copy, if applicable, of (A) the two most recent annual reports
on the applicable form of the Form 5500 series filed with the IRS, (B) such
Western Employee Plan, including amendments thereto, (C) each trust agreement
and insurance contract relating to such Western Employee Plan, including
amendments thereto, (D) the most recent summary plan description for such
Western Employee Plan, including amendments thereto, if the Western Employee
Plan is subject to Title I of ERISA, (E) the most recent actuarial report or
valuation if such Western Employee Plan is a Western Pension Plan, (F) the most
recent determination letter issued by the IRS if such Western Employee Plan is a
Qualified Plan and (G) the most recent financial statements and auditor's
report.
(p) REAL PROPERTY.
(i) The Western Disclosure Letter contains a complete and correct list
of (A) all real property or premises owned on the date hereof, in whole or
in part by Western or any of its Subsidiaries and all indebtedness secured
by any encumbrance thereon, and (B) all real property or premises leased in
whole or in part by Western or any of its Subsidiaries, together with a list
of all applicable leases and the name of the lessor. None of such premises
or properties have been condemned or otherwise taken by any public authority
and no condemnation or taking is threatened or contemplated and none thereof
is subject to any claim, contract or law which might affect its use or value
for the purposes now made of it. None of the premises or properties of
Western or any of its Subsidiaries is subject to any current or potential
interests of third parties or other restrictions or limitations that would
impair or be inconsistent in any material respect with the current use of
such property by Western or any of its Subsidiaries.
(ii) Each of the leases referred to in the Western Disclosure Letter is
valid and existing and in full force and effect, and no party thereto is in
default and no notice of a claim of default by any party has been delivered
to Western or any of its Subsidiaries or is now pending, and there does not
exist any event that with notice or the passing of time, or both, would
constitute a default or excuse performance by any party thereto, provided
that with respect to matters relating to any party other than Western the
foregoing representation is based on the knowledge of Western.
(q) TITLE. Each of Western and its Subsidiaries has good title to its
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)
except (1) statutory liens not yet delinquent which are being contested in good
faith by appropriate proceedings, and liens for taxes not yet due, (2) pledges
of assets in the ordinary course of business to secure public deposits, (3) for
those assets and properties disposed of for fair value in the ordinary course of
business since the date of Western's Annual Report on Form 10-KSB/A for the year
ended December 31, 1996 and (4) defects and irregularities of title and
encumbrances that do not materially impair the use thereof for the purposes for
which they are held.
A-22
<PAGE>
(r) KNOWLEDGE AS TO CONDITIONS. As of the date hereof, Western knows of no
reason why the approvals, consents and waivers of governmental authorities
referred to in Section 5.1(b) should not be obtained without the imposition of
any condition of the type referred to in the provisos thereto.
(s) COMPLIANCE WITH LAWS. Since December 31, 1994, Western and each of its
Subsidiaries have complied in all Material respects with all applicable laws,
except for any noncompliance with any such laws which, individually or in the
aggregate, would not have a Material Adverse Effect on Western or enable any
Person to enjoin the Merger. Except as would not have a Material Adverse Effect
on Western, each of Western and its Subsidiaries has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted. All such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and, to the knowledge of Western, no suspension or cancellation of any of them
is threatened.
(t) FEES. Other than in respect of financial advisory services performed
for Western by Belle Plaine Financial Partners, Inc. and/or other qualified
financial advisors, in amounts and pursuant to arrangements previously disclosed
to the Company, neither Western nor any of its Subsidiaries, nor any of their
respective 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, and no broker or finder has acted directly
or indirectly for Western or any Subsidiary of Western, in connection with the
Plan or the transactions contemplated hereby.
(u) ENVIRONMENTAL MATTERS. (i) Western and each Subsidiary has complied in
all material respects at all times with all applicable Environmental Laws; (ii)
none of the properties (including buildings or any other structures) currently
owned or operated by Western or any Subsidiary ("Western Properties") has been
contaminated with, or has had any release of, any Hazardous Substance; (iii) to
Western's knowledge, none of the properties formerly owned or operated by it or
any Subsidiary has been contaminated with Hazardous Substances during such
period of ownership or operation; (iv) to Western's knowledge, neither it nor
any Subsidiary is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither Western nor any
Subsidiary has received any notice, demand letter, claim or request for
information alleging that Western or any Subsidiary may be in violation of or
subject to liability under any Environmental Law; (vi) neither Western nor any
of its Subsidiaries is subject to any orders, decrees, injunctions or other
agreements with any governmental authority or any third party relating to
Hazardous Substances or any Environmental Law; (vii) there are no circumstances
or conditions involving Western or any of its Subsidiaries that could reasonably
be expected to result in any claims, liability, investigations, suits or costs
or result in restrictions on the ownership, use, or transfer of any Western
Property pursuant to any Environmental Law, (viii) none of the Western
Properties contain any underground storage tanks, asbestos-containing material,
lead products, or polychlorinated biphenyls; (ix) to the knowledge of Western
none of the Western Properties have ever been operated in the past as a gas
station, automotive repair or supply business, metalworking operation,
industrial facility or as a drycleaner; (x) neither Western nor any Subsidiary
has engaged in any activity involving the generation, use, handling or disposal
of any Hazardous Substances other than ordinary and routine office operations
and maintenance, (xi) neither Western nor any Subsidiary has participated in the
management of any borrower or other third party, including entities in which it
may hold a security, fiduciary or other interest, that, to Western's knowledge,
engages in activities involving Hazardous Substances to an extent that it could
be deemed an "owner" or "operator" of such entity under any Environmental Law,
and (xii) to Western's knowledge, it has delivered to the Company copies of all
environmental reports, studies, sampling data, permits, government filings and
other environmental information in its possession relating to Western or its
Subsidiaries or any of their current or former properties or operations.
(v) ALLOWANCE. The allowance for possible loan and lease losses shown on
Western's unaudited balance sheet as of June 30, 1997 was, and the allowance for
possible loan losses shown on the balance sheets in Western Reports for periods
ending after the date of this Plan will be, adequate, as of the date
A-23
<PAGE>
thereof, under generally accepted accounting principles applicable to banks and
bank holding companies. Western has disclosed to the Company in writing prior to
the date hereof the amounts of all loans, leases, advances, credit enhancements,
other extensions of credit, commitments and interest-bearing assets of Western
and its Subsidiaries that as of June 30, 1997 have been classified as "Other
Assets Specially Mentioned," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Credit Risk Assets" or words of similar import. The OREO included
in any non-performing assets of Western or any of its Subsidiaries is carried
net of reserves at the lower of cost or market value; less applicable selling
costs, based on independent appraisals consistent with applicable regulatory
requirements.
(w) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
Western's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997
or Western's Annual Report on Form 10-KSB/A for the year ended December 31,
1996, no officer or director of Western, or any "associate" (as such term is
defined in Rule 12b-2 under the Securities Exchange Act) of any such officer or
director, has any Material interest in any Material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
Western or any of its Subsidiaries.
(x) INSURANCE. Western and its Subsidiaries are currently insured, and
since December 31, 1994, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by Western and its Subsidiaries are in full force and effect, Western
and its Subsidiaries are not in default thereunder and all Material claims
thereunder have been filed in due and timely fashion. Since December 31, 1994,
no claim by Western or any of its Subsidiaries on or in respect of an insurance
policy or bond has been declined or refused by the relevant insurer or insurers.
In the best judgment of Western's management, such insurance coverage is
adequate and will be available in the future under terms and conditions
substantially similar to those in effect on the date hereof. Between the date
hereof and the Effective Time, Western and its Subsidiaries will maintain the
levels of insurance coverage in effect on the date hereof and will submit all
potential claims existing prior to the Effective Time to its insurance carrier
on or before the Effective Time. The Western Disclosure Letter lists all
insurance policies maintained by or for the benefit of Western, its Subsidiaries
or its directors, officers, employees or agents, specifying the (i) type of
policy, (ii) policy limits and (iii) self insurance amounts.
(y) INVESTMENT SECURITIES. Except for pledges to secure public and trust
deposits and reverse repurchase agreements entered into in arm's-length
transactions pursuant to normal commercial terms and conditions and other
pledges required by law, none of the investments reflected in the consolidated
balance sheet of Western for the quarter ended June 30, 1997, and none of the
Material investments made by it or any of its Subsidiaries since December 31,
1996, is subject to any restriction (contractual, statutory or otherwise) that
would materially impair the ability of the entity holding such investment freely
to dispose of such investment at any time.
(z) DERIVATIVES. Neither Western 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.
(aa) REGISTRATION OBLIGATIONS. Neither Western nor any of its Subsidiaries
is under any obligation, contingent or otherwise, to register any of its
securities under the Securities Act except as contemplated by this Plan.
(bb) BOOKS AND RECORDS. The books and records of Western and its
Subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements and reflect in all Material respects the
substance of events and transactions that should be included therein.
A-24
<PAGE>
(cc) CORPORATE DOCUMENTS. Western has delivered to the Company true and
complete copies of (i) its amended articles of incorporation and amended by-laws
and (ii) the articles of incorporation and by-laws of Western Bank.
(dd) COMPANY ACTION. The Board of Directors of Western has adopted
resolutions recommending that the principal terms of this Plan be approved by
the shareholders of Western and directing that this Plan be submitted for
consideration by Western's shareholders at Western's Meeting. Western, as the
sole shareholder of Western Bank, has approved the principal terms of this Plan.
(ee) LOANS. Each loan reflected as an asset on Western's consolidated
balance sheet as of June 30, 1997 and each balance sheet date subsequent thereto
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles, and (iii) to the knowledge of Western, will not be
subject to any defenses which may be asserted against Western's bank
Subsidiaries. All loans and extensions of credit that have been made by Western
Bank or any other bank Subsidiaries of Western and that are subject to Sections
22(h), 23A and 23B of the Federal Reserve Act comply therewith.
(ff) FAIR LENDING; COMMUNITY REINVESTMENT ACT. As of the date hereof, with
the exception of routine investigation of consumer complaints, neither Western
nor any of its Subsidiaries has been advised that it is or may be in violation
of the Equal Credit Opportunity Act or the Fair Housing Act or any similar
federal or state statute. Western Bank received a CRA rating of "outstanding" in
its most recent CRA examination. Each of Western's bank Subsidiaries received a
CRA rating of "satisfactory" or better in its most recent CRA examination.
(gg) NO OMISSION OF MATERIAL FACT. No representation or warranty by
Western in this Plan, including the Annexes hereto, the disclosure letters and
the schedules to be delivered herewith or the Proxy Statement filed in
connection with the Meeting, contains any untrue statement of Material fact, or
omits to state a Material fact necessary to make the statements or facts
contained herein or therein not misleading. None of the information regarding
Western or any of its Subsidiaries or the transactions contemplated hereby
supplied or to be supplied by Western or any of its Subsidiaries for inclusion
in any documents or filings to be filed with any regulatory authority in
connection with the transactions contemplated hereby will contain any untrue
statement of Material fact, or omit to state a Material fact necessary to make
the statements or facts contained therein not misleading.
(hh) WESTERN COMMON STOCK. The shares of Western Common Stock to be issued
pursuant to this Plan, when issued in accordance with the terms of this Plan,
will be duly authorized, validly issued, fully paid and non-assessable.
ARTICLE IV. COVENANTS
SECTION 4.1. ACQUISITION PROPOSALS. The Company agrees that none of it or
any of its officers and directors shall, and the Company 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) 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 the Company) with respect
to a merger, consolidation or similar transaction, other than pursuant to this
Plan, involving, or any purchase of all or any significant portion of the assets
or any equity securities of, the Company (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 in writing by such board's 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.
The Company will immediately cease
A-25
<PAGE>
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 is a party. The Company 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 4.1. The Company will notify Western
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 the Company.
SECTION 4.2. CERTAIN POLICIES OF THE COMPANY. At or before the Effective
Time, the Company shall make such accounting entries or adjustments as Western
shall request in order to implement its plans for the Company following the
Merger or to reflect merger-related expenses and costs; PROVIDED, HOWEVER, that
(a) the Company shall not be required to take such action more than two days
prior to the Effective Time, (b) no such adjustment shall require, based upon
consultation with counsel and accountants for the Company, any filing with any
governmental agency, or violate any law, rule or regulation applicable to the
Company, (c) no such adjustment shall require any changes in net income or
shareholders' equity that will be required to be contained in any financial
statement required to be filed by the Company under the rules of the FDIC if the
Company reasonably believes that all of the conditions to closing set forth in
Article V will not be either satisfied or waived; and FURTHER PROVIDED, that in
any event no accrual or reserve made by the Company pursuant to this Section 4.2
shall constitute or be deemed to be a breach or violation of or failure to
satisfy any representation, warranty, covenant, condition or other provision of
this Plan or otherwise be considered in determining whether any such breach,
violation or failure to satisfy shall have occurred. The recording of such
adjustments shall not be deemed to imply any misstatement of previously
furnished financial statements or information and shall not be construed as
concurrence of the Company's management with any such adjustments.
SECTION 4.3. EMPLOYEE BENEFITS. (a) Western, Western Bank and the Company
agree that, unless otherwise mutually determined or as set forth in subsection
(b) below, the Company Employee Plans in effect at the date of this Plan (except
stock plans (other than the stock bonus plan, which will remain in effect for a
period to be agreed upon by the parties), including without limitation the
Company's stock option plans and the stock award plan) will remain in effect for
a period of at least six months after the Effective Time with respect to persons
covered by such plans at the Effective Time. Western is presently investigating,
with a consultant's assistance, the types of benefits which should be made
available to its employees and those of its Subsidiaries. Each person employed
by the Company prior to the Effective Time who remains an employee of the
Surviving Corporation following the Effective Time (each a "Continued Employee")
will be eligible to participate on the same basis as similarly situated
employees of Western or Western Bank in existing benefit plans of Western or
Western Bank as well as such other and additional benefit plans as shall be
determined by the board of the Surviving Corporation as a result of such
investigation and study. All such participation shall be subject to the terms of
Western's Benefit Plans as may be in effect from time to time. Western and
Western Bank shall, solely for purposes of time of service, vesting and
eligibility to participate in Western's Benefit Plans, recognize credit for each
Continued Employee's term of service with the Company.
(b) Western and Western Bank will honor, to the extent set forth in the
Company Disclosure Letter, all employment and severance agreements of the
Company, in accordance with their terms.
SECTION 4.4. ACCESS AND INFORMATION. Upon reasonable notice, each party
hereto shall (and shall cause its Subsidiaries to) afford to the other party and
its representatives (including, without limitation, directors, officers and
employees of such party and its affiliates, and counsel, accountants and other
advisors retained by such party and its affiliates) such access (including,
without limitation, for the purpose of conducting supplemental due diligence
reviews) during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, loan and
credit files, tax returns and work papers of independent auditors), properties,
personnel and to such other information as the requesting party may reasonably
request; PROVIDED, HOWEVER, that no investigation pursuant to this
A-26
<PAGE>
Section 4.4 shall affect or be deemed to modify any representation or warranty
made herein. Each party agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this Section
4.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan. Subject to the requirements of law, each party will
keep confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 4.4 and in
accordance with the Confidentiality Agreement between the Company and Western in
effect prior to the date hereof (the "Confidentiality Agreement"). In the event
that this Plan is terminated or the transactions contemplated by this Plan shall
otherwise fail to be consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as to another
party hereto (or an affiliate of any party hereto) to be returned to the party
which furnished the same. Except as otherwise specifically provided herein, the
terms of the Confidentiality Agreement shall remain in full force and effect.
SECTION 4.5. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Western, Western
Bank and the Company shall (a) as soon as practicable make any filings and
applications required to be filed in order to obtain all approvals, consents and
waivers of governmental authorities necessary or appropriate for the
consummation of the transactions contemplated hereby and use their reasonable
best efforts to cause the applications for the approvals described in Section
5.1(b) hereof to be initially filed on or before September 30, 1997; (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 and (ii) 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 the publicly available portions of all such
filings and applications promptly after they are filed.
SECTION 4.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) From
and for a period of six years after the Effective Time, Western and Western Bank
agree to indemnify and hold harmless each director and officer of the Company,
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time (including with respect
to this Plan or any of the transactions contemplated hereby), whether asserted,
claimed or arising prior to, at or after the Effective Time, to the extent to
which such Indemnified Parties were entitled under California law and the
Company's articles of incorporation or by-laws in effect on the date hereof, and
Western shall also advance expenses as incurred to the extent permitted under
California law and the Company's articles of incorporation and by-laws.
(b) Any Indemnified Party wishing to claim indemnification under Section
4.6(a) hereof, upon learning of any such claim, action, suit, proceeding or
investigation, shall as promptly as possible notify Western thereof, but the
failure to so notify shall not relieve Western of any liability it may have to
such Indemnified Party if such failure does not materially prejudice Western. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Western shall have the right to
assume the defense thereof and Western shall not 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 one such counsel for the Indemnified Parties in any
jurisdiction promptly as statements thereof are received unless the use of one
counsel for such Indemnified Parties would present such counsel with a conflict
of interest, (ii) the Indemnified Parties will cooperate in the defense of any
such matter and (iii) Western shall not be liable for any settlement effected
without its prior written consent. Notwithstanding the foregoing, Western shall
A-27
<PAGE>
not have any obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is not permitted or is
prohibited by applicable law.
(c) For a period of six years after the Effective Time, Western shall
use its reasonable best efforts to cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained
by the Company (provided that Western may substitute therefor policies of
comparable coverage with respect to claims arising from facts or events
which occurred before the Effective Time); PROVIDED, HOWEVER, that in no
event shall Western be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this Subsection 4.6(c), any amount per annum
in excess of 200% of the amount of the annual premiums paid as of the date
hereof by the Company for such insurance (the "Maximum Amount"). If the
amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Western shall use all
reasonable efforts to maintain the most advantageous policies of directors'
and officers' insurance obtainable for an annual premium equal to the
Maximum Amount. Notwithstanding the foregoing, prior to the Effective Time,
Western may request the Company to, and the Company shall, purchase
insurance coverage, on such terms and conditions as shall be acceptable to
Western, extending for a period of six years the Company's directors' and
officers' liability insurance coverage in effect as of the date hereof
(covering past or future claims with respect to periods before the Effective
Time) and such coverage shall satisfy Western's obligations under this
Subsection (c).
(d) If Western or any of its successors or assigns (i) shall consolidate
with or merge into any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and assigns of
Western shall assume the obligations set forth in this Section 4.6.
(e) The provisions of this Section 4.6 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
SECTION 4.7. ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its 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 Plan as soon as practicable, including
using efforts to obtain all necessary actions or non-actions, extensions,
waivers, consents and approvals from all applicable governmental entities,
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.
SECTION 4.8. PUBLICITY. The initial press release announcing this Plan
shall be a joint press release and thereafter Western and the Company shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the other or the transactions contemplated hereby and
in making any filings with any governmental entity or with any national
securities exchange with respect thereto.
SECTION 4.9. REGISTRATION STATEMENT. As soon as reasonably practicable
after the date hereof, Western and the Company shall jointly prepare a
registration statement, including a joint proxy statement in respect of the
Meetings (as defined herein) (the "Registration Statement"), for the purpose of
registering the Western Common Stock to be issued pursuant hereto, file the
Registration Statement with the SEC, respond to comments of the staff of the SEC
and promptly thereafter mail the Registration Statement to all holders of record
(as of the applicable record date) of shares of Company Common Stock and Western
Common Stock. The Company covenants that (a) all information supplied by it in
writing to Western expressly for use in the Registration Statement will be
accurate and complete in all Material
A-28
<PAGE>
respects and (b) none of the information to be supplied by the Company will, in
the case of the proxy statement to be used by Western to solicit the approval of
its shareholders as contemplated by this Plan, when it is first mailed to
Western's shareholders, contain any untrue statement of a Material fact or omit
to state any Material fact necessary in order to make the statement made
therein, in light of the circumstances under which such statements are made, not
misleading. Western covenants that (a) all information supplied by it in writing
to the Company expressly for use in the Registration Statement will be accurate
and complete in all Material respects and (b) none of the information to be
supplied by Western will, in the case of the proxy statement to be used by the
Company to solicit the approval of its shareholders as contemplated by this
Plan, when it is first mailed to the Company's shareholders, contain any untrue
statement of a Material fact or omit to state any Material fact necessary in
order to make the statement made therein, in light of the circumstances under
which such statements are made, not misleading.
SECTION 4.10. SHAREHOLDERS' MEETINGS. Each of Western and the Company
shall take all action necessary, in accordance with applicable law and its
articles of incorporation and by-laws, to convene a meeting of the holders of
its common stock (each, a "Meeting") as mutually agreed for the purpose of
approving the principal terms of this Plan. Except to the extent legally
required for the discharge by such party's board of directors of its fiduciary
duties as advised in writing by such board's counsel, such party's board of
directors shall recommend at its Meeting that the principal terms of this Plan
be approved by its shareholders.
SECTION 4.11. NOTIFICATION OF CERTAIN MATTERS. Each of Western and the
Company shall give prompt notice to the other of: (a) any notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Plan and prior to the Effective Time, under any
contract Material to the financial condition, properties, businesses or results
of operations of such party taken as a whole to which such party or any
Subsidiary is a party or is subject; and (b) any Material adverse change in the
condition (financial or other), properties, assets, business, results of
operations or prospects of it and its Subsidiaries taken as a whole or the
occurrence of any event which, so far as reasonably can be foreseen at the time
of its occurrence, is reasonably likely to result in any such change. Each of
the Company and Western shall give prompt notice to the other party of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Plan.
SECTION 4.12. NO ACQUISITIONS OF COMPANY COMMON STOCK. Prior to the
earlier of (i) immediately prior to the Effective Time and (ii) the termination
of this Plan in accordance with Article VI hereof, Western shall not and shall
cause its affiliates not to, directly or indirectly, acquire any shares of
Company Common Stock, other than (i) up to 5% of such shares acquired during the
period commencing on the first business day after the release of the press
release announcing this Plan and (ii) shares acquired in a fiduciary or agency
capacity or in satisfaction of a debt or debts previously contracted.
SECTION 4.13. SECURITIES ACT. (a) As soon as practicable after the date of
the Company's Meeting, the Company shall identify to Western all persons who the
Company believes to be affiliates of the Company as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act ("Affiliates").
(b) The Company shall use its best efforts to obtain a written agreement
from each person identified as an Affiliate pursuant to clause 4.13(a) above
who is an officer or director of the Company 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. The
Company shall cause forms of such written agreement to be delivered to each
other person who the Company believes may be or become an Affiliate of
Western for purposes of enabling such persons to comply with the exchange
procedures set forth in Section 1.4.
A-29
<PAGE>
SECTION 4.14. TAX-FREE REORGANIZATION TREATMENT. Except as contemplated by
Section 1.3(c)(iii), neither Western nor the Company shall 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.
SECTION 4.15. SHAREHOLDER AGREEMENTS. Certain directors of the Company, in
their capacities as shareholders, in exchange for good and valuable
consideration, have executed and delivered to Western shareholder agreements
substantially in the form of Annex 3 hereto ("the Shareholder Agreements").
SECTION 4.16. DIRECTOR AND OFFICER RESIGNATIONS. The Company shall cause
to be delivered to Western at the Effective Time the resignations of the members
of the board of directors of the Company and of such officers as are agreed to
by Western and the Company in advance of the Effective Time.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. CONDITIONS TO ALL PARTIES' OBLIGATIONS. The respective
obligations of Western, Western Bank and the Company to effect the Merger shall
be subject to the satisfaction or waiver by Western and the Company prior to the
Effective Time of the following conditions:
(a) The principal terms of this Plan shall have been approved by the
requisite vote of the respective shareholders of the Company and Western.
(b) Western, Western Bank and the Company shall have procured the approvals,
consents or waivers with respect to the Plan, the Merger and the other
transactions contemplated hereby by the Federal Reserve Board, 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, in the opinion of counsel for
Western and the Company, are necessary or appropriate for the consummation of
the Merger and the other transactions contemplated hereby; PROVIDED, HOWEVER,
that no approval, consent or waiver referred to in this Section 5.1(b) shall be
deemed to have been received if it shall include any condition or requirement
(other than conditions or requirements that have been imposed on Western or
Western Bank in connection with previous acquisitions announced since 1995)
that, individually or in the aggregate, (i) would result in a Material Adverse
Effect on Western or the Company or (ii) would reduce the economic and business
benefits of the transactions contemplated by the Plan to Western or the Company
in so significant and adverse a manner that the party or parties so affected, in
its or their judgment, would not have entered into this Plan had such condition
or requirement been known at the date hereof.
(c) All other requirements prescribed by law which are necessary to the
consummation of the Merger and any transactions necessary to consummate the
Merger shall have been satisfied.
(d) 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 transaction necessary to consummate the
Merger, and no litigation or proceeding shall be pending against the Company or
Western or any of its Subsidiaries brought by any governmental agency seeking to
prevent consummation of the Merger or any transaction necessary to consummate
the Merger.
(e) No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated, interpreted, applied or enforced by any
governmental authority which prohibits, restricts or makes illegal consummation
of the Merger or any other transaction contemplated by this Plan.
(f) 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 SEC.
(g) Except if the failure to obtain such opinions is due solely to the
circumstances described in Section 1.3(c)(iii), Western and Western Bank shall
have received an opinion of Sullivan & Cromwell and
A-30
<PAGE>
the Company shall have received an opinion of Company Counsel, no later than
thirty (30) days from the date hereof, 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
Western, Western Bank and the Company will each be a party to that
reorganization. Each such opinion may be based on, in addition to the review of
such matters of law and fact as counsel rendering the opinion considers
appropriate, (i) representations made at counsel's request by Western, Western
Bank, the Company, shareholders of Western or the Company, or any combination of
such persons, (ii) certificates provided at counsel's request by officers of
Western, Western Bank or the Company and other appropriate persons and (iii)
assumptions set forth in the opinion with the consent of Western (in the case of
the opinion to be delivered by Sullivan & Cromwell) or with the consent of the
Company (in the case of the opinion to be delivered by Company Counsel).
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF WESTERN. The obligations of
Western and Western Bank to effect the Merger shall be subject to the
satisfaction or waiver by Western prior to the Effective Time of the following
additional conditions:
(a) Western shall have received from the Company's independent certified
public accountants a "cold comfort" letter or "specified procedures" letter,
dated (A) the date of the mailing of the Registration Statement, and (B) shortly
prior to the Effective Date, with respect to certain financial information
regarding the Company.
(b) Each of the representations and warranties of the Company contained in
this Plan shall have been true and correct on the date hereof and shall be true
and correct at the Effective Time (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date or
period); PROVIDED, HOWEVER, that for purposes of this Section 5.2(b) a
representation or warranty shall only fail to be true and correct at the
Effective Time if the failure of any such representation or warranty to be true
and correct has or constitutes, or is likely to have or constitute or relates
to, either individually or in the aggregate with other such representations or
warranties, a Material Adverse Effect on the Company; the Company shall have
performed, or shall have caused to be performed, in all Material respects, each
of its covenants and agreements contained in this Plan required to be performed
at or prior to the Effective Time; and Western shall have received a certificate
signed by the Chief Executive Officer and the Chief Financial Officer of the
Company, dated the Effective Date, as to the foregoing to the best of their
knowledge.
(c) Western shall have received the written resignation of each director (in
his/her capacity as director) of the Company, effective as of the Effective
Time, and such resignations of officers as may be agreed to by Western and the
Company pursuant to Section 4.16 hereof.
(d) The Company or Western shareholders voting against the principal terms
of this Plan or giving notice in writing to the Company or Western, as the case
may be, at or before the applicable Meeting that such shareholder dissents from
the principal terms of this Plan, in the aggregate, shall not hold more than
five percent of the Company Common Stock or Western Common Stock, as the case
may be (the condition set forth in this paragraph (d) being referred to herein
as the "Dissenters' Rights Condition"); PROVIDED, HOWEVER, that Western may, in
its sole discretion, at anytime, either before or after shareholder approval of
the principal terms of this Plan, waive the Dissenters' Rights Condition, either
in whole or in part.
(e) Prior to solicitation of shareholder approval, Western shall have
received an opinion confirming the fairness of the terms of the Merger to its
shareholders from a financial point of view.
(f) Western shall have received a conformed copy of a certificate of
satisfaction of the Franchise Tax Board of the State of California that all
taxes imposed by law on the Company have been paid or secured, as filed with the
Secretary of State for the State of California pursuant to Section 1103 of the
California Corporations Code.
A-31
<PAGE>
(g) As of December 31, 1997, (i) the Company Book Value shall not be less
than $77,900,000 and (ii) the Company's allowance for loan and lease losses
shall not be less than $7,992,000.
SECTION 5.3. CONDITIONS TO THE OBLIGATION OF THE COMPANY. The obligation
of the Company to effect the Merger shall be subject to the satisfaction or
waiver by the Company prior to the Effective Time of the following additional
conditions:
(a) The Company shall have received from Western's independent certified
public accountants a "cold comfort" letter or letters or "specified procedures"
letter or letters, dated (A) the date of the mailing of the Registration
Statement, and (B) shortly prior to the Effective Date, with respect to certain
financial information regarding Western.
(b) Each of the representations, warranties and covenants of Western
contained in this Plan shall have been true on the date hereof and shall be true
in all Material respects on the Effective Date 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 or period), PROVIDED, HOWEVER, that for
purposes of this Section 5.3(b) a representation or warranty shall only fail to
be true and correct at the Effective Time if the failure of any such
representation or warranty to be true and correct has or constitutes or relates
to, or is likely to have or constitute or relate to, either individually or in
the aggregate with other such representations or warranties, a Material Adverse
Effect on Western; Western shall have performed, or shall have caused to be
performed, in all Material respects, each of its covenants and agreements
contained in this Plan required to be performed at or prior to the Effective
Time; and the Company shall have received certificates signed by the Chief
Executive Officer and the Chief Financial Officer of Western, dated the
Effective Date, as to the foregoing.
(c) The Company shall have received an opinion, dated the Effective Date,
from Sullivan & Cromwell, to the effect that the Western Common Stock being
issued pursuant to this plan will be duly authorized, validly issued, fully paid
and non-assessable.
(d) As of the Effective Time, Aubrey L. Austin shall be a member of the
board of directors of Western and the Surviving Corporation and shall be the
Chairman, President and Chief Executive Officer of the Surviving Corporation.
(e) Prior to the solicitation of shareholder approval and the Effective
Time, the Company shall have received an opinion confirming the fairness of the
terms of the Merger to its shareholders from a financial point of view.
ARTICLE VI. TERMINATION
SECTION 6.1. TERMINATION. This Plan may be terminated, and the Merger
abandoned, prior to the Effective Date, either before or after its approval by
the shareholders of the Company and Western:
(a) by the mutual consent of Western and the Company, if the board of
directors of each so determines by vote of a majority of the members of its
entire board;
(b) by either of Western or the Company, by written notice to the other, if
its board of directors 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 the Company
to approve the principal terms of this Plan at its Meeting, (ii) the failure of
the shareholders of Western to approve the principal terms of this Plan at its
Meeting, or (iii) a Material breach by the other party hereto of any
representation, warranty, covenant or agreement contained herein which is not
cured or not curable within 30 days after written notice of such breach is given
to the party committing such breach by the other party;
(c) by either of Western or the Company, by written notice to the other, if
either (i) any approval, consent or waiver of a governmental authority required
to permit consummation of the Merger or any transaction necessary to consummate
the Merger shall have been denied or (ii) any governmental authority
A-32
<PAGE>
of competent jurisdiction shall have issued a final, unappealable order
enjoining or otherwise prohibiting consummation of the Merger or any transaction
necessary to consummate the Merger;
(d) by either of Western or the Company, by written notice to the other, if
its board of directors so determines by vote of a majority of the members of its
entire board, in the event that the Merger is not consummated by February 28,
1998, unless the failure so to consummate by such time is due to the breach of
any representation, warranty or covenant contained in this Plan by the party
seeking to terminate;
(e) by Western, by written notice to the Company, if the Company takes,
causes to be taken or allows to be taken any action that, without giving effect
to the exception contained in Section 4.1 hereof regarding the exercise by the
Company's board of directors of its fiduciary duties, would otherwise be
prohibited under Section 4.1 hereof; or
(f) by the Company, by written notice to Western prior to the approval by
the shareholders of the Company of the principal terms of this Plan, if the
Company receives an Acquisition Proposal on terms and conditions which the board
of directors determines, after receiving the written advice of its outside
counsel, (i) that to proceed with the Merger will violate the fiduciary duties
of the board of directors to the Company's shareholders and (ii) to accept such
proposal; PROVIDED, HOWEVER, that the Company shall not be entitled to terminate
this Plan pursuant to this clause (f) unless it shall have provided Western with
written notice of such a possible determination (which written notice will
inform Western of the Material terms and conditions of the proposal, including
the identity of the proponent) two business days prior to such determination.
SECTION 6.2. EFFECT OF TERMINATION. (a) In the event of the termination of
this Plan by Western or the Company, as provided above, this Plan shall
thereafter become void and, subject to the provisions of Section 6.2(b) and (c)
and Section 8.2 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 Plan.
(b) The parties agree and acknowledge that it is impractical to ascertain
the precise amount of damage to the Company as a result of a failure to
consummate the Merger and the other transactions contemplated hereby due to a
termination of this Plan by the Company pursuant to clause (iii) of Section
6.1(b) hereof. Accordingly, in the event of such termination, Western shall pay
to the Company $5 million plus all costs and expenses incurred by the Company in
connection with this Plan, up to $1 million, the parties agreeing that such
amount will represent a reasonable estimate of the minimum damage to the Company
and not a penalty. The fee payable pursuant to the foregoing sentence shall be
payable by Western to the Company by wire transfer to an account designated by
the Company in writing, on or before the seventh day after it becomes due.
Payment of such amount shall be in full satisfaction of damages to the Company
arising from any breach by Western 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 Western and Western Bank as a result of a
failure to consummate the Merger and the other transactions contemplated hereby
due to a termination of this Plan by Western pursuant to clause (iii) of Section
6.1(b) or Section 6.1(e) hereof or by the Company pursuant to Section 6.1(f)
hereof. Accordingly, in the event of such termination pursuant to clause (iii)
of Section 6.1(b), the Company shall pay to Western $3 million, and in the event
of such termination pursuant to Section 6.1(e) or Section 6.1(f), the Company
shall pay to Western $10 million, in either case plus all costs and expenses
incurred by Western in connection with this Plan, up to $1 million, the parties
agreeing that such amounts will represent a reasonable estimate of the minimum
damage to Western and Western Bank and not a penalty. The fee payable pursuant
to the foregoing sentence shall be payable by the Company to Western by wire
transfer to an account designated by Western in writing, on or before the
seventh day after it becomes due. Payment of such amount shall be in full
satisfaction of damages to Western and Western Bank arising from any
A-33
<PAGE>
breach by the Company of any of its representations, warranties, covenants or
agreements contained herein.
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. EFFECTIVE DATE AND EFFECTIVE TIME. On such date as Western
selects after December 31, 1997, which shall, unless such 30 day period ends
prior to January 1, 1998, be within 30 days 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 or waiver of all other conditions to the
consummation of the Merger, or on such earlier or later date as may be agreed in
writing by the parties, an agreement of merger and related documents, in
customary form, shall be executed in accordance with all appropriate legal
requirements and shall be filed as required by law, and the Merger provided for
herein shall become effective upon such filing or on such date and such time as
may be specified in such agreement of merger. The date of such filing or such
later effective date is herein called the "Effective Date". The "Effective Time"
of the Merger shall be the time of such filing or as set forth in such agreement
of merger.
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. CERTAIN DEFINITIONS; INTERPRETATION. As used in this Plan,
the following terms shall have the meanings indicated:
"Company Book Value" means the shareholders' equity of the Company,
determined in accordance with GAAP.
"GAAP" means generally accepted accounting principles applicable to bank
holding companies, consistently applied.
"Material" means material to Western or the Company (as the case may be) and
their respective Subsidiaries, taken as a whole.
"Material Adverse Effect", with respect to a person, means any condition,
event, change or occurrence that is reasonably likely to have a Material
adverse effect upon (A) the condition (financial or other), properties,
assets, business, results of operations or prospects of such person and its
Subsidiaries, taken as a whole, or (B) the ability of such person to perform
its obligations under, and to consummate the transactions contemplated by,
this Plan.
"Person" includes an individual, corporation, partnership, association,
trust or unincorporated organization.
"Subsidiary", with respect to a person, means any other person controlled by
such person.
When a reference is made in this Plan to Sections or Annexes, such reference
shall be to a Section of, or Annex to, this Plan unless otherwise indicated. The
table of contents, index of defined terms and headings contained in this Plan
are for ease of reference only and shall not affect the meaning or
interpretation of this Plan. Whenever the words "include", "includes", or
"including" are used in this Plan, they shall be deemed followed by the words
"without limitation". Any singular term in this Plan shall be deemed to include
the plural, and any plural term the singular.
SECTION 8.2. SURVIVAL. Only those agreements and covenants of the parties
that are by their terms applicable in whole or in part after the Effective Time
shall survive the Effective Time. All other representations, warranties,
agreements and covenants shall be deemed to be conditions of the Plan and shall
not survive the Effective Time. If the Plan shall be terminated, the agreements
of the parties in Section 6.2, this Section 8.2, Section 8.6, Section 8.7 and
the last four sentences of Section 4.4 hereof shall survive such termination.
A-34
<PAGE>
SECTION 8.3. WAIVER. Prior to the Effective Time, any provision of this
Plan may be: (i) waived by the party benefitted by the provision; or (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.
SECTION 8.4. COUNTERPARTS. This Plan 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.
SECTION 8.5. GOVERNING LAW. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of California.
SECTION 8.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS PLAN OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.7. EXPENSES. Each party hereto will bear all expenses incurred
by it in connection with this Plan and the transactions contemplated hereby.
SECTION 8.8. NOTICES. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram or telex
(confirmed in writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other party hereto.
If to the Company, to:
Santa Monica Bank
1251 Fourth Street
Santa Monica, Ca 90401
Telecopier: (310) 917-6573
Attention: Aubrey L. Austin
With copies to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Telecopier: (213) 669-6407
Attention: Edward J. McAniff
and
George W. Collins, Inc.
520 Broadway, Suite 300
P.O. Box 2133
Santa Monica, CA 90407-2133
Telecopier: (310) 458-2907
Attention: George W. Collins, Esq.
If to Western or Western Bank, to:
Western Bancorp
1251 Westwood Blvd.
Los Angeles, CA 90024
Telecopier: (310) 477-8611
Attention: Matthew P. Wagner
A-35
<PAGE>
With copies to:
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Telecopier: (213) 683-0458
Attention: Stanley F. Farrar
SECTION 8.9. ENTIRE AGREEMENT; ETC. This Plan, together with the
Confidentiality Agreement and the Shareholder Agreements of even date herewith,
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 the Plan shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Except as to Section 4.6 hereof, nothing in
this Plan is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Plan.
SECTION 8.10. ASSIGNMENT. This Plan may not be assigned by any party
hereto without the written consent of the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be executed
by their duly authorized officers as of the day and year first above written.
WESTERN BANCORP
By: /s/ ARNOLD C. HAHN
-----------------------------------
Name: Arnold C. Hahn
Title:Executive Vice President
and Chief Financial Officer
WESTERN BANK
By: /s/ ARNOLD C. HAHN
-----------------------------------
Name: Arnold C. Hahn
Title:Executive Vice President
and Chief Financial Officer
SANTA MONICA BANK
By: /s/ AUBREY L. AUSTIN
-----------------------------------
Name: Aubrey L. Austin
Title: President and Chief
Executive Officer
A-36
<PAGE>
APPENDIX B
[LOGO]
November 20, 1997 PERSONAL AND CONFIDENTIAL
Board of Directors
Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Members of the Board:
We understand that Santa Monica Bank, a California banking corporation
("Seller"), Western Bancorp, a California corporation ("Buyer"), and its
subsidiary, Western Bank, a California banking corporation, propose to enter
into an Agreement and Plan of Merger to be dated as of July 30, 1997 (the
"Agreement") pursuant to which (i) Buyer will acquire Seller in exchange for the
Cash Consideration and/ or the Stock Consideration (as defined below) and (ii)
Seller will merge with a wholly owned subsidiary of Buyer (the "Acquisition").
You have informed us that prior to your reaching a determination with respect to
the proposed Acquisition, you engaged us to assist you in analyzing strategic
alternatives available to Seller, including the Acquisition, to increase
shareholder value as well as to provide, if so requested, additional services
such as soliciting, or assisting you in soliciting, indications of interest form
third parties, assist you in analyzing and negotiating the Acquisition and
delivering fairness opinions at specified dates. You requested that we assist
you in analyzing and negotiating the Acquisition and that we deliver this
fairness opinion. You have not requested us to solicit, nor assist you in
soliciting, indications of interest from third parties nor to deliver any
opinions other than this opinion.
Pursuant to the Acquisition, as more fully described in the Agreement, we
understand that each outstanding share of the common stock, $3 par value per
share ("Seller Common Stock"), of Seller will be converted, into the right to
receive either (i) $28.00 in cash (the "Cash Consideration") or (ii) 0.875
shares of the common stock, no par value per share ("Buyer Common Stock"), of
Buyer, (the "Stock Consideration"). Holders of Seller Common Stock may elect to
receive the Cash Consideration and, if the number of shares represented by such
elections is so great as to prevent the completion of the Acquisition as a tax-
free reorganization, all of the holders of Seller Common Stock will receive the
Cash Consideration. If the number of shares represented by the holders of Seller
Common Stock electing to receive the Cash Consideration is such as to permit the
completion of the Acquisition as a tax-free reorganization, the remaining
holders of Seller Common Stock shall receive the Stock Consideration, subject to
adjustment and/or proration under certain circumstances set forth in the
Agreement. The terms and conditions of the Acquisition are set forth in more
detail in the Agreement and the foregoing description of the Acquisition is
subject in all respects to such terms and conditions.
You have asked for our opinion as investment bankers as to whether the Cash
Consideration and the Stock Consideration to be received by the shareholders of
Seller pursuant to the Acquisition are each fair to such shareholders from a
financial point of view, as of the date hereof.
In connection with our opinion, we have, among other things; (i) reviewed
certain publicly available financial and other data with respect to Seller and
Buyer, including the consolidated financial statements for recent years and
interim periods to June 30, 1997 and certain other relevant financial and
operating data relating to Seller and Buyer made available to us from published
sources and from the internal records of Seller and Buyer; (ii) reviewed the
financial terms and conditions of the July 29 draft of the Agreement; (iii)
reviewed certain publicly available information concerning the trading of, and
the trading
[LOGO]
<PAGE>
Santa Monica Bank
November 20, 1997
Page 2
market for, Seller Common Stock and Buyer Common Stock; (iv) compared Seller and
Buyer from a financial point of view with certain other companies in the banking
industry which we deemed to be relevant; (v) considered the financial terms, to
the extent publicly available, of selected recent business combinations of
companies in the banking industry which we deemed to be comparable, in whole or
in part, to the Acquisition; (vi) reviewed and discussed with representatives of
the management of Seller and Buyer certain information of a business and
financial nature regarding Seller and Buyer, furnished to us by them, including
financial forecasts and related assumptions of Seller and Buyer; (vii) made
inquiries regarding and discussed the Acquisition and the draft Agreement and
other matters related thereto with Seller's counsel; and (viii) performed such
other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for Seller and Buyer provided to us by their respective managements,
upon their advice and with your consent we have assumed for purposes of our
opinion that the forecasts have been reasonably prepared on bases reflecting the
best available estimates and judgments of their respective managements at the
time of preparation as to the future financial performance of Seller and Buyer
and that it was reasonable for us to rely on such forecasts in forming our
opinion. We have also assumed that there have been no material changes in
Seller's or Buyer's assets, financial condition, results of operations, business
or prospects since the respective dates of their last financial statements made
available to us. We have relied on advice of counsel as to all legal matters
with respect to Seller, the Acquisition and the draft Agreement. We have assumed
that the Acquisition will be consummated in a manner that complies in all
respects with the applicable provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934 and all
other applicable federal and state statutes, rules and regulations. We are not
experts in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for losses with respect thereto and have assumed,
with your consent, that such allowances for each of Seller and Buyer are in the
aggregate adequate to cover such losses. In addition, we have not assumed
responsibility for reviewing any individual credit files, or making an
independent evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of Seller nor Buyer, or have we been
furnished with any such appraisals. Buyer has informed us, and we have assumed
with your consent, that the Acquisition will be recorded as a purchase under
generally accepted accounting principles. Finally, our opinion is based on
economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have further assumed with your consent that the Acquisition will be
consummated in accordance with the terms described in the draft Agreement,
without any further amendments thereto, and without waiver by Seller of any of
the conditions to its obligations thereunder.
We have acted as financial advisor to Seller in connection with the
Acquisition and will receive a fee for our services, including rendering this
opinion, a significant portion of which is contingent upon the consummation of
the Acquisition. In the ordinary course of our business, we actively trade the
equity securities of Buyer for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Cash Consideration and the Stock Consideration to be
received by the shareholders of Seller pursuant to the Acquisition are each fair
to such shareholders from a financial point of view, as of the date hereof.
B-2
<PAGE>
Santa Monica Bank
November 20, 1997
Page 3
We are not expressing an opinion regarding the price at which the Buyer Common
Stock may trade at any future time. The Stock Consideration to be received by
the shareholders of Seller pursuant to the Acquisition is based upon a fixed
exchange ratio and, accordingly, the market value of the Stock Consideration may
vary significantly.
This opinion is directed to the Board of Directors of Seller in its
consideration of the Acquisition and is not a recommendation to any shareholder
as to how such shareholder should vote with respect to the Acquisition. Further,
this opinion addresses only the financial fairness of the Cash Consideration and
the Stock Consideration to the shareholders and does not address the relative
merits of the Acquisition and any alternatives to the Acquisition, Seller's
underlying decision to proceed with or effect the Acquisition, or any other
aspect of the Acquisition. This opinion may not be used or referred to by
Seller, or quoted or disclosed to any person in any manner, without our prior
written consent. In furnishing this opinion, we do not admit that we are experts
within the meaning of the term "experts" as used in the Securities Act and the
rules and regulations promulgated thereunder.
Very truly yours,
/s/ MONTGOMERY SECURITIES
--------------------------------------
MONTGOMERY SECURITIES
B-3
<PAGE>
APPENDIX C
September 17, 1997
[LOGO]
Piper Jaffray Inc.
222 South Ninth
Street
Minneapolis, MN
55402-3804
612 342-6000
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 Merger (the "Agreement") dated July 30, 1997, by
and among Western Bancorp ("Western" or the "Buyer"), a California corporation
formerly known as Monarch Bancorp, Western Bank, a California banking
corporation ("Western Bank"), and Santa Monica Bank ("Santa Monica Bank"), a
California banking corporation. Pursuant to the Agreement, Santa Monica Bank
will be merged with and into Western Bank, a subsidiary of Western, with Western
Bank being the surviving corporation in the Transaction (except as described
below). Pursuant to the Transaction, as more fully described in the Agreement,
outstanding shares of Santa Monica Bank shall generally become and be converted
into the right to receive, at the election of each holder thereof, either (a)
$28 in cash without interest (the "Cash Consideration") or (b) 0.875 shares of
Western Common Stock (the "Stock Consideration"). No more than 50% of the
outstanding shares of Santa Monica Bank Common Stock shall be converted into the
right to receive Stock Consideration, unless, at its sole discretion, Western
chooses to increase the number of shares with the right to receive Stock
Consideration. Furthermore, prior to the election, Western, at its sole option,
may increase the Stock Consideration. If the aggregate Cash Consideration plus
(i) the amount of cash in lieu of fractional shares, and (ii) amounts payable
with respect to any dissenters shares (clauses (i) and (ii) in aggregate, the
"Cash Amount"), would exceed 60% of the sum of the Cash Amount, the aggregate
Cash Consideration and, the aggregate value of the Stock Consideration, and
Western does not elect to increase the Stock Consideration, each share of Santa
Monica Bank Common Stock shall be converted into the right to receive the Cash
Consideration. In this case, the Transaction shall be effected by the merger of
a de novo wholly-owned subsidiary of Western into Santa Monica Bank, with Santa
Monica Bank being the surviving entity. In all cases, 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 not acted as a manager of
underwritings for Western. 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 and Plan of Merger.
2. Reviewed the Reports on Form 10-KSB, as amended, for Western, and its
pedecessors for the years ended December 31, 1996, December 31, 1995,
December 31, 1994, and December 31, 1993.
C-1
<PAGE>
Western Bancorp
September 17, 1997
Page 2
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.
4. Reviewed Reports on Form 10-K for SC Bancorp for the years ended December
31, 1996, December 31, 1995, December 31, 1994, and December 31, 1993.
5. Reviewed the Reports on Form 10-QSB or Form 10-Q for Western for the
quarters ended June 30, 1997, March 31, 1997, September 30, 1996, and June
30 1996.
6. 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.
7. Reviewed the Reports on Form 10-Q for SC Bancorp for the quarters ended June
30, 1997, March 31, 1997, September 30, 1996, and June 30, 1996.
8. Reviewed the Reports on Form F-2 for Santa Monica Bank for the years ended
December 31, 1996, December 31, 1995, December 31, 1994, and December 31,
1993.
9. Reviewed the Reports on Form F-4 for Santa Monica Bank for the quarters
ended June 30, 1997, March 31, 1997, September 30, 1996, and June 30, 1996.
10. Reviewed Western's Current Reports on Form 8-K, dated August 28, 1997,
August 11, 1997, July 17, 1997, June 19, 1997, May 2, 1997, and April 14,
1997.
11. Reviewed the registration statement on Form S-4/A for Western filed on
September 10, 1997.
12. Reviewed financial forecasts for Western for the periods ending December
31, 1997 through 2002 furnished by Western management.
13. Reviewed financial forecasts for Santa Monica Bank for the periods ending
December 31, 1997 through 2002 as furnished by Santa Monica Bank and
revised by Western management.
14. Conducted discussions with certain members of Western's 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 Santa
Monica Bank and the prospects for the combined company after consummation
of the proposed Transaction.
15. Visited the headquarters of Santa Monica Bank 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 Santa Monica Bank.
16. Reviewed the financial terms, to the extent publicly available, of certain
comparable mergers and acquisitions which we deemed relevant.
17. Performed a discounted implied dividend analysis on the financial forecasts
for Santa Monica Bank as provided by Santa Monica Bank management and
revised by Western management.
18. Considered the projected proforma effect of the Transaction on Western's
earnings per share and book value per share for the three years ending
December 31, 2000.
19. Compared certain financial data of Western and Santa Monica Bank with
certain financial data of companies deemed similar to Western and Santa
Monica Bank or within the business sector in which Western or Santa Monica
Bank operates.
C-2
<PAGE>
Western Bancorp
September 17, 1997
Page 3
20. 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 Santa Monica
Bank 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 Santa Monica Bank's management that the information
provided pertaining to Western and Santa Monica Bank 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 Santa Monica Bank is a party to any pending transaction (with the
exception of Western's pending acquisition of SC Bancorp, private placement of
equity to finance the Transaction, and a contemplated offering of trust
preferred securities) including external financing, recapitalizations,
acquisitions or merger discussions, other than the Transaction or in the
ordinary course of business.
In particular, we have also relied upon the assumption that Western's
non-binding agreements with current shareholders to purchase between
approximately $55 million and $121 million in Western Common Stock at $28 per
share will allow Western to raise the capital necessary to consummate the
Transaction and maintain adequate regulatory capital ratios. Furthermore, we
have relied upon the assumption that no more than 50% of Santa Monica Bank's
shares will be converted into the right to receive Stock Consideration, and that
Western will not choose to materially increase the Stock Consideration ratio.
In arriving at our opinion, we have not performed nor been furnished any
appraisals or valuations of the specific assets or liabilities of Santa Monica
Bank being conveyed in the Transaction. We express no opinion regarding the
liquidation value of Santa Monica Bank. We have undertaken no independent
analysis of any pending or threatened litigation, possible unasserted claims or
other contingent liabilities, to which either Western, Santa Monica Bank 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 SANTA MONICA BANK
1251 FOURTH STREET
SANTA MONICA, CALIFORNIA 90401
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS DECEMBER 23, 1997
The undersigned hereby constitutes and appoints W. Paul Carver, John W.
Garacochea and Joe Crail, 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 Santa Monica Bank (the "Bank") that
the undersigned would be entitled to vote if personally present at the Bank's
Special Meeting of Shareholders to be held in the Starlight Room of the
Miramar Hotel, Ocean Avenue and Wilshire Boulevard, Santa Monica, California
90401 on December 23, 1997 at 3:00 p.m. and at any postponement or
adjournment thereof, in the following manner:
(continued on reverse side)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- -------------------------------------------------------------------------------
Please mark your votes as indicated in this example /x/
FOR against abstain
1. APPROVAL OF THE PRINCIPAL / / / / / /
TERMS OF THE MERGER OF
SANTA MONICA BANK WITH A
SUBSIDIARY OF WESTERN
BANCORP, WITH THE RESULT
THAT SANTA MONICA BANK
WILL BECOME A WHOLLY-
OWNED SUBSIDIARY OF
WESTERN BANCORP.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT
REPRESENTS WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE CHOICE
SPECIFIED HEREON. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR
APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER 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 THAT 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.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE
Dated , 1997
---------------
Signature
-----------------
Signature
-----------------
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<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 DECEMBER 23, 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") that 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 December 23, 1997 at 10:00 a.m. and at any postponement or
adjournment thereof, in the following manner:
1. APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER OF SANTA MONICA BANK WITH A
SUBSIDIARY OF WESTERN BANCORP, WITH THE RESULT THAT SANTA MONICA BANK WILL
BECOME A WHOLLY-OWNED SUBSIDIARY OF WESTERN BANCORP
/ / 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 CHOICE SPECIFIED ABOVE. IF
NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE PRINCIPAL
TERMS OF THE MERGER 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 THAT 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. Article Six of Western's Restated Articles of
Incorporation and Article VI of Western's Restated Bylaws 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>
EXHIBITS DESCRIPTION AND METHOD OF FILING
- ------ --------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of July 30, 1997, and amended and
restated as of November 20, 1997, by and among Western, Western Bank and
SMB (incorporated by reference to Appendix A to this Registration
Statement on Form S-4)
4.1 Form of Certificate representing shares of Western Common Stock
(incorporated by reference to Exhibit 3.1 to the Registrant's Current
Report on Form 8-K, dated June 18, 1997)
5.1 Opinion of Sullivan & Cromwell
8.1 Tax Opinion of Sullivan & Cromwell
8.2 Tax Opinion of O'Melveny & Myers LLP
10.1 Form of Standby Stock Purchase Agreement
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Arthur Andersen LLP (Santa Monica Bank)
23.3 Consent of Deloitte & Touche LLP (Santa Monica Bank)
23.4 Consent of Deloitte & Touche LLP (SC Bancorp)
23.5 Consent of Deloitte & Touche LLP (California Commercial Bankshares)
23.6 Consent of Sullivan & Cromwell (included in opinion filed as Exhibit 5.1
hereto)
23.7 Consent of Sullivan & Cromwell for Tax Opinion that is filed as Exhibit
8.1 hereto
23.8 Consent of O'Melveny & Myers LLP for Tax Opinion that is filed as Exhibit
8.2 hereto
23.9 Consent of Vavrinek, Trine, Day & Co.
24.1 Power of Attorney (set forth on Page II-3 of this Registration Statement)
99.1 Consent of Piper Jaffray Inc.
99.2 Consent of NationsBanc Montgomery Securities, Inc.
99.3 Form of Letter of Transmittal and Form of Cash Election
99.4 Consent of Aubrey L. Austin
</TABLE>
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
II-1
<PAGE>
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 (c) 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) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) 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.
(g) 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 in 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 November 19, 1997.
<TABLE>
<S> <C> <C>
WESTERN BANCORP
By: /s/ ARNOLD C. HAHN
-----------------------------------------
Name: Arnold C. Hahn
Title:Executive Vice President and
Chief Financial Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Arnold C. Hahn and Matthew P. Wagner, 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 capacities, 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, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, 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 either of them, or their or his
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<S> <C> <C>
/s/ HUGH S. SMITH, JR.
- ------------------------------ Chairman, Chief Executive November 19, 1997
Hugh S. Smith, Jr. Officer and Director
/s/ ARNOLD C. HAHN Executive Vice President
- ------------------------------ and Chief Financial November 19, 1997
Arnold C. Hahn Officer
/s/ MATTHEW P. WAGNER
- ------------------------------ President and Director November 19, 1997
Matthew P. Wagner
/s/ HAROLD A. BEISSWENGER
- ------------------------------ Director November 19, 1997
Harold A. Beisswenger
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<S> <C> <C>
/s/ RICE E. BROWN
- ------------------------------ Director November 19, 1997
Rice E. Brown
/s/ JOSEPH J. DIGANGE
- ------------------------------ Director November 19, 1997
Joseph J. Digange
/s/ JOHN M. EGGEMEYER
- ------------------------------ Director November 19, 1997
John M. Eggemeyer
/s/ WILLIAM C. GREENBECK
- ------------------------------ Director November 19, 1997
William C. Greenbeck
/s/ LARRY D. HARTWIG
- ------------------------------ Director November 19, 1997
Larry D. Hartwig
/s/ WILLIAM H. JACOBY
- ------------------------------ Director November 19, 1997
William H. Jacoby
/s/ ROBERT L. MCKAY
- ------------------------------ Director November 19, 1997
Robert L. McKay
/s/ JOHN W. ROSE
- ------------------------------ Director November 19, 1997
John W. Rose
/s/ MARK H. STUENKEL
- ------------------------------ Director November 19, 1997
Mark H. Stuenkel
/s/ DALE E. WALTER
- ------------------------------ Director November 19, 1997
Dale E. Walter
/s/ DONALD E. WOOD
- ------------------------------ Director November 19, 1997
Donald E. Wood
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION AND METHOD OF FILING
- ------ --------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 30, 1997, and amended and
restated as of November 20, 1997, by and among Western, Western Bank and
SMB (incorporated by reference to Appendix A to this Registration
Statement on Form S-4)
4.1 Form of Certificate representing shares of Western Common Stock
(incorporated by reference to Exhibit 3.1 to the Registrant's Current
Report on Form 8-K, dated June 18, 1997)
5.1 Opinion of Sullivan & Cromwell
8.1 Tax Opinion of Sullivan & Cromwell
8.2 Tax Opinion of O'Melveny & Myers LLP
10.1 Form of Standby Stock Purchase Agreement
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Arthur Andersen LLP (Santa Monica Bank)
23.3 Consent of Deloitte & Touche LLP (Santa Monica Bank)
23.4 Consent of Deloitte & Touche LLP (SC Bancorp)
23.5 Consent of Deloitte & Touche LLP (California Commercial Bankshares)
23.6 Consent of Sullivan & Cromwell (included in opinion filed as Exhibit 5.1
hereto)
23.7 Consent of Sullivan & Cromwell for Tax Opinion that is filed as Exhibit
8.1 hereto
23.8 Consent of O'Melveny & Myers LLP for Tax Opinion that is filed as Exhibit
8.2 hereto
23.9 Consent of Vavrinek, Trine, Day & Co.
24.1 Power of Attorney (set forth on Page II-3 of this Registration Statement)
99.1 Consent of Piper Jaffray Inc.
99.2 Consent of NationsBanc Montgomery Securities, Inc.
99.3 Form of Letter of Transmittal and Form of Cash Election
99.4 Consent of Aubrey L. Austin
</TABLE>
II-5
<PAGE>
Exhibit 5.1
November 19, 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 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 Santa Monica Bank with a
<PAGE>
Western Bancorp -2-
subsidiary of the 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]
August 29, 1997
Western Bancorp,
1251 Westwood Blvd.,
Los Angeles, California 90024.
Western Bank,
1251 Westwood Blvd.,
Los Angeles, California 90024.
Gentlemen:
We have acted as counsel to Western Bancorp, a California corporation
("Western"), and Western Bank, a California banking corporation ("Western
Bank"), in connection with the merger of Santa Monica Bank, a California banking
corporation (the "Company"), with and into Western Bank as contemplated by the
Agreement and Plan of Merger dated as of the 30th day of July, 1997, by and
among Western, Western Bank and the Company (the "Merger Agreement"), and we
render this opinion to you pursuant to Section 5.1(g) of the Merger Agreement.
Capitalized terms not defined herein have the meanings assigned to them in the
Merger Agreement.
<PAGE>
Western Bancorp
Western Bank -2-
For purposes of the opinion set forth below, we have examined (i) the
Merger Agreement, (ii) the letters of representation and certificates that we
have received from Western, Western Bank and the Company, and (iii) such other
matters as we have deemed necessary or appropriate for purposes of rendering
this opinion.
In connection with this opinion and with your consent, we have assumed
and not attempted to verify independently that:
(1) the Merger will be effected in accordance with the Merger
Agreement and will not be effected under the circumstances described in Section
1.3(c)(iii) of the Merger Agreement;
(2) all the provisions of the Merger Agreement will be performed in
accordance with their terms;
(3) the representations made to us in letters from Western, Western
Bank and the Company are true and complete and will continue to be true and
complete between the date of this opinion and the Effective Time;
(4) No persons other than those listed as 5% shareholders in the
representation letter we have received from the Company own 5% or more of the
Company Common Stock; and
<PAGE>
Western Bancorp
Western Bank -3-
(5) there will be no change in any of the facts or applicable law
material to this opinion between the date of this opinion and the Effective
Time.
On the basis of the foregoing, we advise you that, in our opinion, the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code and Western, Western Bank and the Company will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
Exhibit 8.2
[LETTERHEAD]
August
29th
1 9 9 7
Our File Number
Writer's Direct Dial Number 750,335-2
(213) 669-6467
Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Re: Proposed Merger of Santa Monica Bank with
and Into Western Bank, a Wholly-Owned
Subsidiary of Western Bancorp
------------------------------------------
Dear Sir or Madam:
You have requested our opinion concerning the qualification, as a
reorganization for purposes of the Internal Revenue Code of 1986 (the "Code"),
of the proposed statutory merger (the "Merger") of Santa Monica Bank, a
California banking corporation (the "Company") with and into Western Bank, a
California banking corporation ("Western Bank"), a wholly-owned subsidiary of
Western Bancorp, a California corporation ("Western").
In connection with this opinion, we have examined such documents and
matters of law and fact as we have considered appropriate, including the
Agreement and Plan of Merger, dated as of July 30, 1997 (the "Agreement"), and
with your consent have relied (without any independent investigation on our
part) on the representations contained in the certificates of Western, Western
Bank and the Company, each delivered in connection with this opinion.
Pursuant to the Agreement, and for good and persuasive business
reasons, the Company, at the effective time of the Merger, will be merged, in
accordance with applicable state laws, with and into Western Bank, which will
continue as the surviving corporation. As a result of the Merger, (i) the
Company's
<PAGE>
Page 2 - Santa Monica Bank - August 29, 1997
separate corporate existence will cease, and the Company's assets and business
will be held by Western Bank following the Merger; (ii) each share of capital
stock of Western Bank issued prior to the effective time of the Merger will
continue to be an issued share of capital stock of Western Bank; and (iii)
each outstanding share of Company Common Stock will be converted, at the
election of each holder as provided in the Agreement, into the right to
receive either cash or a fraction of a share of Western Common Stock. No stock
of Western Bank will be issued or used in the Merger. Following the Merger,
Western Bank will continue the business operations of the Company.
Based upon the aforementioned facts and representations, and our
review and analysis of the current state of the law, it is our opinion that
the Merger of the Company with and into Western Bank will be a reorganization
within the meaning of Section 368 (a) of the Code, and that Western, Western
Bank and the Company will each be a party to that reorganization.
This opinion is based on current authorities and upon facts and
assumptions as of the date of this opinion. It is subject to change in the
event of a change in the applicable law or change in the interpretation of
such law by the courts or by the Internal Revenue Service, or a change prior
to the effective time of the Merger of any of the facts and assumptions upon
which it is based. There is no assurance that legislative or administrative
changes or court decisions may not be forthcoming which would significantly
modify the statements and opinions expressed herein. Any such changes may or
may not be retroactive with respect to transactions prior to the date of such
changes. This opinion represents only counsel's best legal judgment, and has
no binding effect or official status of any kind, so that no assurance can be
given that the positions set forth above will be sustained by a court, if
contested. No ruling will be obtained from the Internal Revenue Service with
respect to the Merger.
This opinion is furnished by us as counsel for Santa Monica Bank. We
consent to the filing with the Securities and Exchange Commission of this
letter as an exhibit to the Registration Statement, and to the references to
us under the headings "Summary--Certain Federal Income Tax Consequences" and
"The Merger--Certain Federal Income Tax Consequences". 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 Securities Act of 1933.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE>
Exhibit 10.1
STANDBY STOCK PURCHASE AGREEMENT
THIS STANDBY STOCK PURCHASE AGREEMENT (the "Agreement"), made and
entered into as of November_____, 1997, by and between Western Bancorp, a
California corporation (the "Company"), and __________________, a _____________
(the "Purchaser").
WITNESSETH:
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of July 30, 1997, and amended and restated on September 29, 1997 (the
"Plan"), providing for the acquisition (the "Acquisition") of Santa Monica Bank
(the "Bank");
WHEREAS, the Company has requested the Purchaser to assist with the
financing of the Acquisition by purchasing common stock, no par value ("Common
Stock"), of the Company at the subscription price of $28.00 per share (the
"Subscription Price"), as provided herein;
WHEREAS, the Purchaser desires to, and by these presents hereby does,
agree to purchase the number of shares of Common Stock specified herein and to
serve as a Standby Purchaser for up to a specified additional number of shares
of Common Stock, all as is more particularly set forth herein;
WHEREAS, in consideration for the Purchaser's agreement to serve as a
Standby Purchaser, the Company desires to, and by these presents hereby does,
agree to sell to the Purchaser at the price set forth herein a certain minimum
number of shares of Common Stock, all as more particularly set forth herein; and
WHEREAS, the Purchaser acknowledges that, notwithstanding anything to
the contrary herein contained or implied, in the event that the Plan is
terminated prior to the Effective Time (as defined therein) in accordance with
its terms so that the Acquisition will not take place, the Company will not be
obligated by this Agreement to sell to the Purchaser any shares of Common Stock.
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration the
<PAGE>
receipt and sufficiency of all of which is hereby acknowledged, the parties
hereto agree as follows:
1. PURCHASE AND DELIVERY OF MINIMUM SHARES.
(a) Subject to the terms and conditions herein set forth, the Company
hereby agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, at the Subscription Price per share,
___________ shares of Common Stock (the "Minimum Shares").
(b) Subject to the terms and conditions herein set forth, the
Purchaser hereby agrees to purchase from the Company, at the Subscription
Price per share, up to ___________ additional shares of Common Stock as are
allocated to the Purchaser pursuant to Section 1(c) (the "Standby Shares").
(c) The Purchaser and the Company hereby acknowledge and agree that
the Company has entered into, or contemplates entering into, one or more
other Standby Stock Purchase Agreements with certain other parties
(together with the Purchaser, the "Standby Purchasers") providing for the
same purchase price per share of Common Stock as this Agreement and having
material terms substantially similar to those in this Agreement except that
they may provide for the purchase of a different number of Minimum Shares
in paragraph 1(a) and a different number of Standby Shares in paragraph
1(b). If the Company determines, in its sole discretion, that it is
desirable in connection with the financing of the Acquisition to sell to
the Standby Purchasers an aggregate number of additional shares of Common
Stock over and above the aggregate number of Minimum Shares (the
"Additional Shares"), such Additional Shares shall be made available to the
Standby Purchasers in accordance with their respective agreements;
PROVIDED, HOWEVER, if the number of the Additional Shares is less than the
aggregate of the Standby Shares that all Standby Purchasers are committed
to purchase pursuant to their respective agreements, the Additional Shares
shall be allocated as nearly as possible on a pro rata basis among all
Standby Purchasers based upon the number of Standby Shares each Standby
Purchaser is committed to purchase, so that each Standby Purchaser shall
purchase a number
-2-
<PAGE>
of shares equal to the number of Additional Shares multiplied by a
fraction, the numerator of which is the number of Standby Shares that such
Standby Purchaser has committed to purchase, and the denominator of which
is the aggregate number of Standby Shares that all Standby Purchasers have
committed to purchase. Subject to the terms and conditions herein set
forth, the Purchaser agrees to purchase such number of shares as are
allocated to it pursuant to Sections 1(a), 1(b) and 1(c). Provided that
the Acquisition is effected substantially as provided in the Plan and that
the Purchaser's purchase of shares of Common Stock is effected
substantially concurrently therewith as provided herein, the rights or
obligations of the Purchaser and the Company hereunder are not contingent
on the consummation of the transactions contemplated in any of the other
Standby Stock Purchase Agreements.
2. THE CLOSING.
One business day after the Election Deadline (as defined in the Plan)
and following the Company's determination of the number of Additional Shares
that it desires to issue, if any, the Company shall notify the Purchaser of the
number of Standby Shares, if any, to be purchased by the Purchaser pursuant to
Sections 1(b) and 1(c). Three business days after the Election Deadline (the
"Payment Date"), the Purchaser shall deliver to National Bank of Southern
California or its successor, as escrow agent (the "Escrow Agent"), payment of
the Subscription Price for the Standby Shares and the Minimum Shares (the
"Subscription Payment"). The Subscription Payment will be held by the Escrow
Agent in an escrow account pursuant to an escrow agreement to be entered into
among the Company, the Escrow Agent and the Purchaser (and other purchasers of
shares of Common Stock pursuant to the other Standby Stock Purchase Agreements),
substantially in the form of Exhibit 1 hereto. The Purchaser shall deliver the
Subscription Payment to the Escrow Agent either by certified or official bank
check in next day funds or by wire transfer. If the Purchaser chooses to
deliver the Subscription Payment by certified or official bank check, the
Purchaser shall deliver the certified or official bank check to the following
address: National Bank of Southern California Escrow Division, Escrow
#011864-GG, 4100 Newport Place, Suite 130, Newport Beach, California 92660. If
the Purchaser chooses to deliver the Subscription Payment by
-3-
<PAGE>
wire transfer, (i) the Purchaser shall call either Gloria Garriott or Michele
Mess at (714) 863-2485 or (714) 863-2483 on the Payment Date and (ii) the
Purchaser shall ensure that [his/her] wire clearly indicates [his/her name] and
that the wire transfer is made:
To: National Bank of Southern
California
3951 South Plaza Drive
Santa Ana, California 92704
Account Number: 01900307
ABA/Routing Number: 1222-3980-1
Account Name: National Bank of Southern California Escrow Division
Trust Account
Escrow Number: 011864-GG
3. DELIVERY OF STANDBY SHARES AND MINIMUM SHARES.
Prior to the Effective Time (as defined in the Plan), the Company
shall deliver to U.S. Stock Transfer Corporation, stock transfer agent, the
Standby Shares and the Minimum Shares to be delivered to the Purchaser. At the
Effective Time, which shall be no more than ten business days following the
Election Deadline (such time and date being referred to as the "Closing Time",
the date of the Closing Time being referred to as the "Closing Date" and the
consummation of the transaction being referred to as the "Closing"), U.S. Stock
Transfer Corporation shall cause to be issued and delivered to the Purchaser the
Minimum Shares and the Standby Shares to be purchased by the Purchaser
hereunder, registered in the name of the Purchaser or its nominees, as the
Purchaser may specify at least three business days prior to the Closing Date,
for the Purchaser's account or for the account of its discretionary clients,
against delivery by the Escrow Agent of the Subscription Payment plus interest
actually incurred on such Subscription Payment to the Company.
4. AGREEMENTS AND CONSENTS OF THE PURCHASER.
-4-
<PAGE>
The Purchaser hereby agrees with the Company as follows:
(a) The Purchaser acknowledges and agrees that, notwithstanding
anything to the contrary herein contained or implied, exclusive of any
shares that may be attributable to the Purchaser by virtue of a limited
partnership interest in Castle Creek Partner's Fund-I, the Company will not
issue to the Purchaser shares of Common Stock in an amount that, when
aggregated with other shares of Common Stock beneficially owned or
controlled by or subject to the power to vote of (in each case, within the
meaning of the Change in Bank Control Act of 1978 and the rules and
regulations thereunder) the Purchaser, would exceed 9.9% of the total
issued and outstanding shares of Common Stock upon completion of the
Acquisition, including shares issued pursuant to any other Standby Stock
Purchase Agreements.
(b) The Purchaser acknowledges and agrees that the Company may
decline to issue any of the Standby Shares or Minimum Shares to the
Purchaser hereunder if, in the reasonable opinion of counsel to the
Company, the Purchaser is required to obtain prior clearance or approval of
such transaction from any state or federal bank regulatory authority and if
such approval or clearance has not been obtained or if satisfactory
evidence thereof has not been presented to the Company by the Closing Date,
and a failure of the Purchaser to purchase the Minimum Shares in such event
will be without liability to the Purchaser.
5. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants to the Purchaser as of
the date hereof and as of the Closing Date as follows:
(i) The Company is a "bank holding company" within the
meaning of the Bank Holding Company Act of 1956, as amended, and has
been duly incorporated and is an existing corporation in good standing
under the laws of the State of California with corporate power and
authority to perform its obligations under this Agreement and the
Plan.
-5-
<PAGE>
(ii) The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and by the Plan have been duly
authorized by all necessary corporate action of the Company; and this
Agreement, when duly executed and delivered by the Purchaser, will
constitute a valid and legally binding instrument of the Company
enforceable against the Company 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 and to general equity principles.
(iii) The Minimum Shares and the Standby Shares, if any,
when issued and delivered by the Company against payment therefor as
contemplated hereby, will be validly issued, fully paid and
non-assessable.
(iv) The Company has an authorized capitalization as set
forth in the Registration Statement on Form S-4 ("S-4") pursuant to
the Securities Act of 1933, as amended (the "Securities Act") as filed
with the Securities and Exchange Commission (the "SEC") on
November ___, 1997, and all of the issued shares of the Company's
Common Stock have been duly and validly authorized and issued and are
fully paid and non-assessable.
(v) The aggregate number of shares of the Company's Common Stock
that will be outstanding immediately after the issuance of the Minimum
Shares and any Standby Shares to the Purchaser, the issuance of the
Minimum Shares and any Standby Shares to each of the other Standby
Purchasers pursuant to the other Standby Stock Purchase Agreements and
the issuance of shares of Common Stock pursuant to the Plan shall be
at least 15,136,700 shares.
(vi) The execution, delivery and performance of this Agreement by
the Company, the consummation by the Company of the transactions
herein contemplated and contemplated by the Plan and the
-6-
<PAGE>
compliance by the Company with the terms hereof and thereof do not and
will not violate the Restated Articles of Incorporation or the
Restated By-laws of the Company, or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company is a party or by which the Company
is bound or to which any of its properties or assets are subject, with
such exceptions as would not have a material adverse effect on the
financial condition of the Company, or any applicable statute or any
order, judgment, decree, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its properties or assets; and no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the valid
authorization, execution, delivery and performance by the Company of
this Agreement, the issuance of the Standby Shares and the Minimum
Shares or the consummation by the Company of the other transactions
contemplated by this Agreement.
(vii) The Investor has been provided with the Company's
Annual Report on Form 10-KSB/A, as amended, for the year ended
December 31, 1996, the Company's Quarterly Reports on Form 10-QSB for
the quarter ended March 31, 1997 and Form 10-Q for the quarters ended
June 30, 1997 and September 30, 1997, the Company's Definitive Proxy
Statements with respect to the Company's shareholder meetings on June
2, 1997 and October 10, 1997, the Company's Current Reports on Form
8-K filed on April 14, 1997, May 2, 1997, June 18, 1997, July 15,
1997, August 11, 1997, August 28, 1997, October 3, 1997, October 24,
1997, October 31, 1997 and November 13, 1997 (the "Offering
Materials"). As of the date each such report was filed with the SEC,
each of such reports complied as to form in all material respects with
all applicable laws, rules and regulations, and none of such reports
included any untrue statement of a material fact or omitted to state
any material
-7-
<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading.
(viii) The S-4 and any and all amendments thereto will,
as of the date of each such filing, comply as to form in all material
respects with all applicable laws, rules and regulations, and none of
such filings will include as of the date of filing any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(b) The Purchaser hereby represents and warrants to the Company as
follows:
(i) The Purchaser is not a "bank holding company"
within the meaning of The Bank Holding Company Act of 1956, as amended,
and is a [corporation] [partnership] [trust] duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, with [corporate] power and authority to perform its
obligations under this Agreement.
(ii) Exclusive of any shares that may be attributable
to the Purchaser by virtue of a limited partnership interest in Castle
Creek Capital Partner's Fund-I, the aggregate of all shares of Common
Stock beneficially owned or controlled by or subject to the power to
vote of (in each case, within the meaning of the Change in Bank Control
Act of 1978 and the rules and regulations thereunder) the Purchaser,
together with the Standby Shares and the Minimum Shares, does not
exceed 9.9% of the total issued and outstanding shares of Common Stock
as of the date of the S-4.
(iii) The execution, delivery and performance of this
Agreement by the Purchaser and the consummation by the Purchaser of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action of the Purchaser; and this Agreement, when
duly executed and delivered by the Company, will constitute a valid
and legally binding instrument of the Purchaser,
-8-
<PAGE>
enforceable 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 and to general equity principles.
(iv) The Purchaser is not insolvent and has sufficient
liquidity (including funds under management) to purchase the Minimum
Shares and the Standby Shares on the terms and conditions contained in
this Agreement and will have such funds on the Payment Date. The
Purchaser has simultaneously with the execution and delivery of this
Agreement or prior thereto provided the Company with evidence or
substantiated that such Purchaser has the financial means to satisfy
its financial obligations under this Agreement and the foregoing
evidence and substantiation are true and accurate representations of
such means.
(v) The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act.
(vi) No state, federal or foreign regulatory approvals,
permits, licenses or consents or other contractual or legal
obligations are required in order for the Purchaser to enter into this
Agreement or otherwise purchase the Standby Shares and Minimum Shares,
except those that have been obtained or performed and those which the
failure to obtain or perform will not impair the Purchaser's ability
to perform its obligations under this Agreement.
(vii) The execution and delivery of this Agreement, the
consummation by the Purchaser of the transactions herein contemplated
and the compliance by the Purchaser with the terms hereof do not and
will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, [the
Articles of Incorporation or By-laws [or other organic documents] of
the Purchaser or] any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the
-9-
<PAGE>
Purchaser is a party or by which any of its properties or assets are
bound, with such exceptions as would not have a material adverse
effect on the financial condition of the Purchaser, or any applicable
statute or any order, judgment, decree, rule or regulation of any
court or governmental agency or body, domestic or foreign, having
jurisdiction over the Purchaser or any of its properties or assets;
and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the valid authorization, execution, delivery and
performance by the Purchaser of this Agreement or the consummation by
the Purchaser of the transactions contemplated by this Agreement.
(viii) Except for its investment, if any, in Castle Creek
Capital Partner's Fund-I, and except for its advisory arrangements
with the discretionary clients on behalf of which the Purchaser is
acquiring the Standby Shares and the Minimum Shares, the Purchaser has
not entered into any contracts, arrangements, understandings or
relationships (legal or otherwise) with any other unaffiliated person
or persons with respect to any securities of the Company, including
but not limited to transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or losses, or the
giving or withholding of proxies; and the Purchaser does not own any
securities of the Company that are pledged or otherwise subject to a
contingency the occurrence of which would give another person voting
power or investment power over such securities.
(ix) The Purchaser has received and reviewed the Offering
Materials and the Company has made available to the Purchaser at a
reasonable time prior to the date of this Agreement the opportunity to
ask questions and receive answers concerning the terms and conditions
of the offering and sale of the Minimum Shares and the Standby Shares
hereunder and such other information requested by the Purchaser and
-10-
<PAGE>
reasonably available to the Company, and (A) except as set forth in
this Agreement and in the Offering Materials, no representations or
warranties have been made to it by the Company, any of its officers,
directors or any agent, employee or affiliate of any of them and (B)
in entering into this Agreement it is not relying upon any information
other than information contained in this Agreement and in the Offering
Materials.
(x) The Purchaser is purchasing the Minimum Shares and the
Standby Shares, if any, for [its own account] [the account of its
discretionary clients] for investment purposes only and not with a
view to, or for sale in connection with, any distribution thereof.
(xi) The Purchaser acknowledges that the Minimum Shares and
the Standby Shares have not been registered under the Securities Act
or the securities laws of any state and, therefore, cannot be resold
unless they are registered under the Securities Act and any applicable
state securities laws or an exemption from registration is available
thereunder; provided that nothing in this clause (xi) shall affect the
Purchaser's rights under Section 6 hereof.
(xii) By reason of the Purchaser's knowledge and experience
in financial and business matters in general, and investments in
particular, or by reason of a pre-existing business or personal
relationship with the Company, the Purchaser is able to evaluate the
merits and risks of investment in the Minimum Shares and the Standby
Shares and has the capacity to protect its own interests in connection
with the purchase of the Minimum Shares and the Standby Shares. The
Purchaser is able to bear the economic risk of an investment in the
Minimum Shares and the Standby Shares, including, without limitation,
the risk of losing all of the Purchaser's investment in such shares.
At no time was the Purchaser presented with or solicited by any
leaflet, public or promotional meeting, newspaper or magazine article,
radio or television announcement or any
-11-
<PAGE>
other form of general advertising relating to the Minimum Shares or
the Standby Shares.
(xiii) The Purchaser acknowledges that the Minimum Shares and
the Standby Shares, if any, purchased hereunder will bear a legend in
substantially the following form:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. NEITHER THE SHARES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND ANY SUCH LAWS APPLICABLE THERETO AND THE RULES AND REGULATIONS
THEREUNDER.
6. REGISTRATION AND RESALE.
(a) The Company hereby covenants and agrees with the Purchaser that
the Company shall, at its expense, file under the Securities Act, no later
than 120 days after the Closing Date, a "shelf" registration statement
providing for the registration of, and the sale on a continuous or delayed
basis by the Purchaser or the Purchaser's clients, as the case may be, and
any transferee of, all of the Minimum Shares and the Standby Shares issued
and sold to the Purchaser or such clients hereunder, pursuant to Rule 415
or any similar rule that may be adopted by the SEC; PROVIDED, HOWEVER, that
the Purchaser (or any transferee) shall not be entitled to be named as a
selling securityholder in such registration statement or to use the
prospectus forming a part thereof for resales of the Minimum Shares and the
Standby Shares unless such person has returned a completed and signed
notice and questionnaire (a "Notice and Questionnaire") to the Company
sufficient to permit the Company to comply with the Securities Act and the
regulations thereunder. Notwithstanding the foregoing, if on or after such
date and prior to the filing of such registration statement (i) the Board
of Directors of the Company, in its reasonable judgment and in good faith,
resolves that (a) the filing of a registration statement or a sale of
shares of Common Stock pursuant thereto would materially interfere with any
significant acquisition,
-12-
<PAGE>
corporate reorganization or other similar transaction involving the Company
or (b) the filing of a registration statement or the sale of shares of
Common Stock pursuant thereto would require disclosure of material
information that the Company has a bona fide business purpose for
preserving as confidential and (ii) the Company gives the Purchaser written
notice of such determination, then the Company shall be entitled to
postpone for up to 90 days in the aggregate the filing or effectiveness of
such registration statement; PROVIDED, HOWEVER, that the Company shall not
be entitled to postpone such effectiveness more than three times. The
Company shall use its reasonable best efforts (i) to keep the registration
statement effective in order to permit the prospectus forming a part
thereof to be usable by the Purchaser (or any transferee) for resales of
registrable securities for a period of two years from the Closing Date or
such shorter period that will terminate when either (A) there are no
registrable securities outstanding or (B) Rule 144(k) promulgated under the
Securities Act is amended to permit resales without registration and
(ii) promptly after the request of the Purchaser or any transferee if such
person is not then named in the registration statement, to take any action
reasonably necessary to enable such person to use the prospectus forming a
part thereof for resales of the relevant Common Stock; PROVIDED, HOWEVER,
that nothing shall relieve the Purchaser or any transferee of the
obligation to return a completed and signed Notice and Questionnaire.
(b) Upon the registration of the Common Stock as provided hereunder,
the indemnification and contribution arrangements set forth in Exhibit 2
hereto shall apply.
(c) The Company agrees to file reports sufficient to meet the current
public information requirements of Rule 144(c) promulgated under the
Securities Act for a period of four years from the Closing Date or such
shorter period that will terminate when there are no registrable securities
outstanding.
7. CLOSING CONDITIONS.
-13-
<PAGE>
The respective obligations of the Purchaser and the Company to
consummate the purchase and sale of the Minimum Shares and the Standby Shares,
if any, offered by the Company to the Purchaser shall be subject, in the
discretion of the Company or the Purchaser, as the case may be, to the condition
that all representations and warranties and other statements of the other party
are, at and as of the Closing Time, true and correct in all material respects
and the condition that the other party shall have performed all of its
obligations hereunder theretofore to be performed in all material respects.
8. TERMINATION.
(a) Either of the parties hereto may terminate this Agreement (i) if
the Acquisition (substantially in accordance with the Plan) and/or the
transactions contemplated hereby are not consummated by February 28, 1998
for any reason other than the default of the Purchaser under this Agreement
or (ii) in the event the Company is unable to obtain any required federal
or state approvals for the transactions contemplated hereby on conditions
reasonably satisfactory to it despite its reasonable efforts to obtain such
approvals. In addition, this Agreement shall terminate upon mutual consent
of the parties hereto.
(b) The Purchaser may terminate this Agreement under any
circumstances that would result in the Purchaser, individually or together
with any other person or entity, being required to register as a bank
holding company under federal law or regulations or to submit an
application or notice to acquire or retain control of a bank or bank
holding company to a federal bank regulatory authority.
(c) This Agreement shall terminate in the event that the Plan is
terminated in accordance with its terms.
(d) The Company and the Purchaser hereby agree that any termination
of this Agreement pursuant to Sections 8(a), 8(b) or 8(c) (other than
termination in the event of a breach of this Agreement by the Purchaser or
the Company or misrepresentation of any of the statements made herein by
the Purchaser or the Company) or the termination of the Plan for any reason
-14-
<PAGE>
whatsoever by the Company shall be without liability of the Company or the
Purchaser.
(e) The Company and the Purchaser hereby agree that in the event of a
termination of this Agreement pursuant to Sections 8(a), 8(b) or 8(c) after
delivery of the Subscription Payment to the Escrow Agent, the Escrow Agent
shall return to the Purchaser the Subscription Payment made pursuant to
this Agreement by the Purchaser plus interest actually accrued on such
Subscription Payment.
9. FUTURE ACQUISITIONS AND DISPOSITIONS OF SHARES.
The Purchaser agrees that during the period beginning on the date
hereof and continuing until the Closing Date, it will not offer, sell, contract
to sell or otherwise dispose of, or bid for, purchase, contract to purchase or
otherwise acquire, any shares of Common Stock except in accordance with
applicable law, including the Securities Act and the rules and regulations
thereunder.
10. NOTICES.
All communications hereunder will be in writing and, if to the
Company, will be mailed, delivered or telecopied and confirmed to it at the
offices of the Company at 4100 Newport Place, Suite 900, Newport Beach,
California 92660 Attention: Julius G. Christensen, Facsimile: (714) 863-2336,
with a copy to Sullivan & Cromwell, 444 South Flower Street, 12th Floor, Los
Angeles, California 90071, Attention: Stanley F. Farrar, Facsimile:
(213) 683-0457; and if to the Purchaser, will be mailed, delivered or telecopied
and confirmed to it at the offices of _____________________,
________________________________, Attention: ________________________,
Facsimile: _______________.
11. BINDING EFFECT.
This Agreement shall be binding upon, and shall inure solely to the
benefit of, each of the parties hereto, and each of their respective heirs,
executors, administrators, successors and permitted assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. Neither
party may assign any of its rights or obligations hereunder to any other person
or entity without the prior written consent of the other party,
-15-
<PAGE>
except that the Purchaser may assign its rights and obligations to its
discretionary clients on whose behalf it has executed this Agreement.
12. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA IN EFFECT AT THE TIME OF THE EXECUTION
HEREOF.
13. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which counterparts when so executed and delivered shall be deemed to be an
original, but all such respective counterparts shall together constitute but one
and the same instrument.
14. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
the Purchaser and Western Bancorp has signed or caused to be signed its name,
all as of the day and year first above written.
WESTERN BANCORP
By: __________________________
Name:
Title:
___________________
By: __________________________
Name:
Title:
-16-
<PAGE>
Exhibit 1 to Standby Stock Purchase Agreement
FORM OF ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made this ___ day of November
1997, by and among Western Bancorp ("Company"), National Bank of Southern
California ("Escrow Agent") and each of the persons identified on Schedule 1
hereto (collectively, the "Purchasers"). Except as otherwise defined herein,
terms defined in the Standby Agreements (as defined below) shall have their same
respective meanings when used herein.
W I T N E S S E T H:
- - - - - - - - - - - - - - -
WHEREAS, the Company and each of the Purchasers have entered into
substantially similar Standby Stock Purchase Agreements, each dated as of
November 14, 1997 (the "Standby Agreements"), pursuant to which the Company
proposes to issue to the Purchasers shares of its Common Stock at a price of
$28.00 per share;
WHEREAS, the Company wishes to provide for the availability of cash so
as to facilitate the closing of the Acquisition;
WHEREAS, the Company and the Purchasers desire to establish an escrow
account with the Escrow Agent for the purpose of receiving subscriptions for
Common Stock; and
WHEREAS, the Escrow Agent has agreed to serve as Escrow Agent in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, the parties hereto agree as
follows:
<PAGE>
A G R E E M E N T
1. Establishment of Escrow and Escrow Account. The parties hereto shall
establish, and by execution of this Agreement hereby agree to establish, an
escrow account with the Escrow Agent. The Escrow Agent shall establish an
interest-bearing escrow account which escrow account shall be entitled "Western
Bancorp Acquisition Escrow Account (the "Escrow Account"). All checks for
subscriptions will be payable to the Escrow Agent and all wire transfers for
subscriptions will be sent to the Escrow Account.
2. Escrow Period.
(a) The escrow period (the "Escrow Period") shall begin on the date
that is three business days after the Election Deadline.
(b) Unless earlier terminated by the Company and the Purchasers in
writing, the Escrow Period shall terminate upon the earliest to occur of:
(i) The opening of business on the Closing Date of the Acquisition,
(ii) The termination of the Standby Agreements in accordance with
Section 8 thereof, or
(iii) February 28, 1997.
During the Escrow Period, the Company is aware and understands that it is not
entitled to any funds received in the Escrow Account and no amounts deposited in
the Escrow Account shall become the property of the Company or any other entity,
or be subject to the debts of the Company or any other entity.
3. Deposits into Escrow Account. All funds received by the Escrow Agent
during the Escrow Period shall be deposited in the Escrow Account to be held by
the Escrow Agent. All funds deposited in the Escrow Account shall constitute
the "Escrow Funds."
4. Receipt of Funds Pursuant to Standby Agreements. Prior to the Escrow
Period, the Company shall certify to the Escrow Agent the amount of funds to be
received from the Purchasers pursuant to their respective Standby Agreements.
5. Disbursements from the Escrow Account.
(a) In the event that the Escrow Agent receives notification from the
Company or any of the Purchasers (and confirmed by the Company) that the Standby
Agreements have been terminated pursuant to Sections 8(a), 8(b) or 8(c) thereof,
the Escrow Agent shall promptly refund to each subscriber the amount actually
received from such subscriber,
-2-
<PAGE>
without deduction, penalty or expense to the Purchaser, plus the interest
actually accrued on such amount in accordance with Paragraph 7 hereof, and the
Escrow Agent shall notify the Company and the Purchaser of its distribution of
such funds. The funds returned to each Purchaser shall be free and clear of any
and all claims of the Company or any of its creditors.
(b) In the event that the Escrow Agent receives notification from the
Company that the closing of the Acquisition is to be effected the next business
day substantially as provided in the Plan, the Escrow Agent will release the
Escrow Funds plus the interest actually accrued on such Escrow Funds in
accordance with Paragraph 7 hereof to the Company upon expiration of the Escrow
Period.
6. Collection Procedure. The Escrow Agent is hereby authorized to forward
each check for collection and, upon collection of the proceeds of each check,
deposit the collected proceeds in the Escrow Account. As an alternative, the
Escrow Agent may telephone the bank on which the check is drawn to confirm that
the check has been paid.
7. Investment of Escrow Funds. The Escrow Agent may invest the Escrow Funds
only in such accounts or investments as the Company may specify by written
notice; PROVIDED, HOWEVER, that the Escrow Agent shall invest funds only in
accordance with the provisions of Rule 15c2-4 of the Rules and Regulations of
the Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934, as amended. In accordance with Rule 15c2-4, the Company may only
specify investments in (i) bank accounts, (ii) bank money-market accounts, (iii)
short-term certificates of deposit issued by a bank or (iv) short-term
securities issued or guaranteed by the United States Government.
8. Compensation of Escrow Agent. The Company shall pay the Escrow Agent a
separate fee for its escrow services as set forth in a letter dated as of the
date hereof. If it is necessary for the Escrow Agent to return funds to
Purchasers, the Company shall pay to the Escrow Agent an additional amount
sufficient to reimburse it for its actual cost in disbursing such funds.
However, no such fee, reimbursement for costs or expenses, indemnification for
damages incurred by the Escrow Agent or any monies whatsoever shall be paid out
of or chargeable to the funds on deposit in the Escrow Account. Without
limiting the generality of the foregoing none of the Purchasers shall have any
obligation to pay any fees or expenses of the Escrow Agent.
9. Amendment; Resignation. This Agreement may be altered or amended only with
the written consent of the Company, the Purchasers and the Escrow Agent. The
Escrow Agent may resign as Escrow Agent at any time upon ten days written notice
to the Company and the Purchasers. In the case of the Escrow Agent's
resignation, its only duty
-3-
<PAGE>
shall be to hold and dispose of the Escrow Funds in accordance with the original
provisions of this Agreement until a successor Escrow Agent shall be appointed
and written notice of the name and address of such successor Escrow Agent shall
be given to the Escrow Agent by the Company and Purchasers, whereupon the Escrow
Agent's only duty shall be to pay over to the successor Escrow Agent the Escrow
Funds.
10. Governing Law and Assignment. Nothing in this Agreement is intended to or
shall confer upon anyone other than the parties hereto any legal or equitable
right, remedy or claim. This Agreement shall be construed in accordance with
and governed by the laws of the State of California and shall be binding upon
the parties hereto and their respective successors and assigns; PROVIDED,
HOWEVER, that no assignment or transfer may be made by any party of its rights
under this Agreement or with respect to the Escrow Funds unless the other
parties shall have consented in writing to such assignment or transfer.
11. Notices. All notices required to be given in connection with this
Agreement must be in writing, may be given by the attorney for such party giving
notice and shall be deemed properly given or served if sent (i) by registered or
certified mail, return receipt requested, (ii) by personal delivery, (iii) by
delivery by a bonded air carrier or (iv) by facsimile transmission, and
addressed to such party as set forth below:
If to the Company: Western Bancorp
4100 Newport Place, Suite 900
Newport Beach, California 92660
Facsimile: (714) 863-2336
Attention: Julius G. Christensen
If to the Purchaser: As set forth on Schedule 1 hereto
If to the Escrow
Agent: National Bank of Southern California
4100 Newport Place, Suite 130
Newport Beach, California 92660
Facsimile: (714) __________
Attention: Escrow Division
12. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of the Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
-4-
<PAGE>
13. Execution in Several Counterparts. This Agreement may be executed in
several counterparts or by separate instruments, and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
hereto.
14. Captions. All captions are for convenience only and shall not limit or
define the text hereof.
15. Further Assurances. Each of the parties hereto shall execute such further
documents, instruments and agreements and perform such further acts as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions completed hereby.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
WESTERN BANCORP
By:
______________________
______________________
NATIONAL BANK OF SOUTHERN CALIFORNIA
By:
________________________
________________________
[Purchasers will each sign on their respective Schedule 1]
-5-
<PAGE>
Exhibit 2 to Standby Stock Purchase Agreement
(a) INDEMNIFICATION BY THE COMPANY. Upon the registration of the Common
Stock, the Company shall indemnify and hold harmless each person who has
returned a completed and signed Notice and Questionnaire to the Company (an
"Electing Holder") and the officers and directors and each person who controls
such Electing Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the agent or investment adviser thereof (each such person being
sometimes referred to as an "Indemnified Person"), against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any "shelf" registration statement under which such Common
Stock is to be registered under the Securities Act, or any prospectus contained
therein or furnished by the Company to any Indemnified Person, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company hereby
agrees to reimburse such Indemnified Person for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending
any such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that
the Company shall not be liable to any such Indemnified Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such shelf registration statement or prospectus, or
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by such Indemnified Person expressly for
use therein.
(b) INDEMNIFICATION BY THE ELECTING HOLDERS. Each Electing Holder agrees,
as a consequence of the inclusion of any of such holder's Common Stock in such
shelf registration statement, to (i) indemnify and hold harmless the Company,
its directors, officers who sign any shelf registration statement and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities
<PAGE>
Act or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Company or such other persons may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such shelf registration statement or prospectus, or any amendment or supplement,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Electing Holder expressly for use
therein and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party hereunder, notify such indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability for indemnification
hereunder unless there has been actual prejudice to the indemnifying party from
such omission or from any liability that it may have to any indemnified party
otherwise than under this Exhibit 2. In case any such action shall be brought
against any indemnified party and it shall notify an indemnifying party of the
commencement thereof, such indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall not be
liable to such indemnified party under this Exhibit 2 for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in
-2-
<PAGE>
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) CONTRIBUTION. If the indemnification provided for in this Exhibit 2
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this subsection (d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in
-3-
<PAGE>
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The obligations of the
Electing Holders in this subsection (d) to contribute shall be several in
proportion to the percentage of principal amount of Common Stock registered by
them and not joint.
(e) Notwithstanding any other provision of this Exhibit 2, in no event
will any Electing Holder be required to undertake liability to any person under
this Exhibit 2 for any amounts in excess of the dollar amount of the proceeds to
be received by such holder from the sale of such holder's Common Stock (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
any shelf registration statement under which such Common Stock is to be
registered under the Securities Act.
(f) The obligations of the Company under this Exhibit 2 shall be in
addition to any liability that the Company may otherwise have to any Indemnified
Person and the obligations of any Indemnified Person under this Exhibit 2 shall
be in addition to any liability that such Indemnified Person may otherwise have
to the Company. The remedies provided in this Exhibit 2 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to an
indemnified party at law or in equity.
-4-
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Western Bancorp:
We consent to the use of our report dated February 24, 1997, incorporated
herein by reference, on the consolidated financial statements of Western
Bancorp (formerly Monarch Bancorp) and subsidiaries as of and for the year
ended December 31, 1996, included in Western Bancorp's Annual Report, as
amended, on Form 10-KSBA.
KMPG PEAT MARWICK LLP
Los Angeles, California
November 19, 1997
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Western Bancorp:
We consent to the use of our report, dated June 4, 1997, incorporated by
reference herein, and included in Western Bancorp's Current Report on Form
8-K dated July 15, 1997. 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
November 19, 1997
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Western Bancorp:
We consent to the use of our report, dated October 10, 1997, incorporated by
reference herein and included in Western Bancorp's Current Report on Form 8-K
dated October 23, 1997. Our report, dated October 10, 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 supplemental consolidated
financial statements of Western Bancorp, is based on the report of the other
auditors; (ii) We did not audit the 1996 consolidated financial statements of
SC Bancorp. 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 SC Bancorp in the 1996 supplemental consolidated financial
statements of Western Bancorp, is based on the report of the other auditors;
(iii) 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; (iv) Separate consolidated financial statements of California
Commercial Bankshares also included in the 1995 and 1994 supplemental
consolidated financial statements were audited by other auditors; (v)
Separate consolidated financial statements of SC Bancorp also included in the
1995 and 1994 supplemental consolidated financial statements were audited by
other auditors; (vi) The supplemental consolidated financial statements give
retroactive effect to the acquisition of SC Bancorp on October 10, 1997,
which has been accounted for as a pooling-of-interests. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. The supplemental
consolidated financial statements do not extend through the date of
consummation. However, they will become the historical consolidated financial
statements of Western Bancorp and subsidiaries after financial statements
covering the date of consummation of the business combination with SC Bancorp
are issued; and (vii) 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 poolings-of-interests.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 19, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our Report 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 all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Los Angeles, California
November 19, 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 (formerly Monarch Bancorp) of our report dated
January 19, 1996 on the statement of financial 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 (such financial statements are not included herein),
appearing in the Current Report on Form 8-K of Western Bancorp dated October
3, 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
November 19, 1997
<PAGE>
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Western Bancorp (formerly Monarch Bancorp) on Form S-4 of our report dated
January 24, 1997 on the statement of financial condition of SC Bancorp and
subsidiary as of December 31, 1996 and the related statements of operations,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996 (such consolidated financial statements
are not included herein), appearing in the Current Report on Form 8-K of
Western Bancorp dated October 24, 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
November 19, 1997
<PAGE>
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Western Bancorp (formerly Monarch Bancorp) on Form S-4 of our report dated
January 24, 1997 (March 17, 1997 as to Notes 7 and 13) on the statement of
financial condition of California Commercial Bankshares and subsidiaries as
of December 31, 1996 and 1995 and the related statements of operations,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996 (such consolidated financial statements
are not included herein), appearing in the Current Report on Form 8-K of
Western Bancorp dated July 15, 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
November 19, 1997
<PAGE>
Exhibit 23.7
[LETTERHEAD]
November 19, 1997
Western Bancorp,
4100 Newport Place, Suite 900,
Newport Beach, California 92660.
Dear Sirs:
We hereby consent to the filing of our opinion, dated August 29,
1997, addressed to Western Bancorp as an exhibit to the Registration Statement,
dated the date hereof (the "Registration Statement"), and the reference to us
under the headings "Summary--Certain 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.
Very truly yours,
Sullivan & Cromwell
<PAGE>
Exhibit 23.8
[LETTERHEAD]
November 19, 1997
Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Dear Sirs:
We hereby consent to the filing of our opinion, dated August 29, 1997,
addressed to Santa Monica Bank as an exhibit to the Registration Statement,
dated the date hereof (the "Registration Statement"), and the references to
us under the headings "Summary-Certain 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.
Very truly yours,
O'Melveny & Myers LLP
<PAGE>
Exhibit 23.9
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, and to all
references to our firm in this Registration Statement filed with the
Securities and Exchange Commission.
Vavrinek, Trine, Day & Co.
November 19, 1997
Laguna Hills, California
<PAGE>
Exhibit 99.1
[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 Santa Monica Bank, 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
September 29, 1997
<PAGE>
Exhibit 99.2
NATIONSBANC MONTGOMERY SECURITIES, INC.
Board of Directors
Santa Monica Bank
1251 Fourth Street
Santa Monica, CA 90401
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion letter dated November
20, 1997 to the Board of Directors of Santa Monica Bank regarding the sale of
Santa Monica Bank to Western Bancorp, in the Joint Proxy Statement -
Prospectus and to the references therein to our firm and to our opinion under
the headings: SUMMARY -Opinions of Financial Advisors and -Conditions to the
Merger; THE MERGER -Background of the Merger, -Reasons for the Merger;
Recommendations of the Board of Directors - SMB; and -Opinions of Financial
Advisors - SMB; THE MERGER AGREEMENT -Conditions. In giving the foregoing
consent, we do not admit (i) that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of the 1933,
as amended (the "Securities Act"), or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, and (ii) that we
are experts with respect to any part of the Joint Proxy Statement -
Prospectus within the meaning of the term "experts" as used in the Securities
Act and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES, INC.
November 20, 1997
San Francisco, California
<PAGE>
EXHIBIT 99.3
LETTER OF TRANSMITTAL AND FORM OF CASH ELECTION
AS TO SHARES OF COMMON STOCK OF
SANTA MONICA BANK
INTRODUCTION
This Letter of Transmittal and Form of Cash Election ("Letter of
Transmittal") is provided in connection with the proposed merger (the "Merger")
of Santa Monica Bank with and into Western Bank
or another wholly-owned subsidiary of Western Bancorp ("Western") pursuant to
the Agreement and Plan of Merger, dated as of July 30, 1997, and amended and
restated as of November 20, 1997, by and among Western, Santa Monica Bank and
Western Bank (the "Merger Agreement").
This Letter of Transmittal must be completed by holders of shares of common
stock, par value $3.00 per share, of Santa Monica Bank (the "Shares" or "Santa
Monica Bank Stock") who wish to make an election (a "Cash Election ") in respect
of all or some of their Shares to receive $28 in cash per share of Santa Monica
Bank Stock (the "Cash Consideration"). If you do not wish to receive Cash
Consideration for at least some of your Shares, you do not need to complete this
Letter of Transmittal. Any shareholders who do not make a Cash Election in
respect to all of their Shares will be sent a new letter of transmittal after
the Merger is consummated, with appropriate instructions at that time. The
election process is set forth in the Merger Agreement, which is attached as
Appendix A to and summarized in the Joint Proxy Statement-Prospectus, dated
November 20, 1997 (the "Proxy Statement"). EACH SHAREHOLDER SHOULD READ
CAREFULLY THE MERGER AGREEMENT AND THE PROXY STATEMENT PRIOR TO MAKING AN
ELECTION.
In connection with the Merger, each holder of Santa Monica Bank Stock is
entitled to elect to receive either the Cash Consideration or, subject to
certain limitations set forth in the Merger Agreement, 0.875 shares (the "Stock
Consideration") of common stock, no par value, of Western ("Western Stock") for
each share of Santa Monica Bank Stock held by such holder. If a holder does not
make a Cash Election with respect to any Shares held by such holder, such holder
will not be entitled to elect to receive the Cash Consideration in exchange for
such Shares in the Merger and will be deemed to have elected to receive the
Stock Consideration with respect to such Shares.
A holder of Shares exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Western Stock will receive
cash in an amount equal to such fractional proportion of the price of a share of
Western Stock as of the close of business on the day immediately prior to the
Effective Time.
In addition, there can be no assurance that holders of Santa Monica Bank
Stock who decide to receive Stock Consideration in the Merger will receive
Western Stock with respect to any or all shares of Santa Monica Bank Stock held
by such holders. As set forth in the Merger Agreement, if the number of
shareholders of Santa Monica Bank electing to receive Cash Consideration is so
great as to prevent a reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended, and Western does not choose to increase the
Stock Consideration, Western will not issue any shares of Western Stock in the
Merger. Also, subject to possible adjustment as described in the Merger
Agreement, Western has fixed a maximum number of shares of Western Stock to be
issued in the Merger. If the election process would otherwise result in holders
of Santa Monica Bank Stock receiving a number of shares of Western Stock that is
in excess of that maximum number, the procedures for allocating Western Stock
and cash, as described in the Merger Agreement and the Proxy Statement, will be
followed by the Exchange Agent (who is designated herein).
Neither the Western Board of Directors not the Santa Monica Bank Board of
Directors makes any recommendation as to the type of consideration shareholders
should elect to receive. Each shareholder must make his or her own decision with
respect to such election.
1
<PAGE>
MAKING A CASH ELECTION
For a Cash Election to be properly made and effective, this Letter of
Transmittal, properly completed, together with the certificates (the
"Certificates") representing Shares covered by such Cash Election (or with (i) a
Guarantee of Delivery as provided herein or (ii) the documents required pursuant
to Instruction C4 concerning lost certificates) and all other required
documents, must be received by the Exchange Agent at or prior to 5:00 p.m.,
Pacific Standard Time, on January , 1998 (the "Election Deadline"). THE SHARES
OF SANTA MONICA BANK SHAREHOLDERS WHOSE LETTERS OF TRANSMITTAL AND ALL REQUIRED
DOCUMENTS ARE NOT RECEIVED AT OR PRIOR TO THE ELECTION DEADLINE WILL BE DEEMED
TO BE SHARES WITH RESPECT TO WHICH SUCH SHAREHOLDERS HAVE ELECTED TO RECEIVE THE
STOCK CONSIDERATION. Such Cash Election is subject to (a) the terms, conditions,
and limitations set forth in the Merger Agreement and summarized in the Proxy
Statement and (b) the accompanying instructions. The Merger Agreement and the
Proxy Statement are incorporated herein by reference. Any capitalized terms used
in this Letter of Transmittal but not defined herein shall have the meanings
given to them in the Proxy Statement. Additional copies of the Proxy Statement
are available from Santa Monica Bank upon request (see Instruction C3). THE
INSTRUCTIONS TO THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Shareholders who wish to ensure that they receive cash for their Shares
should deliver this Letter of Transmittal, properly completed and accompanied by
all required documents no later than the Election Deadline, to the Exchange
Agent at the address set forth below.
The Exchange Agent is:
U.S. STOCK TRANSFER CORPORATION
1745 GARDENA AVENUE, SUITE 200
GLENDALE, CALIFORNIA 91204-2991
TELEPHONE: (818) 502-1404
FACSIMILE: (818) 502-0674
Delivery of this Letter of Transmittal to an address other than as set forth
above will not constitute a valid delivery. You must sign this Letter of
Transmittal where indicated below and complete the Substitute Form W-9 provided
herewith.
This Letter of Transmittal, completed, signed and accompanied by your
Certificates (or a completed Guarantee of Delivery or the documents required
pursuant to Instruction C4 concerning lost certificates) and all other required
documents, should be returned to the Exchange Agent in the accompanying
envelope. In order to elect to receive the Cash Consideration in the Merger in
respect of all or some of your shares of Santa Monica Bank Stock, you must
complete and return this Letter of Transmittal and the other required documents
at or prior to the Election Deadline. Any such Cash Election may be revoked at
any time at or prior to the Election Deadline (see Instruction B4). If the
Merger is not consummated, your Certificates will be returned to you. However,
if the Merger is consummated, you will not have another opportunity after the
Election Deadline to make a Cash Election to receive the Cash Consideration.
To: U.S. Stock Transfer Corporation
1745 Gardena Avenue, Suite 200
Glendale, California 91204-2991
Ladies and Gentlemen:
The undersigned hereby surrenders the Certificates listed in Box B below (or
guarantees delivery of such Certificates in accordance with a Guarantee of
Delivery), and makes the election set forth in Box A
2
<PAGE>
below. The undersigned understands that the purpose of the election procedures
described herein is to permit holders of Shares to express their preference to
receive cash in the Merger.
In connection with the Merger, each holder of Santa Monica Bank Stock is
entitled to elect to receive either the Cash Consideration or, subject to
certain limitations set forth in the Merger Agreement, the Stock Consideration
for each share of Santa Monica Bank Stock held by such holder. If a holder does
not make a Cash Election with respect to any Shares held by such holder, such
holder will not be entitled to elect to receive the Cash Consideration in
exchange for such Shares in the Merger and will be deemed to have elected to
receive the Stock Consideration with respect to such Shares
Notwithstanding the foregoing, the holder of Shares exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Western Stock will receive cash in an amount equal to such fractional
proportion of the price of a share of Western Stock as of the close of business
on the day immediately prior to the Effective Time. In addition, there can be no
assurance that holders of Santa Monica Bank Stock will receive Western Stock
with respect to any or all shares of Santa Monica Bank Stock held by such
holders. As set forth in the Merger Agreement, if the number of shareholders of
Santa Monica Bank electing to receive Cash Consideration is so great as to
prevent a reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended, and Western does not choose to increase the Stock
Consideration, Western will not issue any shares of Western Stock in the Merger.
Also, subject to possible adjustment as described in the Merger Agreement,
Western has fixed a maximum number of shares of Western Stock to be issued in
the Merger. If the election process would otherwise result in holders of Santa
Monica Bank Stock receiving a number of shares of Western Stock that is in
excess of that maximum number, the procedures for allocating Western Stock and
cash, as described in the Merger Agreement and the Proxy Statement, will be
followed by the Exchange Agent.
Neither the Western Board of Directors nor the Santa Monica Bank Board of
Directors makes any recommendation as to the type of consideration shareholders
should elect to receive. Each shareholder must make his or her own decision with
respect to such election.
By completing Box A below, each Santa Monica Bank Shareholder may choose to
receive Cash Consideration with respect to some or all of the Shares held by
such holder.
BOX A
- --------------------------------------------------------------------------------
ELECTION
(Check only one box)
The undersigned, subject to the terms and conditions set forth in this
Letter of Transmittal, including the Merger Agreement incorporated herein by
reference, makes the following election with respect to the undersigned's
Shares:
/ / An election to receive Cash Consideration with respect to ALL of the
undersigned's Shares.
/ / An election to receive Cash Consideration with respect to A PORTION of
the undersigned's Shares and to receive Stock Consideration with
respect to the remainder of the undersigned's Shares, as allocated
below:
(IF ELECTING TO RECEIVE CASH CONSIDERATION ONLY FOR A PORTION OF YOUR SHARES,
FILL IN BOTH THE NUMBER OF SHARES FOR WHICH YOU WISH TO RECEIVE CASH
CONSIDERATION AND THE NUMBER OF SHARES FOR WHICH YOU WISH TO RECEIVE STOCK
CONSIDERATION)
<TABLE>
<CAPTION>
CASH CONSIDERATION STOCK CONSIDERATION TOTAL
(NO. OF SHARES) (NO. OF SHARES) (NO. OF SHARES)
<S> <C> <C>
</TABLE>
Any Shares of the undersigned as to which the undersigned has not made an
effective Cash Election will be converted at the Effective Time into the right
to receive Stock Consideration, subject to certain limitations set forth in the
Merger Agreement.
- --------------------------------------------------------------------------------
3
<PAGE>
ALL SHAREHOLDERS MAKING AN ELECTION TO RECEIVE CASH CONSIDERATION FOR ALL OR
A PORTION OF THEIR SHARES MUST COMPLETE THE DESCRIPTION OF SHARES IN BOX B TO
SPECIFY THE SHARES COVERED BY SUCH ELECTION.
BOX B
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES
IF YOU ELECTED IN BOX A TO RECEIVE CASH CONSIDERATION WITH RESPECT TO ALL OF
YOUR SHARES, LIST BELOW ALL OF YOUR CERTIFICATES AND THE SHARES REPRESENTED BY
EACH CERTIFICATE. IF YOU ELECTED IN BOX A TO RECEIVE CASH CONSIDERATION ONLY
WITH RESPECT TO A PORTION OF YOUR SHARES, LIST BELOW THE CERTIFICATES
REPRESENTING SHARES FOR WHICH YOU WISH TO RECEIVE CASH CONSIDERATION.
- --------------------------------------------------------------------------------
NAME AND ADDRESS OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK)
- --------------------------------------------------------------------------------
<S> <C>
NUMBER OF SHARES
REPRESENTED BY
EACH CERTIFICATE
CERTIFICATE NO. OF
CERTIFICATES
SURRENDERED
(OR COVERED BY
GUARANTEE OF
DELIVERY)
- --------------------------------------------------------------------------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
TOTAL SHARES:
-------------
- --------------------------------------------------------------------------------
</TABLE>
In lieu of delivering Certificates herewith, shareholders may make a Cash
Election by delivering a Letter of Transmittal at or prior to the Election
Deadline and complying with Guarantee of Delivery procedures, including (i) the
delivery with the Letter of Transmittal of a completed Guarantee of Delivery set
forth in Box C and (ii) delivery of the Certificates on a timely basis. See
Instruction A2. Cash Elections with respect to all Shares subject to a Guarantee
of Delivery must be made at the time the Guarantee of Delivery is executed. If
the guarantor fails to deliver the Certificates in accordance with the terms of
the Guarantee of Delivery, any purported Cash Election with respect to
Certificates subject to such guarantee will be void.
4
<PAGE>
BOX C
- --------------------------------------------------------------------------------
GUARANTEE OF DELIVERY
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED HEREWITH)
SEE INSTRUCTION A2
The undersigned, a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States,
hereby guarantees delivery to the Exchange Agent, at its address set forth
above, of Certificates for the Shares to which this Letter of Transmittal
relates, duly endorsed in blank or otherwise acceptable in form for transfer on
the books of Santa Monica Bank, no later than 5:00 p.m., Pacific Standard Time,
on the third business day after the date of execution of this Guarantee of
Delivery. THIS BOX IS NOT TO BE USED TO GUARANTEE SIGNATURES. SEE BOX F.
<TABLE>
<S> <C>
Dated: , 199_
(Firm--Please Print)
No. of Shares:
(Authorized Signature)
(Address)
Tel. No. (including area code):
</TABLE>
- --------------------------------------------------------------------------------
THE UNDERSIGNED HEREBY CERTIFIES THAT THE ELECTION SET FORTH HEREIN COVERS
SHARES OF SANTA MONICA BANK STOCK REGISTERED IN THE NAME OF THE UNDERSIGNED AND
EITHER (I) BENEFICIALLY OWNED BY THE UNDERSIGNED OR (II) OWNED BY THE
UNDERSIGNED IN ANY REPRESENTATIVE OR FIDUCIARY CAPACITY FOR A PARTICULAR
BENEFICIAL OWNER OR FOR ONE OR MORE BENEFICIAL OWNERS.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
the Shares covered hereby and to receive on behalf of the undersigned, in
exchange for the Shares covered hereby, any check for the Cash Consideration to
be received in the Merger.
The undersigned understands and acknowledges that all questions as to the
validity, form and eligibility of any election and delivery and/or surrender of
Certificates hereunder shall be determined by the Exchange Agent, or as
otherwise provided by the Merger Agreement or Instruction A7 hereof, and any
such determinations shall be final and binding. No authority herein conferred or
agreed to be conferred shall be affected by, and all such authority shall
survive, the death or incapacity of the undersigned. All obligations of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
Unless otherwise indicated in Box D below entitled "Special Payment
Instructions," please issue any check in the name of the registered holder(s) of
the Shares appearing in Box B above under "Description of Shares." Similarly,
unless otherwise indicated in Box E below entitled "Special Delivery
Instructions," please mail any check to the registered holder(s) of the Shares
at the address(es) of the registered holder(s) appearing in Box B above under
"Description of Shares." In the event that Boxes D and E entitled "Special
Payment Instructions" and "Special Delivery Instructions" are both completed,
please issue any check in the name(s) of, and mail such check to, the person(s)
so indicated.
5
<PAGE>
BOX D BOX E
- -------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS A6 AND C2)
To be completed ONLY if the check is to be made payable to the name of
someone other than the undersigned.
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS C2)
To be completed ONLY if the check is to be mailed to someone other than
the undersigned or to the undersigned at an address other than that shown
under "Description of Shares." Mail check to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
-----------------------------------------------------------
IMPORTANT!
ALL SANTA MONICA BANK SHAREHOLDERS SUBMITTING
THIS LETTER OF TRANSMITTAL MUST SIGN HERE
The undersigned hereby represents and warrants that the undersigned has full
power and authority to complete and deliver this Letter of Transmittal and to
surrender the Certificate(s) surrendered herewith (or any Certificates covered
by a Guarantee of Delivery in accordance with the terms hereof), free and clear
of any liens, claims, charges or encumbrances whatsoever. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Exchange Agent or Western to be necessary or desirable to complete the
assignment, transfer, cancellation and retirement of the Shares covered hereby.
- -------------------------------------------
SIGN HERE:
____________________________________________________________________________
____________________________________________________________________________
(Signature(s) of holder(s))
Name(s):
____________________________________________________________________________
____________________________________________________________________________
(Please Print)
(Area Code and Telephone Number)
Dated: _____________________________________________________________________
Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or (see Instruction A5) by person(s) authorized to become
registered holder(s) by certificates and documents transmitted herewith. If
signature is by attorney, executor, administrator, trustee or guardian or
other acting in a fiduciary capacity, set forth full title and see
Instruction A5.
- -------------------------------------------
BOX F
- -------------------------------------------
SIGNATURE GUARANTEE
(COMPLETE ONLY IF REQUIRED)
SEE INSTRUCTIONS A5 AND A6
NOTE: NOTARIZATION BY A NOTARY PUBLIC IS
NOT ACCEPTABLE
FOR USE BY ELIGIBLE
INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE IN
SPACE BELOW.
----------------------------------------------
6
<PAGE>
IMPORTANT TAX INFORMATION
In order to ensure compliance with federal income tax requirements, each
holder of Shares is requested to provide the Exchange Agent with his or her
correct TIN and to certify whether he or she is subject to backup federal income
tax withholding by completing and signing the Substitute Form W-9 below. (See
Instruction C7 and accompanying Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.)
<TABLE>
<C> <S> <C>
- ----------------------------------------------------------------------------------------------------------------
SUBSTITUTE PLEASE FILL IN YOUR NAME AND ADDRESS
--------------------------------------------------------------------
FORM W-9 Name (if joint names, list first ---------------------------------
Department of the Treasury and circle the name of the person ---------------------------------
Internal Revenue Service or entity whose TIN is entered in
Part 1)
Payor's Request for Taxpayer Address (number and street) City, ---------------------------------
Identification Number (TIN) State and Zip Code ---------------------------------
- ------------------------------------------
PART 1--PLEASE PROVIDE YOUR TAXPAYER
IDENTIFICATION NUMBER IN THE BOX AT RIGHT
AND CERTIFY BY SIGNING AND DATING BELOW. --------------------------------- ---------------------------------
See "Guidelines for Certification of Social Security Number Employee Identification Number
Taxpayer Identification Number" for
Instructions.
If you are awaiting your TIN, check the box at right and complete the
"Certificate of Awaiting Taxpayer Identification Number" below. Awaiting TIN / /
- ------------------------------------------
PART 2--IF YOU ARE EXEMPT FROM BACKUP WITHHOLDING, check the box at right Exempt / /
- ------------------------------------------
PART 3--CERTIFICATION
UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number
to be issued to me) and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have not
been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding, as a result
of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because you have failed to report all interest and dividends on your tax
return. However, if after being notified by the IRS that you are subject to backup withholding you received
another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out
item (2).
- ----------------------------------------------------------------------------------------------------------------
Signature ------------------------------------------------------------- Date------------------- ,
199
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 WITH THIS LETTER OF
TRANSMITTAL AND FORM OF CASH ELECTION MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW INSTRUCTION C7
AND "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9" PROVIDED HEREWITH FOR ADDITIONAL DETAILS.
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been
issued to me, and either (a) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer identification
number within 60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide such number.
Signature ------------------------------------------------- Date---------------,
199--
- -----------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
A. LETTER OF TRANSMITTAL
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used if Certificates are forwarded herewith or if delivery
of the Santa Monica Bank Stock covered hereby is guaranteed in accordance with
the terms hereof. Certificates evidencing all shares of Santa Monica Bank Stock
covered hereby (or a Guarantee of Delivery as provided herein), together with a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof), with any required signature guarantees, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth in the Letter of Transmittal at or prior
to the Election Deadline. THE SHARES OF SANTA MONICA BANK SHAREHOLDERS WHOSE
LETTERS OF TRANSMITTAL AND ALL REQUIRED DOCUMENTS ARE NOT RECEIVED AT OR PRIOR
TO THE ELECTION DEADLINE WILL BE DEEMED TO BE SHARES WITH RESPECT TO WHICH SUCH
SHAREHOLDERS HAVE ELECTED TO RECEIVE THE STOCK CONSIDERATION. If a Santa Monica
Bank Shareholder does not wish to receive Cash Consideration for any Shares,
this Letter of Transmittal need not be returned.
2. GUARANTEE OF DELIVERY. In lieu of forwarding Certificates, shareholders
may deliver their Certificates pursuant to the guaranteed delivery procedure
contained herein. Pursuant to the guaranteed delivery procedure: (i) a properly
completed and duly executed Letter of Transmittal with any required signature
guarantees and with Box C entitled "Guarantee of Delivery" properly completed
and duly executed, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at or prior to the Election
Deadline; and (ii) the Certificates in proper form for transfer must be received
by the Exchange Agent no later than 5:00 p.m., Pacific Standard Time, on the
third business day after the date of execution of the Guarantee of Delivery. If
the guarantor fails to deliver on a timely basis the Certificates in accordance
with applicable guaranteed delivery procedures, any purported Cash Election with
respect to Certificates subject to such guarantee will be void.
3. SHARES HELD BY NOMINEES, TRUSTEES OR OTHER REPRESENTATIVES. Any record
holder of Santa Monica Bank Stock who holds such Santa Monica Bank Stock as a
nominee, trustee or in another representative or fiduciary capacity (a
"nominee") may submit one or more Letters of Transmittal covering the aggregate
number of shares of Santa Monica Bank Stock held by such nominee for the
beneficial owners for whom the nominee is making a Cash Election. If
Certificates are forwarded to the Exchange Agent in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery. Any nominee who submits a Letter of Transmittal may be required
to provide the Exchange Agent with such documents and/or certifications (in
addition to any evidence of authority required by Instruction A5) as may be
requested in order to satisfy the Exchange Agent that such nominee holds for a
particular beneficial owner the Santa Monica Bank Stock covered thereby. If any
Shares of Santa Monica Bank Stock held by a nominee are not covered by an
effective Cash Election, they will be deemed to be Shares with respect to which
such nominee has elected to receive Stock Consideration.
4. METHOD OF DELIVERY. THE METHOD OF DELIVERY OF THIS LETTER OF
TRANSMITTAL, CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND
RISK OF THE SENDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. The risk of loss of such Certificate(s) shall
pass only after the Exchange Agent has actually received the Certificate(s). If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery by the Election Deadline.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND CERTIFICATE
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares covered hereby, the signature(s) must correspond with
the name(s) on the face of the Certificates evidencing such Shares without
alteration or any other change whatsoever.
If any of the Shares covered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal. If any
Certificates delivered herewith are registered in the names of
8
<PAGE>
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares covered hereby, no endorsements of Certificates or separate stock powers
are required, unless checks are to be payable to the order of, or registered in
the name of, a person other than the registered holder(s) of such Shares, in
which case Box D must be completed and the Certificate(s) evidencing the Shares
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on such
Certificate(s). Signatures on such Certificate(s) and stock powers must be
guaranteed by an Eligible Institution (as defined in Instruction A6).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares covered hereby, the Certificate(s) evidencing
such Shares must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on such Certificate(s). Signatures on such Certificate(s) and stock powers must
be guaranteed by an Eligible Institution.
IF THIS LETTER OF TRANSMITTAL OR ANY CERTIFICATE OR STOCK POWER IS SIGNED BY
A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A
CORPORATION, OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY,
SUCH PERSON SHOULD SO INDICATE WHEN SIGNING, AND PROPER EVIDENCE SATISFACTORY TO
THE EXCHANGE AGENT OF SUCH PERSON'S AUTHORITY TO SO ACT MUST BE SUBMITTED.
6. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of the Securities Transfer Association's Medallion Program (each,
an "Eligible Institution"). No signature guarantee is required on this Letter of
Transmittal if this Letter of Transmittal is signed by the registered holder(s)
of Certificates covered hereby, unless such holder(s) has completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions." In addition, if a Certificate is registered in the name
of a person other than the signer of this Letter of Transmittal, or if checks
are to be payable to the order of a person other than the registered holder(s),
then the Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the Certificate, with the signature(s) on such Certificate or stock
powers guaranteed by an Eligible Institution.
7. DETERMINATION OF PROPER CASH ELECTION. The Exchange Agent will have the
reasonable discretion to determine whether Letters of Transmittal have been
properly or timely completed, signed and submitted, modified or revoked, and to
disregard immaterial defects in Letters of Transmittal. In all such matters, the
decision of the Exchange Agent, and any decision of Western and Santa Monica
Bank required by the Exchange Agent and made in good faith, shall be conclusive
and binding. The Exchange Agent will not be under any obligation to notify any
person of any defect in a Letter of Transmittal or other documents submitted to
the Exchange Agent. No alternative, conditional or contingent Cash Elections
will be accepted. If the Exchange Agent shall reasonably determine that any
purported Cash Election was not properly made, such purported Cash Election will
be of no force and effect and the shareholder making such purported Cash
Election shall be deemed not to have made a Cash Election and the Shares covered
thereby shall be deemed to be Shares with respect to which such shareholder has
elected to receive the Stock Consideration.
8. INADEQUATE SPACE. If the space provided in Box B under "Description of
Shares" is inadequate, the Certificate numbers and the number of Shares
evidenced by such Certificates should be listed on a separate schedule and
attached to the Letter of Transmittal.
9. TERMINATION OF MERGER AGREEMENT. All Cash Elections will be revoked
automatically if the Exchange Agent is notified in writing by Western or Santa
Monica Bank that the Merger Agreement has been
9
<PAGE>
terminated, and Certificates will be promptly returned to the persons who have
submitted them by registered mail (with attendant delay).
10. DISSENTERS' RIGHTS. Holders of Santa Monica Bank Stock who wish to
exercise Dissenters' Rights should not complete this Letter of Transmittal.
Western will regard any record holder of Santa Monica Bank Stock who has
delivered a written demand for Dissenters' Rights and who subsequently delivers
a Letter of Transmittal to the Exchange Agent as having withdrawn such demand
for Dissenters' Rights. Western will regard any holder who has delivered a
Letter of Transmittal and who simultaneously or subsequently makes a written
demand for Dissenters' Rights as having revoked his or her Cash Election. For
information concerning Dissenters' Rights, see the information set forth in
Appendix D of the Proxy Statement and the summary set forth therein under the
caption "THE MERGER--Dissenters' Rights."
B. ELECTION PROCEDURES
1. ELECTIONS. By completing Box A entitled "Election" and this Letter of
Transmittal, and making the deliveries required hereby, each in accordance with
these instructions, a Santa Monica Bank Shareholder may receive Cash
Consideration with respect to some or all of the Shares held by such holder. In
connection with making a Cash Election, a Santa Monica Bank Shareholder should
read carefully the Merger Agreement and the Proxy Statement, including the
information contained in the Proxy Statement under "THE MERGER--Certain Federal
Income Tax Consequences." Each Santa Monica Bank Shareholder should consult his
or her own tax advisor as to the specific tax consequences of a Cash Election
and the Merger to such shareholder.
2. TREATMENT OF NON-ELECTING SHARES. Any Shares (other than Dissenting
Shares) with respect to which the Exchange Agent does not receive an effective,
properly completed Letter of Transmittal at or prior to the Election Deadline
will be deemed to be Shares with respect to which such shareholder has elected
to receive the Stock Consideration. This Letter of Transmittal will be deemed
properly completed only if: (i) accompanied by one or more Certificates with
respect to such Shares (or (a) such documents concerning lost certificates as
are required pursuant to Instruction C4 or (b) a properly executed Guarantee of
Delivery with respect to such Shares) and (ii) accompanied by any other
documents required by the Exchange Agent or Western.
3. ELECTION DEADLINE. In order for a Cash Election to be effective, the
Exchange Agent must receive a properly completed Letter of Transmittal,
accompanied by all required documents, no later than 5:00 p.m., Pacific Standard
Time, on January , 1998, which is the Election Deadline.
4. CHANGES TO CASH ELECTIONS. Any holder of Santa Monica Bank Stock who has
made a Cash Election may, at any time at or prior to the Election Deadline,
change his or her Cash Election by submitting to the Exchange Agent a properly
completed and signed revised Letter of Transmittal with all required additional
documents, provided that the Exchange Agent receives such revised Letter of
Transmittal and other necessary documents at or prior to the Election Deadline.
Any holder of Santa Monica Bank Stock may at any time at or prior to the
Election Deadline revoke his or her Cash Election and withdraw his or her
Certificates deposited with the Exchange Agent by written notice to the Exchange
Agent received at or prior to the Election Deadline. If a Cash Election is
revoked by a Santa Monica Bank Shareholder at or prior to the Election Deadline,
the related Shares of Santa Monica Bank Stock will automatically be deemed to be
Shares with respect to which such shareholder has elected to receive the Stock
Consideration unless and until a new Cash Election is properly made with respect
to such shares of Santa Monica Bank Stock at or prior to the Election Deadline.
In the event of such revocation of a Cash Election, upon request of the holder
who submitted the revoked Cash Election, Certificates representing the related
shares of Santa Monica Bank Stock will be returned without charge to such
holder.
5. NO FRACTIONAL SHARES. No certificates representing fractional shares of
Western Stock will be issued in the Merger. In lieu of any fractional share of
Western Stock, holders of Shares that are converted into
10
<PAGE>
the right to receive Western Stock will receive cash in an amount equal to such
fractional proportion of the price of a share of Western Stock as of the close
of business on the day immediately prior to the Effective Time.
6. NO LIABILITY. Neither Western, Santa Monica Bank nor the Exchange Agent
will be liable to any holder of shares of Santa Monica Bank Stock for any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
C. RECEIPT OF CASH CONSIDERATION, SPECIAL INSTRUCTIONS, ADDITIONAL COPIES, LOST
CERTIFICATES AND TAXES
1. RECEIPT OF MERGER CONSIDERATION. As soon as practicable after the
Effective Time, holders who have surrendered their Certificates to the Exchange
Agent for cancellation, together with this Letter of Transmittal duly executed
and completed in accordance with these instructions and such other documents as
are required pursuant to such instructions, shall be entitled to receive in
exchange therefor a check in the amount equal to the cash that such holder has
the right to receive (including any cash in lieu of any fractional shares). All
cash paid upon conversion of the Santa Monica Bank Stock in accordance with the
terms of the Merger Agreement shall be deemed to have been paid or issued in
full satisfaction of all rights pertaining to such Shares.
2. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If any check is to be payable
to the order of, or registered in the name of, a person other than the person(s)
signing this Letter of Transmittal or if such check is to be sent to someone
other than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal but at an address other than that shown in
the box entitled "Description of Shares," the "Special Payment Instructions"
and/or "Special Delivery Instructions" on this Letter of Transmittal must be
completed, and signature guarantees will be required (see Instruction A6).
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Exchange Agent at the address or telephone number set
forth in the Letter of Transmittal. Additional copies of this Letter of
Transmittal, instructions and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may also be obtained from the
Exchange Agent. In addition, copies of this Letter of Transmittal, instructions
and the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 may be obtained by persons who become holders (or beneficial
owners) of Santa Monica Bank Stock between the Mailing Date and the close of
business on the business day prior to the Election Deadline from Western
Bancorp, 4100 Newport Place, Suite 900, Newport Beach, California 92660,
Attention: Julius G. Christensen, telephone (714) 863-2459. Additional copies of
the Proxy Statement may be obtained from Santa Monica Bank, 1251 Fourth Street,
Santa Monica, California 90401, Attention: Dario Quiroga, telephone (310)
394-9611.
4. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Santa Monica Bank Stock has been lost, destroyed or stolen, the
owner of such Certificate should promptly contact the Exchange Agent for
additional instructions as to the steps that may be taken in order to replace
the Certificate(s), or complete a valid Cash Election by submission of a Letter
of Transmittal accompanied by an appropriate affidavit and indemnification
acceptable to the Exchange Agent, Western, Santa Monica Bank and/or their
respective sureties (which may require such person to post or make payment for a
bond against any claim that may be made with respect to such Certificate(s)).
5. STOCK TRANSFER TAXES. If any check is to be issued in a name other than
that in which the Certificates surrendered in exchange therefor are registered,
it shall be a condition of such exchange that the person requesting such
exchange shall pay the amount of any stock transfer taxes (whether imposed on
the registered holder or such person), payable on account of the transfer to
such person, to the Exchange Agent or satisfactory evidence of the payment of
such taxes, or exemption therefrom, shall be submitted to the Exchange Agent
before any such check is issued.
11
<PAGE>
6. WITHHOLDING. Following the Merger, Western or the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to the Merger Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by Western or the
Exchange Agent, such withheld amounts shall be treated for all purposes of the
Merger Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by Western or the Exchange Agent.
7. SUBSTITUTE FORM W-9. Under the federal income tax law, a shareholder who
delivers Santa Monica Bank Stock is required by law to provide the Exchange
Agent (as payor) with such shareholder's correct Taxpayer Identification Number
("TIN") on the enclosed Substitute Form W-9. If such shareholder is an
individual, the TIN is such shareholder's social security number. If the
Exchange Agent is not provided with the correct TIN, the shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"). In
addition, any cash payments that are made to such shareholder with respect to
Santa Monica Bank Stock converted in the Merger may be subject to backup
withholding of 31%. Certain shareholders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such individual must submit a statement, signed
under penalties of perjury, attesting to such individual's exempt status. Forms
of such statements can be obtained from the Exchange Agent. If backup
withholding applies with respect to a shareholder, the Exchange Agent is
required to withhold 31% of any cash payments made to such shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS.
To prevent backup withholding on any cash payments that are made to a
shareholder with respect to Santa Monica Bank Stock covered hereby, the
shareholder is required to notify the Exchange Agent of such shareholder's
correct TIN by completing the Substitute Form W-9 certifying (i) that the TIN
provided on Substitute Form W-9 is correct (or that such shareholder is awaiting
a TIN) and (ii) that (a) such shareholder has not been notified by the IRS that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (b) the IRS has notified such shareholder
that such shareholder is no longer subject to backup withholding.
The shareholder is required to give the Exchange Agent the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If such Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance
concerning which number to report. If the shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, such shareholder should write "Applied For" in the space provided for
the TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part 1, and the Exchange Agent is not provided with a TIN within
60 days, the Exchange Agent will withhold 31% of all cash payments to such
shareholder until a TIN is provided to the Exchange Agent.
Each Santa Monica Bank Shareholder should consult his or her own accountant
or tax advisor for further guidance in completing the Substitute Form W-9.
------------------------
12
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR.--Social Security numbers have nine digits separated by two hyphens: I.E.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: I.E., 00-0000000. The table below will help determine the number to
give the payor.
<TABLE>
<CAPTION>
GIVE THE SOCIAL GIVE THE EMPLOYER
FOR THIS TYPE OF SECURITY NUMBER FOR THIS TYPE OF IDENTIFICATION
ACCOUNT: OF-- ACCOUNT: NUMBER OF--
- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
1. Individual The individual 6. A valid trust, The legal entity (do not
estate or pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title) (4)
2. a. Two or more The actual owner of the 7. Corporation The corporation
individuals (joint account or, if combined
account) funds, the first
individual on the
account (1)
3. Custodian account of The minor (2) 8. Association, club, The organization
a minor (Uniform Gift religious,
to Minors Act) charitable,
educational or other
tax-exempt
organization
4. a. The usual The grantor-trustee (1) 9. Partnership The partnership
revocable savings
trust (grantor is
also trustee)
b. The so-called trust The actual owner (1) 10. A broker or The broker or nominee
account that is not registered nominee
a legal or valid
trust under State
law
5. Sole proprietorship The owner (3) 11. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district or prison)
that receives
agricultural program
payments
</TABLE>
In providing the name of the Substitute Form W-9:
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter the business or "doing
business as" name. You may use either the owner's social security number or
Employer Identification Number.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
13
<PAGE>
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service ("IRS") and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees exempt from backup withholding include the following:
- A corporation
- A financial institution
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7)
- The United States or any agency or instrumentality thereof
- A State, the District of Columbia, a possession of the United States or
any political subdivision or wholly-owned agency or instrumentality
thereof
- A foreign government, a political subdivision of a foreign government or
any wholly-owned agency or instrumentality thereof
- An international organization or any agency or instrumentality thereof
- A dealer in securities or commodities registered as such under the laws of
the United States or a State
- A real estate investment trust
- A common trust fund operated by a bank under section 584(a)
- An entity registered at all times during the year under the Investment
Company Act of 1940
- A foreign central bank of issue.
Exempt payees described above should file the Substitute Form W-9 to avoid
erroneous backup withholding.
PRIVACY ACT NOTICE
Section 6109 requires most recipients of dividends, interest or other
payments to give taxpayer identification numbers to payers who must report the
payments to the IRS. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. Payors must be given the numbers
whether or note recipients are required to file tax returns. Payors must
generally withhold 31% of taxable interest, dividends and certain other payments
to a payee who does not furnish a taxpayer identification number.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you
fail to furnish your taxpayer identification number, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX ADVISOR OR THE INTERNAL REVENUE
SERVICE
14
<PAGE>
Exhibit 99.4
November 19, 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/ AUBREY L. AUSTIN
--------------------------
Aubrey L. Austin
