<PAGE>
REGISTRATION NO. 333-
As filed with the Securities and Exchange Commission on October 14, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ELDORADO BANCSHARES, INC.
(Exact name of registrant as specified in charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)
33-0720548
(I.R.S. Employer Identification No.)
6021
(Primary Standard Industrial
Classification Code Number)
24012 CALLE DE LA PLATA
LAGUNA HILLS, CA 92653
(949) 699-4344
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
------------------------------
COPIES TO:
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ROBERT P. KELLER MICHAEL K. KREBS, ESQ.
PRESIDENT AND CHIEF EXECUTIVE OFFICER NUTTER, MCCLENNEN & FISH, LLP
ELDORADO BANCSHARES, INC. ONE INTERNATIONAL PLACE
24012 CALLE DE LA PLATA BOSTON, MA 02110-2699
LAGUNA HILLS, CA 92653 (617) 439-2000
(949) 699-4344
</TABLE>
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered pursuant
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 2,781,614 $9.38 $26,091,539 $7,697
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2).
------------------------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
[ANTELOPE LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Antelope Valley Bank and Eldorado Bancshares,
Inc. have approved a merger agreement that would result in a combination of the
two companies, with Antelope becoming a subsidiary of Eldorado.
Antelope shareholders will receive 3.625 shares of Eldorado common stock for
each share of Antelope common stock that they own. As of October 30, 1998, there
were 767,342 shares of Antelope common stock outstanding.
YOUR VOTE IS VERY IMPORTANT! The merger cannot be completed unless the
holders of a majority of the shares of Antelope approve it. Shareholders of
Eldorado have already approved the merger.
Whether or not you plan to attend the meeting, please take the time to vote
on the proposal(s) submitted at the Antelope shareholder meeting by completing
and mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you wish to vote, your proxy will be counted as a
vote in favor of the proposal(s) submitted at the meeting. If you fail to return
your card, the effect will be a vote against the merger, unless you attend the
meeting and vote in person for the merger.
SEE "RISK FACTORS" ON PAGE 12 FOR A DISCUSSION OF CERTAIN IMPORTANT ISSUES
FOR YOU TO CONSIDER PRIOR TO CASTING YOUR VOTE.
The date, time and place of the meeting is:
December 7, 1998, 7:00 p.m.
The Essex House Hotel
44916 North 10th Street West
Lancaster, California
This Proxy Statement/Prospectus provides you with detailed information about
the proposed merger. In addition, you may obtain information about Eldorado and
Antelope from documents filed with the Securities and Exchange Commission and
the Federal Deposit Insurance Corporation. WE ENCOURAGE YOU TO READ THIS ENTIRE
DOCUMENT CAREFULLY.
________________________________________________________________________________
President and Chief Executive Officer
Antelope Valley Bank
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATOR HAS APPROVED THE ELDORADO
COMMON STOCK TO BE ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED
IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement/Prospectus is dated , 1998, and was first mailed
to shareholders on , 1998.
<PAGE>
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THIS PROXY STATEMENT/PROSPECTUS INCORPORATES
IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT ANTELOPE AND ELDORADO THAT IS NOT
INCLUDED IN OR DELIVERED WITH THIS DOCUMENT.
THIS INFORMATION IS AVAILABLE WITHOUT CHARGE
TO ANY SHAREHOLDER OF ANTELOPE UPON WRITTEN
OR
ORAL REQUEST TO:
MARGARET A. TORRES
ANTELOPE VALLEY BANK
831 WEST LANCASTER BOULEVARD
LANCASTER, CALIFORNIA 93534
(805) 945-4511
IN ORDER TO ENSURE TIMELY DELIVERY OF THE
INFORMATION, SHAREHOLDERS MUST REQUEST SUCH
INFORMATION NO LATER THAN NOVEMBER 30, 1998.
</TABLE>
<PAGE>
ANTELOPE VALLEY BANK
831 West Lancaster Boulevard
Lancaster, California 93534
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
The Special Meeting of Shareholders of Antelope Valley Bank ("Antelope")
will be held at The Essex House Hotel, 44916 North 10th Street West, Lancaster,
California on December 7, 1998 at 7:00 p.m. local time, (together with all
adjournments and postponements thereof, the "Antelope Meeting") for the
following purposes:
1. To consider and act upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of September 22, 1998, as amended (the
"Merger Agreement"), among Antelope and Eldorado Bancshares, Inc. as
described more fully in the attached Proxy Statement/Prospectus which
includes a copy of the Merger Agreement.
2. To consider and act upon such other business and matters or
proposals as may properly come before the Antelope Meeting.
The Board of Directors of Antelope has fixed the close of business on
October 30, 1998 as the record date for determining the shareholders having the
right to receive notice of and to vote at the Antelope Meeting. Only
shareholders of record at the close of business on such date are entitled to
notice of and to vote at the Antelope Meeting. A list of shareholders entitled
to vote at the Antelope Meeting will be available during ordinary business hours
at Antelope's executive offices, at 831 West Lancaster Boulevard, Lancaster,
California 93594, for ten days prior to the Antelope Meeting, for examination by
any Antelope shareholder for purposes germane to the Antelope Meeting.
By Order of the Board of Directors
Antelope Valley Bank
--------------------------------------
Roy J. Simi
SECRETARY
Lancaster, California
, 1998
THE BOARD OF DIRECTORS OF ANTELOPE RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT! IN ORDER FOR ANTELOPE TO APPROVE THE MERGER, THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF ANTELOPE MUST VOTE IN FAVOR
OF THE MERGER AT THE ANTELOPE MEETING. WHETHER OR NOT YOU EXPECT TO ATTEND THE
ANTELOPE MEETING, PLEASE SIGN AND MAIL, AS SOON AS POSSIBLE, THE ENCLOSED
PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE ANTELOPE BOARD OF DIRECTORS. A
RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS
ENCLOSED FOR THAT PURPOSE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY OR TO
VOTE AT THE ANTELOPE MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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QUESTIONS AND ANSWERS ABOUT THE
MERGER......................... 1
SUMMARY.......................... 2
RISK FACTORS..................... 13
Risks Relating to the Merger... 13
Conditions to the Closing of
the Merger................... 13
Illiquidity of Eldorado Common
Stock........................ 13
Volatility of Stock Price...... 13
Dilution....................... 14
Effect of Recent Acquisitions
by Eldorado.................. 14
Risks Related to Eldorado
Growth Strategy.............. 14
Eldorado Product
Concentration................ 15
Eldorado Has No Present
Intention to Pay Dividends... 15
Reliance by Eldorado on Certain
Funding Sources.............. 15
Control of Eldorado by
Directors, Executive Officers
and Principal Shareholders... 15
THE SPECIAL MEETING OF ANTELOPE
SHAREHOLDERS................... 16
General........................ 16
Matters to be Considered....... 16
The Antelope Record Date....... 16
Votes Required and Voting of
Proxies...................... 16
Solicitation of Proxies........ 17
Revocability of Proxies........ 17
Dissenter's Rights............. 18
Effect of Merger on Antelope
Board........................ 18
PROPOSAL ONE: THE MERGER......... 19
Background and Reasons for the
Merger....................... 19
Opinion of Antelope's Financial
Advisor...................... 23
Closing Date................... 28
Terms of the Merger............ 28
Regulatory Approvals Required
for the Merger............... 28
Interests of Certain Persons in
the Merger................... 30
Management and Operations after
the Merger................... 33
Certain Federal Income Tax
Consequences................. 33
Accounting Treatment........... 35
Right of Dissenting
Stockholders................. 35
Resales by Affiliates.......... 37
How to Surrender and Receive
Eldorado Common Stock in
Exchange for Antelope Common
Stock........................ 38
Conditions to the Consummation
of the Merger................ 38
Conduct of Business Pending the
Merger....................... 39
Expenses....................... 40
Termination of the Merger
Agreement.................... 41
Stock Option Agreement......... 42
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL
INFORMATION.................... 45
INFORMATION REGARDING ANTELOPE... 57
General........................ 57
Properties..................... 57
Year 2000 Preparedness......... 58
Management of Antelope......... 58
Summary Compensation Table..... 61
INFORMATION REGARDING ELDORADO... 64
General........................ 64
Recent Developments............ 65
</TABLE>
(i)
<PAGE>
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COMPARATIVE PER SHARE DATA AND
DIVIDEND INFORMATION........... 66
DESCRIPTION OF ELDORADO CAPITAL
STOCK.......................... 66
Common Stock................... 66
Preferred Stock................ 68
Effect of Capital Securities on
Common Stock................. 69
COMPARISON OF THE RIGHTS OF
HOLDERS OF ELDORADO COMMON
STOCK AND HOLDERS OF ANTELOPE
COMMON STOCK................... 71
Introduction................... 71
Certain Voting Rights.......... 71
Dividends...................... 72
Election of Directors.......... 72
Removal of Directors; Filling
Vacancies on the Board of
Directors.................... 72
Special Meeting of
Shareholders;
Shareholders Action by
Written
Consent...................... 73
Amendment of Bylaws............ 73
Amendment of Charter........... 73
Dissenter's Rights............. 74
Certain Business Combinations
and Reorganizations.......... 74
LEGAL MATTERS.................... 75
EXPERTS.......................... 75
OTHER MATTERS.................... 75
WHERE YOU CAN FIND MORE
INFORMATION.................... 75
EXHIBITS
Merger Agreement................. Exhibit A
Stock Option Agreement........... Exhibit B
Opinion of Financial Advisor..... Exhibit C
Text of Section 1300 et seq. of
California Corporations Code
Detailing Dissenters' Rights
and Procedures................. Exhibit D
</TABLE>
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<TABLE>
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DOCUMENTS DELIVERED WITH
PROXY STATEMENT/PROSPECTUS
Antelope Documents
Annex I: Antelope's Annual Report on Form
10-KSB, as amended, for the year
ended December 31, 1997.
Annex II: Antelope's Quarterly Report on
Form 10-QSB, as amended, for the
fiscal quarter ended June 30,
1998.
Eldorado Documents
Annex III: Eldorado's Annual Report on Form
10-K, as amended, for the year
ended December 31, 1997.
Annex IV: Eldorado's Quarterly Report on
Form 10-Q, as amended, for the
fiscal quarter ended June 30,
1998.
Annex V: The consolidated financial
statements of Eldorado Bancorp
and its subsidiary as of
December 31, 1996 and 1995 and
for each of the years in the
three year period ended December
31, 1996.
</TABLE>
(ii)
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING THE MERGER? HOW WILL I BENEFIT?
A: The merger is expected to result in a strong community banking franchise
based primarily in Southern California with assets of approximately $1.2
billion. We believe that the merger will enable the combined company to
provide a wide array of banking services to a broader market of customers. We
also believe that the merger will allow the combined company to compete more
effectively for banking customers in the markets it serves.
Eldorado notes that achieving these benefits is subject to certain risks as
discussed in the section of the Summary entitled "Cautionary Statement
Regarding Forward-looking Information" on page 5.
To review the reasons for the merger in greater detail, see pages 19 through
21.
Q: WHEN AND WHERE WILL THE ANTELOPE SHAREHOLDER MEETING TAKE PLACE?
A: The Antelope Meeting will take place on December 7, 1998 at 7:00 p.m. at The
Essex House Hotel, 44916 North 10th Street West in Lancaster, California.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your completed and signed proxy card in the enclosed return
envelope as soon as possible, so that your shares may be represented at the
Antelope Meeting. The Antelope Board of Directors recommends voting in favor
of the approval of the Merger Agreement and the merger.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Just send in a later-dated, signed proxy card to Antelope's Secretary before
the shareholder meeting or attend your meeting in person and vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send Antelope shareholders written
instructions for exchanging their share certificates.
Q: PLEASE EXPLAIN WHAT I WILL RECEIVE IN THE MERGER.
A: If the merger is completed, Antelope shareholders will receive 3.625 shares
of Eldorado common stock for each share of Antelope common stock. We will not
issue fractional shares of Eldorado common stock. Instead, Antelope
shareholders will receive a check for the value of such fractional shares. If
you currently own shares of Eldorado common stock, then you will continue to
hold those shares after the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as quickly as possible. In
addition to shareholder approval, we must also obtain regulatory approvals.
We hope to complete the merger by December 31, 1998.
Q: WHAT ARE THE TAX CONSEQUENCES TO SHAREHOLDERS OF THE MERGER?
A: The exchange of shares by Antelope shareholders will be tax-free to Antelope
shareholders for federal income tax purposes, except for taxes on cash
received for a fractional share. To review the federal income tax
consequences to shareholders in greater detail, see pages 33 through 35.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have questions about the merger, you should contact:
Antelope Valley Bank
831 West Lancaster Boulevard
Lancaster, California 93534
Attention: Margaret A. Torres
(805) 945-4511
1
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO BETTER UNDERSTAND THE MERGER AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THE
ENTIRE DOCUMENT AND THE DOCUMENTS WE HAVE REFERRED YOU TO.
THE COMPANIES
ANTELOPE VALLEY BANK
831 West Lancaster Boulevard
Lancaster, California 93534
(805) 945-4511
Antelope Valley Bank (referred to in this Proxy Statement/Prospectus as
"Antelope") is a California chartered commercial bank, which began operations in
1981. In addition to its main office located in Lancaster, California, Antelope
has seven full service branch offices located in the following communities in
the Antelope Valley area of California: Palmdale, Wrightwood, Frazier Park,
Quartz Hill, Rosamond, Lake Los Angeles and Acton.
Antelope is a community bank conducting a general commercial banking
business within the Antelope Valley of Southern California. Antelope targets as
its customers the commercial and retail accounts of small to medium sized
businesses, professionals and executives.
At June 30, 1998, Antelope had $200.9 million in assets, $178.1 million in
deposits and shareholders' equity of $20.6 million. In the past two years,
Antelope has experienced relatively strong balance sheet growth, including
growth in total assets of approximately 29% in 1997 and 6% in the first six
months of 1998. This growth has been generated both internally and through the
opening of new branch offices. Antelope opened three new branch offices acquired
from Wells Fargo Bank in February 1997 and a fourth new branch office in June
1998.
Antelope is an insured bank under the Federal Deposit Insurance Act up to
the maximum limits. Antelope is not a member of the Federal Reserve System.
In addition to the information contained in the text of this Proxy
Statement/Prospectus, we are delivering a copy of Antelope's most recent amended
Annual Report on Form 10-KSB as Annex I and amended Quarterly Report on Form
10-QSB as Annex II, each as filed with the FDIC.
ELDORADO BANCSHARES, INC.
24012 Calle de la Plata, Suite 150
Laguna Hills, California 92653
(949) 699-4344
Eldorado Bancshares, Inc. (referred to in this Proxy Statement/Prospectus as
"Eldorado") is a Delaware corporation and registered bank holding company under
the Bank Holding Company Act of 1956, as amended (the "BHC Act"). Through its
sole operating subsidiary, Eldorado Bank, Eldorado offers commercial banking
products and services to small and medium sized businesses and retail customers
from 17 full service branches located primarily in the Orange County, San Diego
County and Sacramento areas of California.
Eldorado's products include commercial, consumer and real estate loans, a
broad range of deposit products and other non-deposit banking services, as well
as small equipment leases and single-family residential mortgages. As of June
30, 1998, Eldorado, on a consolidated basis, had total assets of $1.0 billion,
deposits of $876.6 million and shareholders' equity of $97.7 million.
The key elements of Eldorado's strategic plan have been and continue to be:
- the establishment and enhancement of an attractive community banking
franchise through the acquisition of community banks primarily, but not
exclusively, in and around its Southern California base,
- improving core profitability, and
- maintaining a strong balance sheet.
Since 1995, Eldorado has acquired three community banks with total assets of
approximately $779 million.
Eldorado has three classes of common stock outstanding: Special Common
Stock, Class B Common Stock and non-voting Class C Common
2
<PAGE>
Stock. The shares of Eldorado common stock to be issued to the Antelope
shareholders in the merger will be shares of Eldorado Class B Common Stock
(which we refer to in this Proxy Statement/Prospectus as the "Eldorado Common
Stock"). See pages 66 to 70 for more information concerning the rights and
preferences of the capital stock of Eldorado.
In addition to the information contained in the text of this Proxy
Statement/Prospectus, we are delivering a copy of Eldorado's most recent amended
Annual Report on Form 10-K as Annex III and amended Quarterly Report on Form
10-Q as Annex IV, each as filed with the SEC, as well as the audited financial
statements of Eldorado Bancorp as Annex V.
REASONS FOR THE MERGER
We believe that the combined companies will have greater financial strength,
expansion opportunities and growth potential than either Antelope or Eldorado
would have on its own. The merger is expected to result in a strong community
banking franchise based primarily in Southern California with assets of
approximately $1.2 billion. We believe that the merger will enable the combined
company to provide a wide array of banking services to a broader market of
customers. We also believe that the merger will allow the combined company to
compete more effectively for banking customers in the markets it serves.
To review the reasons for the merger in greater detail, see pages 19 to 21.
RECOMMENDATIONS TO SHAREHOLDERS
The Board of Directors of Antelope believes that the merger is in your best
interests and unanimously recommends that you vote FOR the proposals to approve
and adopt the Merger Agreement. The Merger Agreement is included with this Proxy
Statement/Prospectus as Exhibit A and is incorporated by reference herein.
THE MERGER
WHAT ANTELOPE SHAREHOLDERS WILL RECEIVE AFTER THE MERGER (SEE PAGE 28)
As a result of the merger,
- Antelope shareholders will receive 3.625 shares of Eldorado Common Stock
for each share of Antelope common stock. Eldorado will not issue
fractional shares. Instead, Antelope shareholders otherwise entitled to
receive fractional shares will receive a check for the value of any
fractional shares.
- Antelope will merge with a wholly owned subsidiary of Eldorado, AVB
Acquisition Co., Inc., which has been organized by Eldorado solely for
the merger and which will disappear in connection with the merger.
Antelope shareholders should not send in their stock certificates for
exchange until instructed to do so after we complete the merger.
OWNERSHIP OF ELDORADO AFTER THE MERGER
Eldorado will issue approximately 2.8 million shares of Eldorado Common
Stock to Antelope shareholders in the merger. Following the merger, Antelope
shareholders will own approximately 23.1% of all classes of the outstanding
Eldorado common stock and 23.5% of the outstanding voting common stock of
Eldorado. This information is based on the number of shares of Eldorado and
Antelope common stock outstanding on October 30, 1998. This information does not
take into account the exercise of outstanding stock options of Eldorado.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE MERGER (SEE PAGE 16)
The favorable vote of the holders of a majority of the shares of Antelope
common stock is required to approve the merger. The shareholders of Eldorado
have already voted in favor of the merger.
As of the date of this Proxy Statement/Prospectus, directors and executive
officers of Antelope owned approximately 30.7% of Antelope's common stock. All
of Antelope's directors have agreed with Eldorado to vote their shares in favor
of the merger.
3
<PAGE>
BOARDS OF DIRECTORS OF THE SURVIVING COMPANY AFTER THE MERGER (SEE PAGE 33)
Following the merger, the Board of Directors of Antelope will consist of
four of its current directors (Clyde G. Golding, Jack D. Seefus, William Walsh,
IV and A.C. Warnack) plus Robert P. Keller, who is the President and Chief
Executive Officer of Eldorado.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 30)
When considering the Antelope Board's recommendations that the Antelope
shareholders vote in favor of the merger, you should be aware that a number of
employees have severance agreements and other arrangements that provide them
with interests in the merger that are different from, or in addition to, yours.
For a more detailed description of these benefits, see pages 30 to 33.
CONDITIONS TO THE MERGER (SEE PAGE 38)
The completion of the merger depends upon meeting a number of conditions,
including the following:
- obtaining the approval of the shareholders of Antelope;
- obtaining required regulatory approvals and consents; and
- the receipt of opinions of Antelope's and Eldorado's legal counsel and
accountants on certain tax and accounting matters.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 41)
Either Antelope or Eldorado can terminate the Merger Agreement if any of the
following occurs:
- we do not complete the merger by April 30, 1999,
- we are denied any required regulatory approval,
- the other party materially breaches its representations or warranties
under the Merger Agreement and does not cure such breach within 15 days,
or
- the other party fails to meet all of the required conditions to the
closing of the merger.
In addition, under certain circumstances involving a proposal by a third
party for the acquisition of Antelope, either Eldorado or Antelope may terminate
the Merger Agreement. For a more detailed description of the termination rights
of the companies, see pages 41 to 42.
TERMINATION FEES AND EXPENSES (SEE PAGE 41)
If the Merger Agreement is terminated under certain circumstances, Antelope
must pay to Eldorado a termination fee of $500,000 plus Eldorado's expenses. For
more details about when the termination fee would have to be paid, see pages 41
to 42.
STOCK OPTION AGREEMENT (SEE PAGE 42)
As a condition to the Merger Agreement, Eldorado and Antelope have entered
into the Stock Option Agreement included with this Proxy Statement/Prospectus as
Exhibit B. The Stock Option Agreement is intended to protect Eldorado's
interests under the Merger Agreement if a third party attempts to acquire or
obtain control of Antelope before the closing of the merger. The Stock Option
Agreement may discourage other parties from making offers to acquire Antelope
and may increase the likelihood that the merger with Eldorado will be completed.
In certain situations, the Stock Option Agreement gives Eldorado an option
to buy up to 152,700 shares of Antelope common stock at a purchase price of
$43.25 per share. Such number of shares is equal to approximately 19.9% of the
shares of Antelope common stock outstanding on the date of the Merger Agreement.
Instead of exercising the option, Eldorado may require Antelope to repurchase
the option at a formula price.
The option is exercisable if certain circumstances arise creating the
potential for a third party to acquire or obtain control of Antelope. As of the
date of this Proxy Statement/Prospectus, to the best knowledge of Eldorado and
Antelope, no such circumstances exist.
4
<PAGE>
ACCOUNTING TREATMENT (SEE PAGE 35)
We expect the merger to qualify as a "pooling of interests," which means
that we will treat our companies as if they had always been combined for
accounting and financial reporting purposes. As a condition to the merger, both
Eldorado and Antelope must receive letters from their respective accountants
stating that in their opinion the merger will qualify for pooling of interests
treatment.
OPINION OF FINANCIAL ADVISOR (SEE PAGE 23)
In deciding to approve the merger, the Board of Directors of Antelope
considered the opinion of their financial advisor, Carpenter & Company, as to
the fairness of the exchange ratio to the shareholders of Antelope from a
financial point of view. We have attached the opinion as Exhibit C and encourage
you to read it in its entirety.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 33)
We have structured the merger so that Antelope shareholders will not
recognize any gain or loss for federal income tax purposes in the merger (except
tax payable on cash received by Antelope shareholders instead of fractional
shares).
RIGHT OF DISSENTING STOCKHOLDERS (SEE PAGE 44)
Antelope shareholders will be entitled to dissenters' rights in connection
with the merger if they comply with the requirements of Section 1300 et seq. of
the California Corporations Code. A copy of the applicable sections is attached
to this Proxy Statement/Prospectus as Exhibit D.
CERTAIN EFFECTS OF THE MERGER ON THE RIGHTS OF ANTELOPE SHAREHOLDERS (SEE PAGE
71)
After the merger, Antelope shareholders will become shareholders of
Eldorado, and Antelope will become a wholly owned subsidiary of Eldorado.
Eldorado expects that, for the foreseeable future, Antelope will be operated
separately from Eldorado's existing bank subsidiary. The merger will result in
certain changes in the rights of Antelope shareholders because those rights will
be governed by the Delaware General Corporation Law and Eldorado's Certificate
of Incorporation and bylaws.
ELDORADO AND ANTELOPE MARKET PRICE INFORMATION (SEE PAGE 66)
There is no active or established trading market for either Eldorado or
Antelope common stock.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We have each made forward-looking statements in this document (and in
documents that are incorporated by reference) that are subject to risks and
uncertainties. Forward-looking statements include information concerning
possible or future results of operations of Antelope and Eldorado, including
anticipated benefits from the merger. Also, when we use words such as
"believes," "expects," "anticipates" or similar expressions, we are often, but
not always, making forward-looking statements. Antelope shareholders should note
that many factors could affect the future financial results of Antelope and
Eldorado and could cause such results to differ materially from those expressed
in our forward-looking statements. Those factors include, but are not limited to
the following:
- adverse changes in the quality of the assets held by Eldorado and
Antelope, which would result in credit risk-related losses and expenses;
- a downturn in the economy of Southern California, where Eldorado and
Antelope are located;
- a devaluation of real estate in Southern California, which is used by
many of Eldorado's and Antelope's borrowers as collateral for loans;
- increased competition in California among banks and bank holding
companies;
- fluctuations in market rates and prices, which can negatively affect
Eldorado's and Antelope's net interest margin, asset valuations and
expense expectations; and
- changes in the regulatory requirements of federal and state agencies
applicable to bank holding companies and banks such as Eldorado,
Antelope and Eldorado's bank subsidiary.
5
<PAGE>
ELDORADO SELECTED FINANCIAL DATA
You should read this selected financial data with Eldorado's amended Annual
Report on Form 10-K/A for the year ended December 31, 1997 and its amended
Quarterly Report on Form 10-Q/A for the quarter ended June 30, 1998, delivered
with this Proxy Statement/Prospectus as Annexes III and IV, respectively. As we
have described elsewhere in this Proxy Statement/Prospectus, due to Eldorado's
three acquisitions between September 1995 and June 30, 1997, which were
accounted for using the purchase method of accounting, Eldorado's historical
operating results prior to June 30, 1997 are of limited relevance in evaluating
its historical financial performance and predicting its future operating
results. The selected historical financial data as of and for the five years
ended December 31, 1997 are derived from Eldorado's consolidated financial
statements, which have been audited by independent public accountants. The
selected historical financial data as of and for the six months ended June 30,
1998 and June 30, 1997 have not been audited but, in the opinion of Eldorado's
management, contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the financial position and results of operations of
Eldorado as of such dates and for such periods. The results of operations for
the six months ended June 30, 1998 are not necessarily indicative of the results
of operations that may be expected for the year ended December 31, 1998, or for
any future period.
<TABLE>
<CAPTION>
AS OF AND FOR
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
---------- --------- --------- --------- ------- ------- -------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF CONSOLIDATED OPERATIONS
Net interest income before
provision for possible loan and
lease loss....................... $ 22,204 $ 12,285 $ 32,881 $ 11,708 $ 2,817 $ 2,861 $ 2,994
Provision for possible loan and
lease loss....................... 1,922 715 1,495 515 295 583 1,085
---------- --------- --------- --------- ------- ------- -------
Net interest income after provision
for possible loan and lease
loss............................. 20,282 11,570 31,386 11,193 2,522 2,278 1,909
Noninterest income................. 11,361 5,989 14,904 4,899 696 666 655
Noninterest expenses
Amortization of goodwill and
intangibles.................... 1,739 705 2,514 268 -- -- --
Carrying costs and losses on
OREO........................... 408 241 382 288 531 222 182
Provision for recourse
obligations.................... -- 905 2,021 -- -- -- --
Other noninterest expense........ 22,330 14,241 34,771 14,714 3,760 3,711 4,358
---------- --------- --------- --------- ------- ------- -------
Total noninterest expense...... 24,477 16,092 39,688 15,270 4,291 3,933 4,540
---------- --------- --------- --------- ------- ------- -------
Income (loss) before income taxes
and extraordinary item........... 7,166 1,467 6,602 822 (1,073) (989) (1,976)
Income tax benefit (provision)..... (3,743) (912) (3,612) 1,503 443 -- --
---------- --------- --------- --------- ------- ------- -------
Income (loss) before extraordinary
item............................. 3,423 555 2,990 2,325 (630) (989) (1,976)
Extraordinary item(1).............. -- -- -- -- 625 -- --
---------- --------- --------- --------- ------- ------- -------
Net income (loss).................. 3,423 555 2,990 2,325 (5) (989) (1,976)
Preferred dividends................ 636 85 731 -- -- -- --
---------- --------- --------- --------- ------- ------- -------
Net income (loss) available to
common........................... $ 2,787 $ 470 $ 2,259 $ 2,325 $ (5) $ (989) $(1,976)
---------- --------- --------- --------- ------- ------- -------
---------- --------- --------- --------- ------- ------- -------
Per share data(2):
Weighted average shares outstanding
Basic............................ 9,173,698 5,449,466 7,406,062 2,650,386 134,099 26,864 26,864
Diluted.......................... 10,294,675 5,449,466 8,634,651 2,650,386 134,099 26,864 26,864
Basic:
Income (loss) before extraordinary
item............................. $ .30 $ .09 $ .31 $ .88 $ (4.70) $(36.82) $(73.56)
Extraordinary item................. -- -- -- -- 4.66 -- --
---------- --------- --------- --------- ------- ------- -------
Net income (loss) per share........ $ .30 $ .09 $ .31 $ .88 $ (.04) $(36.82) $(73.56)
Net income (loss) per
share,excluding goodwill
amortization(3).................. $ .49 $ .22 $ .64 $ .98 $ (.04) $(36.82) $(73.56)
Diluted:
Income (loss) before extraordinary
item............................. $ .27 $ .09 $ .26 $ .88 $ (4.70) $(36.82) $(73.56)
Extraordinary item................. -- -- -- -- 4.66 -- --
---------- --------- --------- --------- ------- ------- -------
Net income (loss) per share........ $ .27 $ .09 $ .26 $ .88 $ (.04) $(36.82) $(73.56)
Net income (loss) per share,
excluding goodwill
amortization(3).................. $ .44 $ .22 $ .55 $ .98 $ (.04) $(36.82) $(73.56)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
---------- --------- --------- --------- ------- ------- -------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED FINANCIAL POSITION
Total assets....................... $1,023,310 $ 909,760 $ 902,355 $ 437,060 $55,905 $57,686 $61,916
Loans and leases, net.............. 688,477 554,054 605,883 320,958 38,338 45,492 48,179
Goodwill and other intangibles..... 65,078 67,802 66,769 10,736 -- -- --
Deposits........................... 876,602 758,400 765,203 383,031 51,431 55,876 59,651
Long-term debt..................... 27,657 28,194 27,657 537 537 1,894 1,894
Common shareholders' equity........ 86,032 84,560 83,077 40,772 3,541 (948) 41
Shareholders' equity (deficit)..... 97,691 96,219 94,736 40,772 3,541 (948) 41
Average assets..................... 942,663 499,180 706,327 241,866 56,995 61,312 66,515
Average earning assets............. 761,201 430,454 571,091 198,720 50,329 53,873 58,632
Average common equity.............. 84,008 46,852 65,539 20,698 (81) (572) 981
Per share data(2):
Common shares outstanding.......... 9,173,698 9,173,698 9,173,698 4,848,715 447,734 26,864 26,864
Diluted common shares
outstanding...................... 10,294,674 9,173,698 9,652,238 4,848,715 447,734 26,864 26,864
Book value per share............... $ 9.38 $ 9.22 $ 9.06 $ 8.41 $ 7.91 $(35.39) $ 1.53
Diluted book value per share....... 8.36 9.22 8.61 8.41 7.91 (35.39) 1.53
Tangible book value per share...... 2.28 1.83 1.78 6.19 7.91 (35.39) 1.53
Diluted tangible book value per
share............................ 2.04 1.83 1.69 6.19 7.91 (35.39) 1.53
SELECTED PERFORMANCE RATIOS(4)
Return on average assets........... .73% .22% .42% .96% (.01)% (1.61)% (2.97)%
Return on average assets, excluding
goodwill amortization(3)......... 1.10 .51 .78 1.07 (.01) (1.61) (2.97)
Return on average common equity.... 6.69 2.02 3.45 11.23 nm(5) nm(6) (201.43)
Return on average common equity,
excluding goodwill
amortization(3).................. 10.86 5.06 7.28 12.53 nm(5) nm(6) (201.43)
Net yield on interest earning
assets........................... 5.88 5.76 5.76 5.89 5.60 5.31 5.10
Noninterest income to average
assets........................... 4.75 4.96 4.66 4.84 4.94 4.67 4.50
Efficiency ratio(6)................ 67.74 79.25 72.77 88.60 107.03 105.22 119.43
SELECTED ASSET QUALITY RATIOS(7)
Nonperforming assets to total
portfolio loans and leases and
OREO............................. 2.82% 3.75% 3.95% 4.73% 7.50% 7.93% 7.60%
Nonperforming assets to total
assets........................... 1.42 2.08 2.30 2.89 5.42 6.55 6.20
Allowance for loan and lease losses
to portfolio loans and leases.... 1.53 1.85 1.80 1.96 1.64 1.77 1.68
Allowance for loan and lease losses
to nonperforming loans and
leases........................... 60.24 57.52 52.18 57.31 39.44 32.95 34.41
Net charge-offs to average
portfolio loans and leases....... 1.36 .48 .29 .26 1.13 1.25 2.10
SELECTED CAPITAL RATIOS
Tier 1 Leverage Ratio.............. 6.61% 6.66% 6.59% 6.98% 6.25% nm%(5) 0.07%
Tier 1 Risk-Weighted Ratio......... 8.88 9.53 8.85 9.22 8.67 nm(5) 0.08
Total Risk-Weighted Ratio.......... 10.03 10.87 10.18 10.64 11.24 nm(5) 0.20
Average common equity to average
assets........................... 8.91 9.39 9.28 8.56 nm(5) nm(5) 1.47
</TABLE>
- ------------------------
(1) Forgiveness of indebtedness net of $443,000 income tax benefit.
(2) Share and per share amounts have been retroactively restated to reflect (i)
a one-for-two reverse split of the Eldorado Common Stock effective September
4, 1998 and (ii) changes in the presentation of earnings per share as set
forth in the notes to Eldorado's consolidated financial statements set forth
in Annexes III and IV.
(3) Excludes the amortization of goodwill and other intangibles. Although such
presentation is not defined by Generally Accepted Accounting Principles
("GAAP"), management believes it to be beneficial to gaining an
understanding of Eldorado's financial performance in comparison to its peer
group.
(4) The average ratios are annualized for the six months ended June 30, 1998 and
June 30, 1997, respectively.
(5) Not meaningful as the average common equity for 1995 and 1994 and
shareholders' equity for 1994 were negative.
(6) As used in this Proxy Statement/Prospectus, the term efficiency ratio means
noninterest expense -- excluding goodwill amortization of goodwill and other
intangibles, losses and carrying costs of OREO and provision for recourse
obligations -- as a percentage of total revenue less interest expense. This
definition of efficiency ratio may not be comparable to that used by our
peer group.
(7) Selected Asset Quality Ratios and Selected Capital Ratios are end of period
ratios, except for net charge-offs to average portfolio loans and leases,
average equity to average assets and the leverage ratio. The average ratios
are based on daily averages for the indicated periods and are annualized
where appropriate. The leverage ratio is based on the average daily balances
for the three-month period ended as of the indicated date. Portfolio loans
and leases are exclusive of residential mortgage loans held for sale.
7
<PAGE>
ANTELOPE SELECTED FINANCIAL DATA
You should read this selected financial data with Antelope's amended Annual
Report on Form 10-KSB/A for the year ended December 31, 1997 and its amended
Quarterly Report on Form 10-QSB/A for the quarter ended June 30, 1998, delivered
with this Proxy Statement/Prospectus as Annexes I and II, respectively. The
selected historical financial data as of and for the five years ended December
31, 1997 are derived from Antelope's consolidated financial statements, which
have been audited by independent public accountants. The selected historical
financial data as of and for the six months ended June 30, 1998 and June 30,
1997 have not been audited but, in the opinion of Antelope's management, contain
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the financial position and results of operations of Antelope as
of such dates and for such periods. The results of operations for the six months
ended June 30, 1998 are not necessarily indicative of the results of operations
that may be expected for the year ended December 31, 1998, or for any future
period.
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS AS OF AND FOR
ENDED JUNE 30, THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
SUMMARY OF CONSOLIDATED OPERATIONS
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income before possible loan and lease
loss............................................. $ 5,343 $ 4,710 $ 9,883 $ 8,066 $ 8,152 $ 7,818 $ 7,559
Provision for possible loan and lease loss......... 540 450 1,054 700 1,040 860 880
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for possible
loan and lease loss.............................. 4,803 4,260 8,829 7,366 7,112 6,958 6,679
Noninterest income................................. 2,082 2,069 4,225 4,517 4,109 3,620 3,463
Noninterest expense
Amortization of goodwill......................... 223 145 367 -- -- -- --
Other noninterest expense........................ 5,520 4,994 10,345 8,659 8,851 8,502 8,286
--------- --------- --------- --------- --------- --------- ---------
Total noninterest expense...................... 5,743 5,139 10,712 8,659 8,851 8,502 8,286
--------- --------- --------- --------- --------- --------- ---------
Income before income tax........................... 1,142 1,190 2,342 3,224 2,370 2,076 1,856
Income tax provision............................... 281 366 422 1,130 720 607 526
--------- --------- --------- --------- --------- --------- ---------
Net income......................................... $ 861 $ 824 $ 1,920 $ 2,094 $ 1,650 $ 1,469 $ 1,330
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income available to common..................... $ 861 $ 824 $ 1,920 $ 2,094 $ 1,650 $ 1,469 $ 1,330
<CAPTION>
Per share data:
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted Average shares outstanding
Basic............................................ 767,342 767,342 767,342 767,342 767,342 767,342 767,342
Diluted.......................................... 767,342 767,342 767,342 767,342 767,342 767,342 767,342
Basic:
Net income per share............................... $ 1.12 $ 1.07 $ 2.50 $ 2.73 $ 2.15 $ 1.91 $ 1.73
Net income per share before goodwill amortization
(1).............................................. $ 1.41 $ 1.26 $ 2.98 $ 2.73 $ 2.15 $ 1.91 $ 1.73
Diluted:
Net income per share............................... $ 1.12 $ 1.07 $ 2.50 $ 2.73 $ 2.15 $ 1.91 $ 1.73
Net income per share before goodwill amortization
(1).............................................. $ 1.41 $ 1.26 $ 2.98 $ 2.73 $ 2.15 $ 1.91 $ 1.73
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS AS OF AND FOR
ENDED JUNE 30, THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
CONSOLIDATED FINANCIAL POSITION
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets....................................... $ 200,916 $ 182,659 $ 189,659 $ 147,210 $ 131,160 $ 130,288 $ 124,551
Loans and leases, net.............................. 118,822 108,684 116,127 93,734 85,386 85,774 73,730
Intangibles........................................ 3,874 4,219 4,134 -- -- -- --
Deposits........................................... 178,125 162,604 167,867 127,630 113,707 115,198 110,819
Common shareholders' equity........................ 20,614 18,205 19,680 17,723 15,899 13,765 12,483
Total shareholders' equity......................... 20,614 18,205 19,680 17,723 15,899 13,765 12,483
Average assets..................................... 193,423 173,097 180,278 139,176 130,905 127,323 126,152
Average earning assets............................. 168,086 150,638 155,171 121,919 115,402 112,087 111,095
Average common equity.............................. 20,169 17,897 18,351 16,884 14,696 13,118 11,860
<CAPTION>
Per share data:
<S> <C> <C> <C> <C> <C> <C> <C>
Common shares outstanding.......................... 767,342 767,342 767,342 767,342 767,342 767,342 767,342
Diluted common shares outstanding.................. 767,342 767,342 767,342 767,342 767,342 767,342 767,342
Book value per share............................... $ 26.86 $ 23.73 $ 25.65 $ 23.10 $ 20.72 $ 17.94 $ 16.27
Fully diluted book value per share................. 26.86 23.73 25.65 23.10 20.72 17.94 16.27
Tangible book value per share...................... 21.82 18.23 20.26 23.10 20.72 17.94 16.27
Fully diluted book value per share................. 21.82 18.23 20.26 23.10 20.72 17.94 16.27
<CAPTION>
SELECTED PERFORMANCE RATIOS (2)
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets........................... .89% .95% 1.07% 1.50% 1.26% 1.15% 1.05%
Return on average assets excluding
goodwill amortization (1)........................ 1.13 1.13 1.27 1.50 1.26 1.15 1.05
Return on average common equity.................... 8.54 9.21 10.46 12.40 11.23 11.20 11.21
Return on average common equity excluding goodwill
amortization..................................... 10.75 10.83 12.46 12.40 11.23 11.20 11.21
Net interest margin................................ 6.41 6.31 6.37 6.62 7.06 6.97 6.80
Efficiency ratio (3)............................... 74.34 73.67 73.33 68.82 72.19 74.33 75.18
Net interest income to average assets.............. 5.52 5.44 5.48 5.80 6.23 6.14 5.99
<CAPTION>
SELECTED ASSET QUALITY RATIOS (4)
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets to total portfolio loans and
leases and OREO.................................. 1.08% 2.15% 1.11% 3.48% 3.13% 4.28% 2.81%
Nonperforming assets to total assets............... .64 1.30 .73 2.43 2.24 3.06 1.78
Allowance for loan and lease losses to portfolio
loans and leases................................. 1.31 1.12 1.21 1.35 1.54 1.14 1.20
Net charge-offs to average portfolio loans and
leases........................................... .82 1.18 .84 .84 .77 .96 1.25
<CAPTION>
SELECTED CAPITAL RATIOS (4)
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leverage ratio..................................... 8.55% 8.00% 8.34% 12.22% 12.12% 10.67% 10.02%
Tier I capital to risk weighted assets............. 11.80 11.13 11.42 16.16 16.40 14.00 14.70
Total capital to risk weighted assets.............. 12.93 12.09 12.55 17.41 17.87 15.06 15.79
Average common equity to average assets............ 10.43 10.34 10.18 12.13 11.23 10.30 9.40
</TABLE>
- ------------------------
(1) Excludes the amortization of goodwill and other intangibles. Although such
presentation is not defined by GAAP, management believes it to be beneficial
to gaining an understanding of Antelope's financial performance in
comparison to its peer group.
(2) The average ratios are annualized for the six months ended June 30, 1998 and
June 30, 1997, respectively.
(3) As used in this Proxy Statement/Prospectus, the term efficiency ratio means
noninterest expense -- excluding goodwill amortization of goodwill and other
intangibles, losses and carrying costs of OREO and provision for recourse
obligations -- as a percentage of total revenue less interest expense. This
definition of efficiency ratio may not be comparable to that used by our
peer group.
(4) Selected Asset Quality Ratios and Selected Capital Ratios are end of period
ratios, except for net charge-offs to average portfolio loans and leases,
average equity to average assets and the leverage ratio. The average ratios
are based on daily averages for the indicated periods and are annualized
where appropriate. The leverage ratio is based on the average daily balances
for the three-month period ended as of the indicated date. Portfolio loans
and leases are exclusive of residential mortgage loans held for sale.
9
<PAGE>
UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL DATA
The following table is a summary of certain unaudited combined financial
information from the section of this Proxy Statement/Prospectus entitled
"Unaudited Pro Forma Combined Condensed Financial Information." The combined
financial information of Eldorado and Antelope gives effect to the merger as a
pooling of interests, as if such transaction had been completed as of the
beginning of each of the periods presented in the case of Summary of
Consolidated Operations and other data, and on the balance sheet date in the
case of Consolidated Financial Position. You should read the following summary
with the "Unaudited Pro Forma Combined Condensed Financial Information" and the
related notes thereto and the financial information of Eldorado and Antelope
presented in Annexes I through V. The Unaudited Pro Forma Combined Summary
Financial Data is presented for illustrative purposes only. This information is
not necessarily indicative of the operating results or financial position that
would have occurred if the merger had been consummated on the dates indicated,
nor is such data necessarily indicative of Eldorado's future operating results
or financial condition.
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED AS OF AND FOR
JUNE 30, THE YEAR ENDED DECEMBER 31,
--------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
---------- --------- ---------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS AND
RATIOS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF CONSOLIDATED OPERATIONS
Net interest income before possible loan and lease
loss................................................ $ 27,547 $ 16,995 $ 42,764 $ 19,774 $ 10,969
Provision for possible loan and lease loss............ 2,462 1,165 2,549 1,215 1,335
---------- --------- ---------- --------- ---------
Net interest income after provision for possible loan
and lease loss...................................... 25,085 15,830 40,215 18,559 9,634
---------- --------- ---------- --------- ---------
Noninterest income.................................... 13,443 8,058 19,129 9,416 4,805
Noninterest expenses
Amortization of goodwill............................ 1,962 850 2,881 268 --
Provision for recourse obligation................... -- 905 2,021 -- --
Other noninterest expense........................... 28,258 19,476 45,498 23,661 13,142
---------- --------- ---------- --------- ---------
Total noninterest expense....................... 30,220 21,231 50,400 23,929 13,142
---------- --------- ---------- --------- ---------
Income before income tax and extraordinary item....... 8,308 2,657 8,944 4,046 1,297
Income tax benefit (provision)........................ (4,024) (1,278) (4,034) 373 (277)
---------- --------- ---------- --------- ---------
Income before extraordinary item...................... 4,284 1,379 4,910 4,419 1,020
Extraordinary item (1)................................ -- -- -- -- 625
---------- --------- ---------- --------- ---------
Net income............................................ 4,284 1,379 4,910 4,419 1,645
Preferred dividend.................................... 636 85 731 -- --
---------- --------- ---------- --------- ---------
Net income available to common........................ $ 3,648 $ 1,294 $ 4,179 $ 4,419 $ 1,645
---------- --------- ---------- --------- ---------
---------- --------- ---------- --------- ---------
Per share data (2):
Weighted Average shares outstanding
Basic............................................... 11,955,313 8,231,081 10,187,677 5,432,001 2,915,714
Diluted............................................. 13,076,290 8,231,081 11,416,266 5,432,001 2,915,714
Basic:
Net income before extraordinary item.................. $ .31 $ .16 $ .41 $ .81 $ .35
Extraordinary item.................................... -- -- -- -- .21
---------- --------- ---------- --------- ---------
Net income per share.................................. $ .31 $ .16 $ .41 $ .81 $ .56
Net income per share before goodwill amortization
(3)................................................. $ .47 $ .26 $ .69 $ .86 $ .56
Diluted:
Net income before extraordinary item.................. $ .28 $ .16 $ .37 $ .81 $ .35
Extraordinary item.................................... -- -- -- -- .21
---------- --------- ---------- --------- ---------
Net income per share.................................. $ .28 $ .16 $ .37 $ .81 $ .56
Net income per share before goodwill amortization
(3)................................................. $ .43 $ .26 $ .62 $ .86 $ .56
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED AS OF AND FOR
JUNE 30, THE YEAR ENDED DECEMBER 31,
--------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
---------- --------- ---------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS AND
RATIOS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED FINANCIAL POSITION
Total assets................................................ $1,224,226 $1,092,420 $1,092,014 $ 584,270 $ 187,065
Loans and leases, net....................................... 807,299 662,738 722,010 414,692 123,724
Goodwill and other intangibles.............................. 68,952 72,021 70,903 10,736 --
Deposits.................................................... 1,054,727 921,004 933,070 510,661 165,138
Long-term debt.............................................. 27,657 28,194 27,657 537 537
Common shareholders' equity................................. 104,642 102,766 102,757 58,495 19,440
Total shareholders' equity (deficit)........................ 116,301 114,425 114,416 58,495 19,440
Average assets.............................................. 1,136,086 672,277 886,605 381,042 187,900
Average earning assets...................................... 929,287 581,092 726,262 320,639 165,731
Average common equity....................................... 104,177 64,749 83,890 37,582 14,615
Per share data (2):
Common shares outstanding................................... 11,955,313 11,955,313 11,955,313 7,630,330 3,229,349
Diluted common shares outstanding........................... 13,076,289 11,955,313 12,433,853 7,630,330 3,229,349
Book value per share........................................ $ 8.75 $ 8.60 $ 8.60 $ 7.67 $ 6.02
Fully diluted book value per share.......................... 8.00 8.60 8.26 7.67 6.02
Tangible book value per share............................... 2.99 2.57 2.66 6.26 6.02
Fully diluted book value per share.......................... 2.73 2.57 2.56 6.26 6.02
SELECTED PERFORMANCE RATIOS (4)
Return on average assets.................................... .76% .41% .55% 1.16% .88%
Return on average assets, excluding goodwill amortization
(3)....................................................... 1.11 .67 .88 1.23 .88
Return on average common equity............................. 7.06 4.03 4.98 11.76 11.26
Return on average common equity,
excluding goodwill amortization (3)....................... 10.86 6.67 8.42 12.47 11.26
Net yield on interest earning assets........................ 5.98 5.90 5.89 6.17 6.62
Net interest income to average assets....................... 4.89 5.10 4.82 5.19 5.84
Efficiency ratio (5)........................................ 68.96 77.75 73.51 81.06 83.31
SELECTED ASSET QUALITY RATIOS (6)
Nonperforming assets to total portfolio loans and leases and
OREO...................................................... 2.49% 3.52% 3.40% 4.38% 4.45%
Nonperforming assets to total assets........................ 1.29 1.98 2.03 2.77 3.19
Allowance for loan and lease losses to portfolio loans and
leases.................................................... 1.49 1.71 1.69 1.79 1.57
Allowance for loan and lease losses
to nonperforming loans and leases.........................
Net charge-offs to average portfolio loans and leases....... 1.26 .66 .39 .48 .89
SELECTED CAPITAL RATIOS (6)
Tier 1 Leverage Ratio....................................... 6.95% 6.90% 6.91% 8.30% 10.35%
Tier 1 Risk-Weighted Ratio.................................. 9.38 9.82 9.30 10.97 14.11
Total Risk-Weighted Ratio................................... 10.53 11.09 10.60 12.35 15.91
Average common equity to average assets..................... 9.17 9.63 9.46 9.86 7.78
</TABLE>
- ------------------------------
(1) Forgiveness of indebtedness net of $443,000 income tax benefit.
(2) Share and per share amounts have been retroactively restated to reflect (i)
a one-for-two reverse split of the Eldorado common stock effective September
4, 1998 and (ii) changes in the presentation of earnings per share as set
forth in the notes to the Eldorado's consolidated financial statements set
forth in Annexes III and IV.
(3) Excludes the amortization of goodwill and other intangibles. Although such
presentation is not defined by GAAP, management believes it to be beneficial
to gaining an understanding of Eldorado's financial performance in
comparison to its peer group.
(4) The average ratios are annualized for the six months ended June 30, 1998 and
June 30, 1997, respectively.
(5) As used in this Proxy Statement/Prospectus, the term efficiency ratio means
noninterest expense -- excluding amortization of goodwill and other
intangibles, losses and carrying costs of OREO and provision for recourse
obligations -- as a percentage of total revenue. Our definition of
efficiency ratio may not be comparable to that used by our peer group.
(6) Selected Asset Quality Ratios and Selected Capital Ratios are end of period
ratios, except for net charge-offs to average portfolio loans and leases,
average equity to average assets and the leverage ratio. The average ratios
are based on daily averages for the indicated periods and are annualized
where appropriate. The leverage ratio is based on the average daily balances
for the three-month period ended as of the indicated date. Portfolio loans
and leases are exclusive of residential mortgage loans held for sale.
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table shows unaudited comparative per share data for Eldorado
and Antelope, using the pooling of interests method of accounting. The
information should be read in conjunction with the consolidated historical
financial statements and notes thereto of Eldorado and Antelope which are
incorporated by reference in the Proxy Statement/Prospectus and delivered
herewith as Annexes I through IV, and the unaudited pro forma condensed
financial information, including notes thereto, which appear elsewhere in this
Proxy Statement/Prospectus. The pro forma data is presented for comparative
purposes only and is not necessarily indicative of the combined financial
position or results of operations which would have been realized had the merger
been consummated during the periods or as of the dates for which the pro forma
data is presented. See "Unaudited Pro Forma Combined Condensed Financial
Information."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------
1998 1997 1996 1995
------------ ------------ --------- ---------
<S> <C> <C> <C> <C>
PER SHARE OF ELDORADO COMMON STOCK:
Income from continuing operations:
Historical:
Basic net income per share...................................... $ .30 $ .31 $ .88 $ (.04)
Basic net income before goodwill amortization(1)................ .49 .64 .98 (.04)
Diluted net income per share.................................... .27 .26 .88 (.04)
Diluted net income before goodwill amortization(1).............. .44 .55 .98 (.04)
Pro forma:
Basic net income per share...................................... .31 .41 .81 .56
Basic net income before goodwill amortization(1)................ .47 .69 .86 .56
Diluted net income per share.................................... .28 .37 .81 .56
Diluted net income before goodwill amortization(1).............. .43 .62 .86 .56
Book Value (as of period end):
Historical........................................................ 9.38 9.06
Pro forma......................................................... 8.75 8.60
Shares used for book value calculation:
Historical (basic)................................................ 9,173,698 9,173,698
Historical (diluted).............................................. 10,294,675 9,652,238
Pro forma (basic)................................................. 11,955,313 11,955,313
Pro forma (diluted)............................................... 13,076,290 12,433,853
PER SHARE OF ANTELOPE COMMON STOCK(2):
Income (loss) from continuing operations:
Historical:
Basic net income per share...................................... $ 1.12 $ 2.50 $ 2.73 $ 2.15
Basic net income before goodwill amortization(1)................ 1.41 2.98 2.73 2.15
Diluted net income per share.................................... 1.12 2.50 2.73 2.15
Diluted net income before goodwill amortization(1).............. 1.41 2.98 2.73 2.15
Equivalent pro forma:
Basic net income per share...................................... 1.11 1.49 2.95 2.05
Basic net income before goodwill amortization(1)................ 1.70 2.51 3.13 2.05
Diluted net income per share.................................... 1.02 1.33 2.95 2.05
Diluted net income before goodwill amortization(1).............. 1.56 2.24 3.13 2.05
Book value (as of period end):
Historical........................................................ 26.86 25.65
Equivalent pro forma.............................................. 31.73 31.16
</TABLE>
- --------------------------
(1) Excludes the amortization of goodwill and other intangibles. Although such
presentation is not defined by GAAP, management believes it to be beneficial
to gaining an understanding of Elodrado's and Antelope's financial
performance in comparison to its peer group.
(2) The equivalent pro forma per share amounts reflected above for Antelope are
determined by multiplying the corresponding pro forma amounts per share of
Eldorado Common Stock, by the exchange ratio of 3.625 shares of Eldorado
Common Stock in exchange for each share of Antelope Common Stock.
12
<PAGE>
RISK FACTORS
THE FOLLOWING RISKS SHOULD BE CONSIDERED BY THE ANTELOPE SHAREHOLDERS IN
DECIDING WHETHER TO APPROVE AND ADOPT THE MERGER AGREEMENT. IN ADDITION WE
STRONGLY URGE YOU TO CONSIDER THE RISK FACTORS SET FORTH ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS (INCLUDING IN THE SUMMARY UNDER THE CAPTION "CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS") AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE IN AND DELIVERED WITH THIS PROXY STATEMENT/PROSPECTUS.
IN PARTICULAR, ANTELOPE SHAREHOLDERS SHOULD ALSO CONSIDER THE RISK FACTORS SET
FORTH IN ELDORADO'S ANNUAL REPORT ON FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31,
1997, WHICH HAS BEEN BOTH INCORPORATED BY REFERENCE IN AND DELIVERED WITH THIS
PROXY STATEMENT/PROSPECTUS IN ANNEX III.
RISKS RELATING TO THE MERGER
The merger involves the integration of two companies that have previously
operated independently. We cannot assure you that Eldorado will be able to
integrate the operations of Antelope without encountering difficulties. Such
difficulties could include interruptions and dislocations associated with the
integration of different business strategies and disparate business backgrounds
and operating cultures of the two companies. In addition, after the merger, the
combined resources of the two companies may not be adequate to handle the needs
of the combined companies. We can provide no assurance whether and to what
extent the merger will achieve the benefits described elsewhere in this Proxy
Statement/Prospectus.
CONDITIONS TO THE CLOSING OF THE MERGER
In addition to the approval of Antelope's shareholders, as well as certain
other events, the closing of the merger is conditioned on the following events:
- - The receipt of a letter from Eldorado's accountant, PricewaterhouseCoopers
LLP, and a letter from Antelope's accountant, Grant Thornton LLP, that the
merger qualifies for pooling of interests accounting treatment.
- - The receipt of certain regulatory approvals from the Federal Reserve Board,
FDIC and California Department of Financial Institutions.
Even if the shareholders of Antelope approve the merger, we can provide no
assurance that any of the other conditions to the merger will occur or that the
merger will close.
ILLIQUIDITY OF ELDORADO COMMON STOCK
No active market currently exists for Eldorado Common Stock, and it is
uncertain whether an active trading market will arise following the merger. In
the Merger Agreement, Eldorado has agreed to use all commercially reasonable
efforts after the merger is completed to have the Eldorado Common Stock issued
to you quoted on Nasdaq. We can provide no assurance, however, that such shares
will be approved for quotation on Nasdaq and you should be aware that such
approval is not a condition to the closing of the merger.
In August 1998, Eldorado filed a registration statement with the Securities
and Exchange Commission (the "SEC") concerning a proposed public offering of
additional shares of Eldorado Common Stock. As a result of the recent volatility
in the stock market, completion of the offering has been delayed. We cannot
assure you that Eldorado will complete the offering or that, if completed, any
active trading market will result after the offering.
A public trading market having the desired characteristics of depth,
liquidity and orderliness depends upon the presence in the marketplace of
willing buyers and sellers of the Eldorado Common Stock at any given time, which
presence is dependent upon the individual decisions of investors over which
neither Eldorado nor any market maker has any control. Although Eldorado will
have over 800 shareholders of record following the merger, over 75% of Eldorado
common stock will be held by less than 20 shareholders.
VOLATILITY OF STOCK PRICE
The market price of the Eldorado Common Stock may be subject to significant
fluctuations in response to numerous factors, including:
13
<PAGE>
- - variations in the annual or quarterly financial results of Eldorado or its
competitors,
- - changes by financial research analysts in their estimates of the earnings of
Eldorado or its competitors or the failure of Eldorado or its competitors to
meet such estimates,
- - conditions in the economy, in general, or the banking industry, in particular,
or
- - unfavorable publicity regarding Eldorado or the industry.
In addition, the stock market has, on occasion, experienced significant
price and volume fluctuations that have affected the market prices for many
companies' securities. Those swings in stock prices in many cases have been
unrelated to the operating performance of those companies. Any such fluctuations
following the merger may adversely affect the prevailing market price of
Eldorado Common Stock.
DILUTION
Upon completion of the merger, Eldorado will have outstanding stock options
and warrants for the purchase of an aggregate of 2,725,517 shares of Eldorado
Common Stock at a weighted average exercise price of $9.84 per share. Such stock
options or warrants will, if exercised, result in dilution to Eldorado's
shareholders. Moreover, in the event that Eldorado issues additional shares of
its common stock in the future, including shares that may be issued in
connection with its proposed public offering or potential future acquisitions,
then-existing shareholders of Eldorado may experience further dilution in the
tangible book value and/or earnings per share of its common stock.
EFFECT OF RECENT ACQUISITIONS BY ELDORADO
Since September 1995, Eldorado's operations have changed substantially.
During the past three years, Eldorado has acquired three banks with a total of
approximately $779 million in assets. Those acquisitions, including the
acquisition of Eldorado Bancorp in June 1997, resulted in a fourteenfold
increase of Eldorado's assets. The acquisition of Eldorado Bancorp in and of
itself nearly doubled Eldorado's assets.
Eldorado used the purchase method of accounting for each of its previous
acquisitions, and therefore, the operating results of each acquired company are
included in Eldorado's financial statements only from the date of its
acquisition. Because of Eldorado's recent acquisitions and its use of the
purchase method of accounting, its historical operating results before June 30,
1997 are of limited relevance in evaluating the Company's historical financial
performance and predicting its future operating results.
RISKS RELATED TO ELDORADO GROWTH STRATEGY
An important element of Eldorado's business strategy continues to involve
active and substantial efforts to acquire or combine with other financial
institutions that would complement Eldorado's existing businesses. We can
provide no assurance, however, that Eldorado will be able to identify additional
suitable acquisition targets or consummate any such acquisitions.
If Eldorado is able to identify and consummate future acquisitions, its
ability to manage such future growth will depend primarily upon its ability to
- - monitor operations,
- - control costs,
- - maintain positive customer relations,
- - maintain regulatory compliance, and
- - attract, assimilate and retain additional qualified personnel.
Any failure by Eldorado to achieve those objectives in an efficient and
timely manner may cause interruptions and dislocations in its business. Such
problems may have a negative effect on Eldorado's existing operations, as well
as its ability to retain the customers of the acquired businesses, operate any
such businesses profitably or otherwise implement its growth strategy.
In addition to affecting Eldorado's immediate financial performance, any
such interruption or dislocation may cause Eldorado's federal and state banking
regulators to require Eldorado to delay or forgo future acquisitions until such
issues have been addressed to the satisfaction of those regulators.
Also, the presence of any liabilities of an acquired company that are
unknown to Eldorado at the time of acquisition may adversely affect Eldorado.
14
<PAGE>
In sum, any failure to manage its acquisition strategy effectively would
have an adverse effect on Eldorado.
ELDORADO PRODUCT CONCENTRATION
Eldorado makes a significant percentage of its loans and derives a
significant percentage of its revenue under the loan programs of the U.S. Small
Business Administration (the "SBA"). Eldorado's revenue from SBA loan programs
constituted 15.9% of its total revenue for the six months ended June 30, 1998.
In recent years, Congress has considered proposals to reduce substantially the
scope of various SBA programs, the level of funding for the SBA and the
attractiveness of the programs that the SBA may offer to both borrowers and
lenders. If Congress enacts any such type of proposal, Eldorado could be
adversely affected.
ELDORADO HAS NO PRESENT INTENTION TO PAY DIVIDENDS
Eldorado has never paid common stock dividends and does not plan on paying a
dividend in the foreseeable future. Eldorado's ability to declare such a
dividend will depend upon, among other things, future earnings, its operating
and financial condition, its capital requirements, general business conditions
and receipt of necessary regulatory approvals, if then required.
RELIANCE BY ELDORADO ON CERTAIN FUNDING SOURCES
Eldorado funds loans and leases primarily through the deposits and various
lines of credit of its customers. For the six months ended June 30, 1998, 15.0%
of Eldorado's average deposits consisted of the relatively volatile deposits of
title or escrow companies. For the same period, one company controlled title and
escrow deposits that represented 11.7% of Eldorado's total average deposits. We
consider such deposits to be volatile because the deposit amounts increase and
decrease significantly throughout the course of any given period. In addition,
only a limited number of deposit customers control such deposits, so the
decision by any one depositor to withdraw funds could have a significant
immediate effect on Eldorado's total deposits at any given time. Title and
escrow deposits tend to increase significantly at the end of a month, when real
estate closings tend to occur. Such deposits are also subject to seasonal
fluctuations, tending to decrease during those seasons when the volume of
residential real estate transactions is lower.
As a consequence of such potential volatility, Eldorado uses title and
escrow deposits solely to fund short-term assets, primarily consisting of
residential mortgages held for sale, which are generally sold within 30 days
after such mortgage loans are funded. We believe that Eldorado has adequate
alternative funding sources, such as lines of credit and, to a much lesser
extent, FHLB borrowings, to offset any significant decrease in or the
elimination of title and escrow deposits. We can provide no assurance, however,
that any alternative funding sources will be available at a reasonable cost if
and when needed. Eldorado would be adversely effected if it is unable to obtain
any necessary replacement funding on reasonable terms.
CONTROL OF ELDORADO BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS
Dartmouth Capital Group, L.P. ("DCG"), Eldorado's single largest
shareholder, will beneficially own approximately 25.4% of the shares of Eldorado
voting common stock outstanding following the merger. Upon completion of the
merger, Eldorado's directors, executive officers and principal shareholders,
including DCG, together with their affiliates, will beneficially own
approximately 67.2% of the shares of Eldorado voting common stock then
outstanding. As a result, if such shareholders take a common position, they
could control the outcome of corporate actions requiring shareholder approval,
including the election of directors and the approval of significant corporate
transactions, such as a merger or sale of all or substantially all of Eldorado's
assets. We can provide no assurance that the investment objectives of such
shareholders will be the same as yours or as those of Eldorado's other
shareholders.
15
<PAGE>
THE SPECIAL MEETING OF ANTELOPE SHAREHOLDERS
GENERAL
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Antelope Board of proxies representing Antelope common stock
to be voted at the Special Meeting of the Antelope shareholders, (the "Antelope
Meeting"), Antelope Meeting to be held on December 7, 1998, and at any
postponement or adjournment thereof. This Proxy Statement/Prospectus and
accompanying proxy card are first being mailed to Antelope shareholders on or
about , 1998.
MATTERS TO BE CONSIDERED
The purpose of the Antelope Meeting is to consider and vote upon the
principal terms of the merger and transact such other business as may properly
come before the Antelope Meeting or any adjournments or postponements thereof.
Based upon 767,342 shares of Antelope common stock outstanding on October
30, 1998 and assuming no dissenters' rights are perfected by Antelope
shareholders and no cash is paid in lieu of fractional shares, 2,781,614 shares
of Eldorado Common Stock would be issued in the merger. Upon completion of the
merger, Antelope shareholders would hold approximately 23.5% of Eldorado voting
common stock then outstanding. Consummation of the merger is subject to
satisfaction of a number of conditions, including the receipt of various
regulatory approvals for the merger and the approval of the principal terms of
the merger by the Antelope shareholders. See "Proposal One: The Merger --
Conditions to the Consummation of the Merger."
THE ANTELOPE RECORD DATE
Antelope has fixed the close of business on October 30, 1998 as the record
date for the determination of Antelope shareholders entitled to receive notice
of, and to vote at, the Antelope Meeting (the "Record Date"). Only holders of
record of shares of Antelope common stock at the close of business on the Record
Date will be entitled to notice of, and to vote at, the Antelope Meeting and any
postponements or adjournments thereof. On the Record Date, 767,342 shares of
Antelope common stock were issued and outstanding.
VOTES REQUIRED AND VOTING OF PROXIES
In advance of the Antelope Meeting, the Antelope Board will appoint one or
three persons as inspectors of election, whose duties will be those set forth in
Section 707 of the California General Corporation Law (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
Antelope shareholders. A majority of all shares of Antelope common stock
entitled to vote, represented in person or by proxy, constitutes a quorum.
Abstentions 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 Antelope common stock held of record will be
entitled to one vote upon each matter properly submitted to the Antelope
shareholders at the Antelope Meeting and any postponement thereof.
The affirmative vote of the holders of at least a majority of the total
number of outstanding shares of Antelope common stock entitled to vote at the
Antelope Meeting is required to approve the principal terms of the merger. The
failure to vote, an abstention or a broker non-vote has the same effect as a
vote against the principal terms of the merger.
Each share of Antelope common stock represented by a proxy properly executed
and received by Antelope in time to be voted at the Antelope 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"
16
<PAGE>
the proposal to approve the principal terms of the merger. All proxies voted
"FOR" such matter, 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 Antelope 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 Antelope
shareholders specifically abstains from voting with respect to such approval
will not be voted in favor of any such adjournment or postponement.
The Antelope Board is not currently aware of any business to be acted upon
at the Antelope Meeting other than as described herein. If, however, other
matters are properly brought before the Antelope Meeting, persons appointed as
proxies will have discretion to vote or act thereon in their best judgment.
Certain Antelope shareholders, all of whom are directors of Antelope,
holding approximately 30.7% of Antelope common stock outstanding on the Record
Date, have agreed, among other things, to vote "FOR" the adoption and approval
of the Merger Agreement and the merger.
If a quorum is not obtained, or fewer shares of Antelope 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 Antelope
Meeting will be postponed or adjourned for the purpose of allowing additional
time to obtain additional proxies or votes. At any subsequent reconvening of the
Antelope Meeting, it is expected that all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
Antelope Meeting (except for any proxies that have theretofore effectively been
revoked or withdrawn).
SOLICITATION OF PROXIES
The cost of soliciting proxies relating to the Antelope Meeting will be paid
by Antelope. In addition to solicitation of proxies by the use of mail,
directors, officers and employees of Antelope may solicit proxies from Antelope
shareholders personally or by telephone or telegram without additional
remuneration therefor. Antelope 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.
REVOCABILITY OF PROXIES
The presence of an Antelope shareholder at the Antelope Meeting (or at any
postponement or adjournment thereof) will not automatically revoke such Antelope
shareholder's proxy. However, an Antelope shareholder may revoke a proxy at any
time prior to its exercise by (a) delivery to the Corporate Secretary of
Antelope, Roy J. Simi, of a written notice of revocation prior to or at the
Antelope Meeting (or, if the Antelope Meeting is adjourned or postponed, prior
to or at the time the adjourned or postponed meeting is actually held); (b)
delivery to the Corporate Secretary of Antelope prior to or at the Antelope
Meeting (or, if the Antelope 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 Antelope Meeting (or, if the
Antelope 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 Antelope Valley Bank, 831
West Lancaster Blvd., Lancaster, California 93534, Attn: Corporate Secretary.
17
<PAGE>
DISSENTERS' RIGHTS
If the principal terms of the Merger are approved by Antelope shareholders,
holders of Antelope 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 ANTELOPE 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
ANTELOPE ON OR BEFORE THE DATE OF THE ANTELOPE MEETING, AND ANY SUCH SHAREHOLDER
MUST VOTE AGAINST THE APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER AND PROPOSAL
ONE AND COMPLY WITH SUCH OTHER PROCEDURES AS REQUIRED BY THE CGCL, AS MORE FULLY
DESCRIBED IN "PROPOSAL ONE: THE MERGER -- RIGHT OF DISSENTING STOCKHOLDERS."
FAILURE TO SEND SUCH NOTICE, TO VOTE AGAINST THE PRINCIPAL TERMS OF THE MERGER
OR TO FOLLOW SUCH OTHER PROCEDURES WILL RESULT IN WAIVER OF SUCH SHAREHOLDER'S
DISSENTERS' RIGHTS. See Exhibit D for a discussion of dissenters' rights and a
description of the procedures that must be followed to perfect such rights.
EFFECT OF MERGER ON ANTELOPE BOARD
If the merger is approved by the shareholders of each constituent
corporation, and if all regulatory approvals are obtained, upon effectiveness of
the merger, the Board of Directors of Antelope will initially be fixed at five
persons who shall initially be Clyde G. Golding, Jack D. Seefus, William Walsh
IV, A.C. Warnack and Robert P. Keller. In the event the merger is not
consummated as contemplated, all directors of Antelope elected at the last
annual meeting of shareholders of Antelope will continue to serve as directors
of Antelope until the next annual shareholders meeting of Antelope and until
their successors have been elected and duly qualified. See "Information
Regarding Antelope -- Management of Antelope -- Directors and Executive
Officers."
18
<PAGE>
PROPOSAL ONE: THE MERGER
BACKGROUND OF AND REASONS FOR THE MERGER
The Board of Directors of Antelope has periodically evaluated opportunities
for developing and expanding the business of Antelope or otherwise enhancing
shareholder value. These opportunities include, from time-to-time, the
evaluation of potential acquisitions of commercial banks or banking offices in
the Antelope Valley and adjacent areas, or the sale of Antelope to other
institutions interested in expanding their operations. Most recently, in
February 1997, Antelope acquired branches in Rosamond, Wrightwood and Frazier
Park, California from Wells Fargo Bank.
In January 1998, the Executive Committee of Antelope (consisting of
directors Seefus, Golding, Walsh, Warnack and Harrison) began to assess the
prospects for arranging a sale of Antelope. The members of the Executive
Committee were motivated by several factors, including prices being offered in
connection with recent California bank mergers and acquisitions, the limited
growth prospects for Antelope in its principal market areas, competition from
larger financial institutions in terms of pricing and product offerings and the
age of the board members and certain senior managers.
Also in January 1998, President Jack D. Seefus met with the President of a
Southern California based independent banking institution, who expressed
informal interest in a possible acquisition of Antelope. Following this meeting,
a subsequent meeting was held on January 29, 1998 between Mr. Seefus, Mr.
Golding and the President and a Director of the potential acquiror. As a result
of these preliminary discussions, a letter of intent was received on March 4,
1998, in which the institution indicated its interest in acquiring Antelope for
approximately $55.00 per share of Antelope common stock, payable in the common
stock of the acquiror. A meeting of the Executive Committee was held on March
23, 1998 to discuss the offer, at which time it was decided to defer responding
to the offer until an investment banking firm was retained to advise Antelope
about the offer and related matters. On April 7, 1998, the Board retained
Carpenter & Company to evaluate the offer, Antelope and the values that might be
received in a sale or merger. The Antelope Board also created an Ad Hoc
Committee, consisting of Chairman Golding, and Directors Warnack, Walsh and
Seefus, to represent Antelope in connection with any sale and related
negotiations. The Antelope Board also ratified severance agreements with four
officers of Antelope in order to help assure that they would remain with
Antelope during the marketing and sale of Antelope. See "Information Regarding
Antelope -- Change in Control and Severance Compensation Agreements."
In April and May 1998, Carpenter & Company prepared and distributed
preliminary information packages to a group of prospective bidders, with a view
toward determining the level of interest in a sale by June 1, 1998.
Approximately 20 parties were contacted by Carpenter & Company and information
packages were ultimately distributed to approximately 10 prospective acquirors.
As a result of this process, on or before June 1, 1998, Antelope had received
indications of interest from two California financial institutions, including
the bidder that had originally submitted an offer in March, and one out-of-state
financial services firm with California operations. The proposal of the
out-of-state firm for a stock merger was valued at between $58.64 and $65.16 per
share of Antelope common stock based on the current market price of the
acquiror's shares. This offer was not pursued due to the Antelope Board's
determination based on market data that the trading history of such firm's
common shares was too volatile and its earnings prospects too uncertain. The
bidder which had previously submitted an indication of interest increased the
value of its offer to approximately $58.00 per share of Antelope common stock
based on the current market price of its common stock. This bidder subsequently
withdrew its offer after performing limited due diligence respecting Antelope.
The bidder advised Carpenter & Company that it had determined Antelope's retail
customer orientation and the demographics of the Antelope Valley market area did
not fit well with the bidder's existing operations.
Eldorado, the third party submitting an indication of interest, initially
indicated a willingness to pay approximately $59.00 per share of Antelope common
stock based on a $16.00 per share value placed by
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Eldorado on Eldorado Common Stock (as adjusted to reflect the one-for-two
reverse stock split of Eldorado). Eldorado submitted a revised proposal on July
24, 1998, providing for an exchange ratio of 3.625 shares of Eldorado Common
Stock for each share of Antelope common stock. Based on a valuation of $16.00
per share of Eldorado Common Stock, the acquisition was valued by the parties at
approximately $58.00 per share of Antelope common stock.
Only six percent of the outstanding shares of Eldorado Common Stock are held
by non-affiliated shareholders and there is presently no active trading market
in the shares of Eldorado Common Stock. The share valuation of Eldorado Common
Stock used by the Antelope Board of Directors was established based upon the
input of Eldorado and Carpenter & Company. The stock prices of banking
institutions with publicly-traded securities and broadly comparable past and
projected earnings and operations to those of Eldorado were analyzed. In
addition, Antelope was aware that Eldorado had filed with the SEC a registration
statement for a public offering of Eldorado Common Stock, and Antelope discussed
with Eldorado's proposed underwriters the criteria that would be relevant in
determining the price at which shares would be sold in such offering, if
completed. No discount was established to take account of the relative
illiquidity of the shares of Eldorado Common Stock to be received by Antelope's
shareholders if Eldorado does not complete a public offering, the shares of
Eldorado Common Stock do not qualify for listing on Nasdaq, or an active trading
market does not develop. See "-- Opinion of Antelope's Financial Advisor."
After the marketing of Antelope commenced in April 1998, and before the
Merger Agreement was executed between the parties, the public market for bank
shares suffered a substantial decline. Between July 31 and September 11, 1998,
share prices of California based banking institutions with assets of over $500
million (excluding Bank of America and Wells Fargo Bank) had declined by
approximately 34.1% from their 52 week highs, while the share prices of major
U.S. money center banks, as represented by the S&P Bank Index, declined by
approximately 22.7% over the same period. As a result, market valuations for all
banks were adversely affected.
Based upon this change in the market, the Antelope Board of Directors
believed at the time the Board considered the Merger Agreement that a range of
between $11.50 and $12.50 was a better estimate as to the value of the shares of
Eldorado Common Stock than the $16.00 per share value reflected in Eldorado's
July 24 proposal. This change resulted in a reduction in the estimated value of
the transaction to the shareholders of Antelope to be between $42.23 and $45.31
per share of Antelope common stock. However, the Antelope Board also believed at
that time that the decrease in the transaction value reflected a similar decline
in the value of Antelope based on the recent market conditions affecting the
value of all banking institutions. Eldorado was not willing to increase the
exchange ratio to provide additional consideration in the form of additional
shares of Eldorado Common Stock to Antelope's shareholders.
On September 14, 1998 the Antelope Board of Directors held a meeting to
consider all relevant factors concerning the merger and the proposed Merger
Agreement and Stock Option Agreement and engaged in a discussion with Carpenter
& Company, in which the Board asked questions related to Carpenter & Company's
presentations and oral opinion concluding that the consideration offered by
Eldorado was, as of such date, fair, from a financial point of view, to
Antelope's shareholders. The Antelope Board also reviewed the terms of the
certain letter agreements between Antelope and Messrs. Seefus, Nagy and
Hennager, which will become effective as of and upon the closing of the merger,
relating to the terms of continued employment of such executives upon the
closing of the merger. See "-- Interests of Certain Persons in the Merger." Upon
completion of their review of all of the forgoing matters, the Board of
Directors of Antelope approved the Merger Agreement and the Stock Option
Agreement, and the directors of Antelope agreed to vote their shares for
approval of the Merger Agreement. Subsequently, press releases were issued
announcing the merger on September 16, 1998 and the Merger Agreement was
executed.
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RECOMMENDATION OF THE ANTELOPE BOARD OF DIRECTORS
The Board of Directors of Antelope believes the merger is in the best
interest of Antelope's shareholders and has unanimously approved the Merger
Agreement and the transactions contemplated thereby.
The Board of Directors of Antelope unanimously recommends that the shareholders
of Antelope vote "FOR" the proposal to approve and adopt the Merger Agreement.
The terms of the proposed merger are the result of arm's length negotiations
between representatives of Antelope and representatives of Eldorado, culminating
in the execution of the Merger Agreement. In arriving at its decision to approve
and recommend the terms of the Merger Agreement, the Antelope Board considered a
number of factors, including, but not limited to, the following:
1. Antelope's business, results of operations, financial condition and
future prospects. The Board of Directors of Antelope believes that future
growth opportunities within Antelope's principal markets are limited,
given the market share held by Antelope in such communities. At June 30,
1997, Antelope held 23.3% of all deposits held by commercial banks in
Lancaster, 15.3% in Palmdale, 55.1% in Wrightwood and 100% in Frazier
Park, Rosamond, Lake Los Angeles and Acton, representing the communities
served by Antelope. In addition, Antelope's earnings in recent years have
been flat. Earnings declined by approximately 8.3% in 1997, although a
9.4% increase over 1997 is expected for 1998. Such an increase would
simply restore earnings to their 1996 level.
2. Eldorado's business, results of operation, financial condition and
future prospects, which the Board of Directors of Antelope believes to be
superior to those of Antelope. Specifically, when compared to Antelope,
the Antelope Board believes Eldorado (a) serves a broader geographic area
with greater opportunities for growth, including Orange and San Diego
Counties; (b) has higher loan limits, more diversified product offerings
and other competitive advances for expanding its customer base; and (c)
greater capacity to access capital markets to support future expansion.
3. Carpenter & Company's presentation to the Board of Directors and the
opinion of Carpenter & Company, Antelope's financial advisor, that the
merger consideration was, as of the date of such opinion, fair from a
financial point of view to the holders of the shares of Antelope common
stock. In that regard, the Board of Directors of Antelope was aware that
Carpenter & Company had provided investment banking services to Eldorado
in two of its prior three acquisitions. See "-- Opinion of Antelope's
Financial Advisor" and Exhibit C.
4. The review by the Board of Directors of Antelope with its legal and
financial advisors of the provisions of the proposed Merger Agreement and
Stock Option Agreement.
5. The belief of the Board of Directors of Antelope that the terms of the
merger were attractive and that they would allow Antelope's shareholders
to receive shares of Eldorado Common Stock, an investment with greater
potential for increased liquidity than the shares of Antelope common
stock. While the shares of Eldorado Common Stock are not quoted on Nasdaq
or listed on any securities exchange, the Antelope Board believes that
the future prospects for Eldorado achieving such a listing are
substantially greater than the prospects for Antelope achieving such a
listing for its shares. The Board of Directors of Antelope was aware that
there could be no assurance that Eldorado would be able to complete the
proposed public offering contemplated in its August 1998 registration
statement or, absent such offering, that Eldorado would be able to quote
the Eldorado Common Stock on the Nasdaq, even though Eldorado has
committed in the Merger Agreement to use commercially reasonable efforts
to
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cause the shares of Eldorado Common Stock to be issued to the
shareholders of Antelope to be so quoted. Furthermore, the Board of
Directors of Antelope was aware that even if the public offering were
completed or if the Nasdaq quotation were otherwise attained, there can
be no assurance that an active trading market for Eldorado Common Stock
would develop or continue.
6. The ability of the shareholders of Antelope to defer paying taxes on the
disposition of shares of Antelope common stock until the sale of the
shares of Eldorado Common Stock received in the merger. See "-- Certain
Federal Income Tax Consequences."
7. The increasing competition in the market for financial services from
existing and potential competitors, many of whom have far greater assets
and resources than Antelope.
8. The successful history of Dartmouth Capital Group, L.P., the principal
shareholder of Eldorado, in obtaining regulatory approval for the
acquisition of California banking institutions and the integration of
such institutions, having acquired four such institutions since the
beginning of 1995.
In determining to approve and recommend the merger, the Board of Directors
of Antelope did not assign any relative or specific rates to the foregoing
factors and individual directors may have given different rates to different
factors.
Certain members of the Board of Directors of Antelope have interests in the
merger in addition to their interests as shareholders generally, including in
the case of President Jack D. Seefus, payments under future employment and
severance arrangements. Shareholders may wish to consider those interests in
evaluating the Antelope Board's recommendation that shareholders vote for
approval of the Merger Agreement. See "-- Interest of Certain Persons in the
Merger."
ELDORADO'S REASONS FOR THE MERGER
For Eldorado, the merger will provide an opportunity to further one of the
significant elements of its strategic plan, which is establishment and
enhancement of an attractive commercial banking franchise through the
acquisition of community banks primarily, but not exclusively, in and around its
Southern California base. Since 1995, Eldorado has continually been engaged in
the identification and evaluation of potential acquisitions of community banks
in California and has acquired three community banks with total assets of
approximately $779 million. Eldorado focuses primarily on community banks that
have strong lending franchises, niche business lines or low cost deposits that
would complement Eldorado's existing operations and branch network and also
provide opportunities for cost savings.
Eldorado believes that Antelope's strong capital position, significant
market presence in the Antelope Valley area of California and focus on consumer
lending products, particularly indirect automobile finance, are consistent with
Eldorado's business strategy. In particular, Eldorado believes that the merger
will enable Eldorado to broaden the spectrum of banking services available to
consumers and small to medium size businesses in both Antelope's geographic area
as well as in the area Eldorado now serves. In addition, the merger will also
increase Eldorado's presence in the area surrounding Los Angeles to the
northeast, where Eldorado currently does not have any offices. Finally, even
though Eldorado intends to operate Antelope as a separate subsidiary for the
foreseeable future, Eldorado also believes that the acquisition of Antelope will
provide various opportunities for cost savings through consolidation of certain
administration functions.
The material factors considered by the Eldorado Board were the historical
operating results, current financial condition, business and management and
future financial and other prospects of Antelope and Eldorado, including
Antelope's demonstrated commitment to meeting the community banking needs of the
areas it serves. The Eldorado Board also considered the terms of the Merger
Agreement,
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the Stock Option Agreement and the other documents executed in connection with
the merger. The Eldorado Board did not assign any specific or relative weight to
the factors in its consideration.
OPINION OF ANTELOPE'S FINANCIAL ADVISOR
GENERAL. Pursuant to an engagement letter dated April 13, 1998 (the
"Engagement Letter"), Antelope engaged Seapower Carpenter Capital, Inc., also
known as Carpenter & Company ("Carpenter"), to provide financial advisory
services and a fairness opinion with respect to the merger. Carpenter is an
investment banking firm specializing in California financial institutions, and,
as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, underwritings, private placements
and valuations for corporate and other purposes. Antelope selected Carpenter to
render the opinion on the basis of its experience and expertise in transactions
similar to the merger and its reputation in the banking and investment
communities. No limitations were imposed by Antelope on Carpenter with respect
to the investigations made or procedures followed in rendering its opinion.
At a meeting of Antelope Board on September 14, 1998, Carpenter delivered
its oral opinion that, as of the date of the opinion and subject to the
limitations and assumptions set forth in the opinion, the Merger Consideration
pursuant to the Merger Agreement was fair to Antelope shareholders from a
financial point of view. Carpenter's oral opinion was subsequently confirmed in
writing as of such date.
The full text of Carpenter's written opinion to the Antelope Board, which
sets forth the assumptions made, matters considered, and limitations of the
review, by Carpenter, is attached hereto as Exhibit C and is incorporated herein
by reference. The following summary of Carpenter's opinion is qualified in its
entirety by reference to the full text of the opinion, which should be read
carefully and in its entirety. In furnishing such opinion, Carpenter does not
admit that it is an expert with respect to the Registration Statement of which
this Proxy Statement/Prospectus is part within the meaning of the term "experts"
as used in the Securities Act and the rules and regulations promulgated
thereunder. Nor does Carpenter admit that its opinion constitutes a report or
valuation within the meaning of Section 11 of the Securities Act. Carpenter's
opinion is directed to the Antelope Board, covers only the fairness of the
consideration to be received by holders of Antelope common stock from a
financial point of view as of the date of the opinion, and does not constitute a
recommendation to any holder of Antelope common stock as to how such shareholder
should vote at the Antelope Meeting.
In connection with its Opinion, Carpenter, among other things:
- reviewed certain publicly available financial and other data with respect
to Antelope and Eldorado, including the consolidated financial statements
for recent years and interim periods to June 30, 1998 and certain other
relevant financial and operating data relating to Antelope and Eldorado
made available to Carpenter from published sources and from the internal
records and projections of Antelope;
- reviewed the Merger Agreement;
- reviewed certain publicly available information concerning the trading
of, and the trading market for, Antelope common stock and Eldorado Common
Stock;
- compared Antelope and Eldorado from a financial point of view with
certain other companies in the banking industry which Carpenter deemed to
be relevant;
- considered the financial terms, to the extent publicly available, of
selected recent business combinations of companies in the banking
industry which Carpenter deemed to be comparable, in whole or in part, to
the merger;
- considered the financial and other terms of recent business combinations
proposals made to Antelope by other companies in 1998, and compared them
to the merger;
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- reviewed and discussed with representatives of the management of Antelope
certain information of a business and financial nature regarding
Antelope, furnished to Carpenter by them;
- made inquiries regarding and discussed the merger and the Merger
Agreement and other matters related thereto with Antelope's counsel; and
- performed such other analyses and examinations as Carpenter deemed
appropriate.
In connection with its review, Carpenter did not assume any obligation
independently to verify the foregoing information and relied on such information
being accurate and complete in all material respects. Carpenter also assumed
that there were no material changes in Antelope's or Eldorado's assets,
financial condition, results of operations, business or prospects since the
respective dates of their last financial statements made available to it.
Carpenter relied on advice of counsel to Antelope as to all legal matters with
respect to Antelope, the merger and the Merger Agreement. Antelope acknowledged
that Carpenter did not discuss with Antelope's independent accountants any
financial reporting matters with respect to Antelope, the merger or the Merger
Agreement. Antelope informed Carpenter, and Carpenter assumed that the merger
would be accounted for as a pooling of interests under generally accepted
accounting principles. Carpenter assumed that the merger would 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.
Carpenter assumed that the allowance for loan losses for each of Antelope
and Eldorado are in the aggregate adequate to cover such losses. In addition,
Carpenter 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 Antelope or
Eldorado, nor was Carpenter furnished with any such appraisals. Finally,
Carpenter's opinion was based on economic, monetary and market and other
conditions as in effect on, and the information made available to Carpenter as
of, the date of the opinion. Accordingly, although subsequent developments may
affect Carpenter's opinion, it has not assumed any obligation to update, revise
or reaffirm such opinion.
SET FORTH BELOW IS A SUMMARY OF CARPENTER'S ANALYSIS IN CONNECTION WITH ITS
OPINION THAT IS COMPLETE IN ALL MATERIAL RESPECTS.
REVIEW OF ELDORADO AND ANTELOPE. Carpenter analyzed the financial results
of both Eldorado and Antelope for the period from 1995 through June 30, 1998 as
reported by both companies in their respective annual reports and public
filings. Specifically, Carpenter reviewed total assets, shareholder equity, net
income, return on assets, and return on equity. Assets of Eldorado grew from
$55.9 million at December 31, 1995 to $1,023 million at June 30, 1998.
Shareholder equity of Eldorado grew from $3.5 million at December 31, 1995 to
$86.0 million at June 30, 1998. Net income of Eldorado for the fiscal year
ending December 31, 1996 was $0.3 million, for the fiscal year ending December
31, 1997 was $3.3 million, and for the six month period ending June 30, 1998 was
$3.4 million. Return on assets and return on equity of Eldorado for each of the
fiscal years ending December 31, 1995 through December 31, 1997 and the six
month period ending June 30, 1998, were respectively 0.67% and 8.75%, 0.07% and
0.70%, 0.45% and 4.1%, and 0.7% and 6.6%. Total assets of Antelope at the end of
each of the fiscal years ending December 31, 1995 through December 31, 1997 and
the six month period ending June 30, 1998 were $131 million, $147 million, $190
million, and $201 million respectively. Shareholder equity of Antelope at the
end of each of the fiscal years ending December 31, 1995 through December 31,
1997 and the six month period ending June 30, 1998 was $15.9 million, $17.7
million, $19.7 million, and $20.6 million respectively. Net income of Antelope
for each of the fiscal years ending December 31, 1995 through December 31, 1997
and the six month period ending June 30, 1998 was $1.65 million, $2.09 million,
$1.92 million, and $861 thousand, respectively. Return on assets and return on
beginning equity of Antelope for each of the fiscal years ending December 31,
1995 through December 31, 1997 and the six month period ending June 30, 1998,
were 1.3% and 12.0%, 1.5% and 13.2%, 1.1% and 10.8%, and 0.9% and 8.7%,
respectively.
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TRADING ACTIVITY AND PRICES. Carpenter reviewed the trading activity and
sales prices in the common stock of Antelope, which trades in the
Over-the-Counter (OTC) market. As of June 30, 1998, there were 767,342 shares of
Antelope common stock outstanding. Antelope common stock traded in a range
during the first six months of the year 1998 between $35.375 and $40.75 per
share. Trading volume for Antelope common stock averaged approximately 200
shares a day during the first half of 1998. Eldorado is not publicly traded in
any significant volume.
IMPUTED MARKET VALUE OF ANTELOPE AND ELDORADO. Because of the very limited
market liquidity in Antelope common stock and the absence of liquidity in
Eldorado Common Stock, Carpenter calculated imputed stock values for both
companies based on the trading prices of comparable companies. Carpenter
compiled a list of all publicly traded California community banks with more than
$500 million in assets (the "Publicly Traded Community Banks"), comprising a
total of 18 companies, Carpenter then derived an average price to earnings ratio
for this group of companies. As of July 15, 1998, when Antelope entered into
serious negotiations with Eldorado, that earnings multiple was 20.7x (the "July
Earnings Multiple"). Applying the July Earnings Multiple to earnings projections
for 1998 for each of Antelope and Eldorado as furnished to Carpenter by their
respective management produced an imputed value for Antelope and Eldorado of
$56.72 and $15.73 per share respectively. Between July 15, 1998 and September
11, 1998, (the trading day prior to the meeting at which Antelope's Board of
Directors approved the merger), the Publicly Traded Community Banks dropped
sharply in price, and their average price to earnings ratio declined to 15.6x
(the "September Earnings Multiple"). Applying the September Earnings Multiple to
earnings projections for 1998 for each of Antelope and Eldorado as furnished to
Carpenter by their respective management produced an imputed value for Antelope
and Eldorado of $42.74 and $11.86 per share respectively. Carpenter then
calculated the exchange ratio in a hypothetical merger transaction between
Antelope and Eldorado that was based on these imputed values. A hypothetical
exchange based on these imputed values would result in the issuance to Antelope
shareholders of 3.604 shares of Eldorado Common Stock for each Antelope share
held, as compared to the actual exchange ratio of 3.625 Eldorado shares for each
Antelope share in the merger.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Using publicly available
information, Carpenter reviewed the consideration paid in recently announced
transactions whereby certain banks and bank holding companies ("Banks") of
various sizes were acquired. Specifically, Carpenter reviewed 28 transactions
involving acquisitions of Banks based in California announced since August 1,
1997 (the "California Bank Acquisitions"), and 10 acquisitions of banks based in
California with total assets between $100 million and $350 million since the
same date, consisting of the following (acquiror/target): Popular, Inc/ First
State Bank of Southern California, First Banks America, Inc./Redwood Bancorp,
First Banks, Inc./ Republic Bank, Western Bancorp/Bank of Los Angeles, Bank of
Commerce/Rancho Vista National Bank, Mid-State Bank/BSM Bancorp, Pacific
Bank/Sterling West Bancorp, SierraWest Bancorp/California Community, City
National Corp./Harbor Bancorp (collectively the "Small Bank Acquisitions"). For
each bank acquired or to be acquired in such transactions, Carpenter analyzed
data illustrating, among other things, the ratio of the premium (i.e., purchase
price in excess of tangible book value) to core deposits, purchase price to book
value and to tangible book value and purchase price to last 12 months' ("LTM")
earnings.
The figures for the California Bank Acquisitions and Small Bank Acquisitions
produced, respectively: (i) median percentage of premium to core deposits of
13.8%, and 14.1%; (ii) average multiple of purchase price to book value of
262.3%, and 265.4%; (iii) average multiple of purchase price to tangible book
value of 274.4%, and 280.1%; (iv) median multiple of purchase price to LTM
earnings of 22.0x, and 22.5x; and (v) average purchase price as a percentage of
assets of 22.7% and 22.1%.
All but one of the transactions analyzed in the California Bank Acquisition
group were announced prior to July 31, 1998, and all of the Small Bank
Acquisitions were announced prior to that date. Following July 31, 1998, as
noted above, market prices declined considerably. The general market environment
as represented by the S&P Bank Index has declined in value by 22.7% over the
period
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July 31, 1998 through September 11, 1998. The stock prices of Publicly Traded
Community Banks declined by 24.8% from July 15, 1998 through that same date. In
evaluating the merger, therefore, Carpenter used two imputed values for Eldorado
Common Stock. The first value of 12.00 per share was derived from the September
Earnings Multiple for Publicly Traded Community Banks, rounded down to the
nearest dollar. The second value of $16.00 per share was derived from the July
Earnings Multiple for Publicly Traded Community Banks, also rounded to the
nearest dollar. Carpenter then applied each of these values to the Merger
Consideration. Based upon an assumed value of $12.00 and $16.00 for each share
of Eldorado Common Stock, Carpenter determined that the consideration to be
received by the holders of Antelope common stock in the merger represented a
percentage of premium to core deposits of 7.6% and 14.1%, a multiple of price to
book value of 161.9% and 215.9%, a multiple of price to tangible book value of
199.4% and 265.9%, a multiple of price to Antelope's LTM earnings through June
30, 1998 of 17.0x and 22.7x, and as a percentage of assets of 16.6% and 22.2%.
No other company or transaction used in the above analysis, as a comparison
is identical to Antelope or the merger. Accordingly, an analysis of the results
of the foregoing is not mathematical. Rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading value
and the announced acquisition prices of the companies to which Antelope and the
merger are being compared.
PRO-FORMA MERGER AND CONTRIBUTION ANALYSIS. Carpenter analyzed the
contribution of each of Antelope and Eldorado to, among other things, total
equity, total tangible common equity, assets, LTM net income, and gross loans of
the pro forma combined companies. For purposes of this analysis, the balance
sheets for the period ended June 30, 1998 were used, and the projected 1998
year-end income statements were used for comparative purposes. This analysis
showed, among other things, that based on pro forma combined balance sheets for
Antelope and Eldorado as defined above, Antelope would have contributed 17.4% of
total equity, 44.4% of tangible common shareholders equity, 16.4% of assets, and
14.7% of loans. Pro forma income statements as defined above indicated that
Antelope would have contributed 16.0% of the pre-tax net income and 18.8% of the
after-tax net income of the pro forma combined companies based on projected 1998
earnings. Antelope would have contributed 21.2% of the after-tax net income
attributable to common shareholders based on projected pro forma combined income
statements for 1998. Based upon analysis using a fixed exchange rate of 3.625
Eldorado shares for every Antelope share (provided for in the Merger Agreement),
holders of Antelope common stock would own approximately 21% of the combined
companies based on fully diluted shares outstanding on the date of the opinion.
REGRESSION ANALYSIS. Carpenter undertook an analysis to determine the price
to book multiple at which Antelope might trade on a stand-alone basis. A
regression analysis of publicly available data on comparable banks and bank
holding companies indicated a correlation between return on equity and price to
book value. Based on Antelope's 1998 annualized June 30, 1998 return on equity
of 8.54%, this analysis yielded a price to book at which Antelope might trade of
1.56x and an implied value of $42.02 per share for Antelope, based on closing
trading prices on September 11, 1998.
DISCOUNTED VALUE ANALYSIS. Carpenter estimated the present value (current
share price) based on estimated earnings that Antelope (a) could produce on a
stand-alone basis through fiscal year 2003 without giving effect to, among other
things, potential cost savings that could be realized in a sale to an in-market
acquiror, and (b) that the combined entity expressed in Antelope equivalent
shares could produce. Carpenter utilized Antelope and Eldorado management
projections (the "Management Plans") for 1998 and Eldorado projections for 1999
to 2001 and assumed ten percent annual earnings growth thereafter. The range of
estimated future prices was calculated by applying market multiples ranging from
10.0x to 18.0x to the projected 2003 EPS of Antelope alone and of the combined
companies. The estimated future share prices were then discounted to present
values using discount rates
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ranging from 12 percent to 20 percent. This analysis indicated an implied per
share price range today for Antelope on a stand alone basis of approximately
$17.72 to $45.04. The corresponding range for the combined companies, including
estimated consolidation savings provided by Antelope and Eldorado management, is
$22.99 to $58.42 in Antelope equivalent shares. These analyses do not purport to
be indicative of actual values or expected values of Antelope common stock.
The summary set forth above does not purport to be a complete description of
the presentation by Carpenter to the Antelope Board or of the analyses performed
by Carpenter. The preparation of a fairness opinion is not necessarily
susceptible to partial analysis or summary description. Carpenter believes that
its analyses and the summary set forth above must be considered as a whole and
that selecting a portion of its analyses and factors, without considering all
analyses and factors, would create an incomplete view of the process underlying
the analyses set forth in its presentation to the Antelope Board. The ranges of
valuations resulting from any particular analysis described above should not be
taken to be Carpenter's view of the actual value of Antelope or the combined
companies.
In performing its analyses, Carpenter made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Antelope or Eldorado. Material
among those assumptions were that of a reasonably stable economic and interest
rate environment, and no significant changes in the regulatory and statutory
regime governing the businesses of both Eldorado and Antelope sufficient to
materially impact their results. The analyses performed by Carpenter 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 Carpenter's analysis of the fairness of
the consideration to be received by the holders of Antelope common stock in the
merger and were provided to the Antelope Board in connection with the delivery
of Carpenter's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or any time in the future.
The forecasts utilized by Carpenter in certain of its 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 contemplated in such forecasts.
In the ordinary course of our business, Carpenter represents acquirors and
sellers of financial institutions, and Carpenter has represented Eldorado as an
acquiror in the past. As partial compensation for those past services, Carpenter
and/or its affiliates were issued and continue to hold 33,302 shares of Eldorado
Common Stock.
Pursuant to the Engagement Letter, Antelope will pay Carpenter a transaction
fee in connection with the merger, a substantial portion of which is contingent
upon the consummation of the merger. Under the terms of the Engagement Letter,
Antelope will pay Carpenter a transaction fee equal to 1.00% of the value
attributed in the merger to Antelope common stock, less $25,000 previously paid
to Carpenter. Antelope has also agreed to reimburse Carpenter for its reasonable
out-of-pocket expenses. Antelope has agreed to indemnify Carpenter, its
affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities.
CLOSING DATE
Unless Antelope and Eldorado shall mutually select another date, the closing
of the transactions contemplated by the Merger Agreement (the "Closing") shall
take place on a date fixed by Eldorado (the "Closing Date"). The Closing Date
may not be more than 30 days following the later of the receipt of all necessary
approvals of all governmental authorities (including the expiration of all
applicable waiting periods in connection with those approvals) and the approval
of the merger and the Merger Agreement by the Antelope shareholders. In no
event, however, will the Closing occur unless all other conditions to the
consummation of the Merger have been satisfied or waived as of such date.
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If the Closing does not occur by April 30, 1999, then either Antelope or
Eldorado may terminate the Merger Agreement, unless the terminating party has
caused a delay in the Closing as a result of the terminating party's breach of
any of its representations, warranties, covenants or agreements contained in the
Merger Agreement.
TERMS OF THE MERGER
The Merger Agreement provides that AVB Acquisition Co. Inc., a wholly owned
subsidiary of Eldorado, will be merged with and into Antelope, with Antelope
being the surviving corporation. Following the merger, Antelope will be a wholly
owned subsidiary of Eldorado. Upon the consummation of the merger, each share of
Antelope common stock issued and outstanding immediately prior to the effective
date of the merger, other than shares for which dissenters' rights are perfected
and certain shares held directly or indirectly by Eldorado (which will be
canceled), will be automatically converted into the right to receive 3.625
shares of Eldorado Common Stock (the "Merger Consideration"). No fractional
shares of Eldorado Common Stock will be issued in the merger. Any fractional
shares resulting from the conversion will be paid in cash, based upon the
average market value of Eldorado Common Stock during the ten day trading period
immediately preceding the fifth trading day prior to the effective date of the
merger. Upon such conversion, the holders of such Antelope common stock will
thereafter cease to be shareholders of Antelope and will become shareholders of
Eldorado. For a description of the terms of the Eldorado Common Stock and
Eldorado's other authorized classes of common stock, see "Description of
Eldorado Capital Stock -- Common Stock."
The completion of the merger is subject to a number of conditions,
including: the approval by the holders of a majority of the outstanding shares
of Antelope common stock, the receipt of all necessary consents, waivers,
clearances, approvals and authorizations from regulatory or governmental bodies,
the satisfaction or waiver of certain other conditions (including the absence of
judicial or regulatory actions seeking to restrain or prohibit the merger), the
receipt of standard officers' certificates, legal and accountant's opinions, the
execution of non-competition agreements by certain of Antelope's directors, and
the absence of any material adverse change in the condition or business of
Antelope. See "-- Conditions to the Merger" and "-- Regulatory Approvals
Required for the Merger."
REGULATORY APPROVALS REQUIRED FOR THE MERGER
GENERAL. The merger cannot proceed in the absence of the regulatory
approvals described below. Eldorado and Antelope are not aware of any material
governmental approvals or actions that are required for consummation of the
merger, except as described below. Eldorado and Antelope have agreed in the
Merger Agreement to use all commercially reasonable efforts to take promptly all
actions necessary, proper or advisable to consummate the transactions
contemplated by the Merger Agreement. Such actions include 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, we can provide no assurance that
such regulatory approvals will be obtained, nor can we assure the date of any
such approval. We can also provide 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 herein under "--
Conditions to the Consummation of the Merger."
FEDERAL RESERVE BOARD AND FEDERAL DEPOSIT INSURANCE CORPORATION
APPROVALS. The merger is subject to prior approval by the Federal Reserve Board
under Section 3 of the BHCA in accordance with regulations adopted by the
Federal Reserve Board 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
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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. The Federal Reserve Board
will furnish notice and a copy of the application for approval of the merger to
the California Department of Financial Institutions, Antelope's primary
supervisory regulatory authority, which will have 30 days to submit its views
and recommendations to the Federal Reserve Board.
Consummation of the merger is also 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.
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 Eldorado and Antelope under the Community
Reinvestment Act of 1977, as amended (the "CRA"). The CRA requires that the
Federal Reserve Board and the FDIC 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. Furthermore, the BHCA and BMA, as well as
Federal Reserve Board and FDIC regulations, require publication of notice of,
and the opportunity for public comment on, the application submitted by Eldorado
for approval of the merger. The statutes provide that the Federal Reserve Board
and the FDIC may permit interested parties to intervene in the proceedings and
hold a public hearing in connection therewith if the either determines that such
a hearing would be appropriate. Any such intervention by third parties could
prolong the period during which the application is subject to review by
Eldorado's regulators. Eldorado was last examined for CRA compliance before it
consolidated its four bank subsidiaries into a single bank. In that examination,
one of its banks received an "outstanding" rating and the others received a
rating of "satisfactory." Antelope has a CRA rating of "satisfactory."
In making its determination with respect to the merger, the Federal Reserve
Board and the FDIC will take into consideration the financial and managerial
resources and future prospects of Eldorado and Antelope and the convenience and
needs of the communities served. As part of, or in addition to, consideration of
the above factors, it is anticipated that the Federal Reserve Board and the FDIC
will consider the financial condition of Eldorado and Antelope, current and
projected economic conditions in Southern California and the overall capital and
safety and soundness standards of Eldorado and Antelope as compared to those
established by the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and the regulations promulgated thereunder.
The bank regulatory agencies, including the Federal Reserve Board and the
FDIC, have over the course of the last year issued various policy pronouncements
regarding the so-called Year 2000 problem, which concerns the inability of
information systems, primarily computer software programs, to
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recognize properly and process date-sensitive information as the Year 2000
approaches. In light of the importance of the Year 2000 problem, Eldorado and
Antelope have assembled project teams of senior officers and outside consultants
to assess the impact of the Year 2000 problem on their information systems and
those of their customers, vendors and borrowers. Most recently, the bank
regulatory agencies have issued additional guidance under which they are
assessing and will assess Year 2000 readiness. The failure of a financial
institution, such as Eldorado or Antelope, to take appropriate steps to address
deficiencies in their Year 2000 process may form the basis for delay or denial
of an application or other regulatory request. In particular, the Federal
Reserve Board has indicated that institutions with less than satisfactory Year
2000 readiness may not use the expedited application procedures for bank and
nonbank acquisitions.
Under the BHCA and the BMA, the Merger may not be consummated until the
thirtieth day following the later of the Federal Reserve Board or FDIC
approvals, as the case may be. If the Federal Reserve Board and the FDIC have
not received any adverse comments from the Department of Justice relating to
competitive factors, the waiting period may be reduced to no less than 15 days.
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 Federal Reserve Board and the FDIC
approvals, unless a court specifically orders otherwise.
Eldorado submitted a notice seeking approval of the Merger and related
matters to the Federal Reserve Board on October , 1998. It is expected that an
approval will be received prior to the Antelope Meeting, but there can be no
assurance that such an approval will be obtained. Eldorado and Antelope
submitted an application seeking approval of the Merger and related matters to
the FDIC on or about October , 1998. The application was deemed
informationally complete by the FDIC on October , 1998 and processing of the
same commenced. It is expected that an approval will be received prior to the
Antelope Meeting, but there can be no assurance that such approval will be
obtained.
STATE COMMISSIONER APPROVAL. Because Antelope is a state-chartered bank,
Eldorado must obtain approval of the California Commissioner of Financial
Institutions ("State Commissioner") pursuant to the California Financial Code
prior to the consummation of the Merger. Eldorado sought such approval by filing
an application with the State Commissioner on or about October , 1998. The
application submitted to the State Commissioner for approval was accepted as
complete on October , 1998. It is expected that an approval will be received
prior to the Antelope Meeting, but there can be no assurance that such approval
will be obtained.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Antelope Board with respect to the
merger, shareholders should be aware that certain directors and officers of
Antelope have interests in the merger that are in addition to their interests as
Antelope shareholders generally. The Antelope Board was aware of these
interests, and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
CONTINUED EMPLOYMENT OF CERTAIN OFFICERS; SALARY CONTINUATION AGREEMENTS;
SEVERANCE AND CHANGE IN CONTROL AGREEMENTS. Concurrently with the execution of
the Merger Agreement, each of Jack D. Seefus, George E. Nagy and James J.
Hennager entered into a letter agreement with Eldorado, which letter agreements
will become effective upon the completion of the merger (the "Letter
Agreements"). The Letter Agreements set out certain terms of continued
employment for these individuals and amend the existing Salary Continuation
Agreements ("Continuation Agreements") and Severance and Change in Control
Agreements ("Severance Agreements") to which these individuals are currently
parties. See "Information Regarding Antelope -- Management of Antelope," "--
Salary Continuation Plan" and "-- Change in Control and Severance Compensation
Agreements."
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In the case of Mr. Seefus, the Letter Agreement provides that Mr. Seefus
will be the President and Chief Operating Officer of Antelope at a base salary
of no less than $11,258 per month. In addition Mr. Seefus would be eligible to
participate in the Eldorado Bancshares Bonus Plan for 1999 ("Eldorado Plan").
The Letter Agreement with Mr. Seefus also provides that consideration will be
given to granting an option to Mr. Seefus to purchase 15,000 shares of Eldorado
Common Stock. The decision to grant such an option is within the sole discretion
of the Compensation Committee of Eldorado's Board of Directors. If granted, such
an option would have exercise price and vesting provisions that would be
determined consistent with the comparable provisions of the currently
outstanding options for Eldorado Common Stock. Further, Eldorado would make any
remaining lease payments due with respect to the automobile driven by Mr. Seefus
and transfer title to such automobile to Mr. Seefus. In addition, the Letter
Agreement with Mr. Seefus provides that the existing Continuation Agreement
which Mr. Seefus has with Antelope, which generally provides that Mr. Seefus
will be entitled to annual benefits of $100,000 for 15 years after retirement if
certain conditions are met, would remain in effect, but would be amended upon
the closing of the merger to provide that receipt of any salary continuation
payments would be contingent on Mr. Seefus' not competing or otherwise
interfering with the business of Eldorado. In addition, the Letter Agreement
with Mr. Seefus provides that upon the closing of the merger, the Severance
Agreement to which Mr. Seefus is a party, which generally provides that if Mr.
Seefus' employment is terminated within one year following a change in control,
or if Mr. Seefus resigned within one year following a change in control, Mr.
Seefus would be entitled to a lump sum payment of 18 months salary and 150% of
his last annual bonus, would remain in effect, but would be amended upon the
closing of the merger. The amendment to Mr. Seefus' Severance Agreement would
provide that the Severance Agreement would be terminated two years from the date
of the closing of the merger or upon the termination of Mr. Seefus' employment
with Eldorado for any reason other than for a reason for which severance is
payable. Further, Mr. Seefus' Severance Agreement would be amended to provide
that severance compensation would be payable to Mr. Seefus if Mr. Seefus
terminates his employment with Eldorado for Good Reason (as defined below).
The Letter Agreement with Mr. Nagy provides that Mr. Nagy will be the
Executive Vice President and Chief Loan Officer of the Bank at a base salary of
no less than $8,300 per month. In addition Mr. Nagy would be eligible to
participate in the Eldorado Plan. Further, the Letter Agreement provides that
Eldorado would make any remaining lease payments due with respect to the
automobile driven by Mr. Nagy and transfer title to such automobile to Mr. Nagy.
In addition, the Letter Agreement with Mr. Nagy provides that the existing
Continuation Agreement which Mr. Nagy has with Antelope, which generally
provides that Mr. Nagy will be entitled to annual benefits of $80,000 for 15
years after retirement if certain conditions are met, would remain in effect,
but would be amended upon the closing of the merger to provide that receipt of
any salary continuation payments would be contingent on Mr. Nagy's not competing
or otherwise interfering with the business of Eldorado. In addition, the Letter
Agreement with Mr. Nagy provides that upon the closing of the merger, the
Severance Agreement to which Mr. Nagy is a party, which generally provides that
if Mr. Nagy's employment is terminated within one year following a change in
control, or if Mr. Nagy resigns within one year following a change in control,
Mr. Nagy would be entitled to a lump sum payment of 12 months salary and 100% of
his last annual bonus, would remain in effect, but would be amended upon the
closing of the merger. The amendment to Mr. Nagy's Severance Agreement would
provide that the Severance Agreement would be terminated two years from the date
of the closing of the merger or upon the termination of Mr. Nagy's employment
with Eldorado for any reason other than for a reason for which severance is
payable. Further, Mr. Nagy's Severance Agreement would be amended to provide
that severance compensation would be payable to Mr. Nagy if Mr. Nagy terminates
his employment with Eldorado for Good Reason.
The Letter Agreement with Mr. Hennager provides that upon effectiveness of
the merger Mr. Hennager will be the Senior Vice President and Consumer Loan
Administrator of the Bank at a
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base salary of no less than $7,633 per month. In addition Mr. Hennager would be
eligible to participate in the Eldorado Plan. Further, the Letter Agreement
provides that Eldorado would make any remaining lease payments due with respect
to the automobile driven by Mr. Hennager and transfer title to such automobile
to Mr. Hennager. In addition, the Letter Agreement with Mr. Hennager provides
that the existing Continuation Agreement which Mr. Hennager has with Antelope,
which generally provides that Mr. Hennager will be entitled to annual benefits
of $65,000 for 15 years after retirement if certain conditions are met, would
remain in effect, but would be amended upon the closing of the merger to provide
that commencement of the salary continuation benefits would not begin until age
67 and that receipt of any salary continuation payments would be contingent on
Mr. Hennager's not competing or otherwise interfering with the business of
Eldorado. In addition, the Letter Agreement with Mr. Hennager provides that upon
the closing of the merger, the Severance Agreement to which Mr. Hennager is a
party, which generally provides that if Mr. Hennager's employment is terminated
within one year following a change in control, or if Mr. Hennager resigns within
one year following a change in control, Mr. Hennager would be entitled to a lump
sum payment of 12 months salary and 100% of his last annual bonus, would remain
in effect, but would be amended upon the closing of the merger. The amendment to
Mr. Hennager's Severance Agreement would provide that the Severance Agreement
would be terminated two years from the date of the closing of the merger or upon
the termination of Mr. Hennager's employment with Eldorado for any reason other
than for a reason for which severance is payable. Further, Mr. Hennager's
Severance Agreement would be amended to provide that severance compensation
would be payable to Mr. Hennager if Mr. Hennager terminates his employment with
Eldorado for Good Reason.
As it pertains to the Letter Agreements between Antelope and each of Messrs.
Seefus, Nagy and Hennager, "Good Reason" means the continuation by Antelope, for
more than 30 days after notice from the executive, of any of the following: (i)
delegation of executive duties substantially inconsistent with such executive's
position at Antelope, (ii) removal from such executive such authority and
responsibility which is necessary to carry out the duties of the position of
such executive, (iii) substantially and adversely altering the nature, status or
prestige of such executive's responsibilities, (iv) relocation of the executive
to an office more than 25 miles from the current location of Antelope's
executive offices or (v) a reduction of such executive's base compensation.
In addition to the agreements described above with Messrs. Seefus, Nagy and
Hennager, Antelope has in effect Continuation Agreements with three additional
officers of Antelope. Pursuant to the terms of each such Continuation Agreement,
as a result of the merger, the retirement benefits under the Continuation
Agreements, to the extent not already vested, will become 100% vested, and
Eldorado will assume the obligations of and be bound by the terms of each such
Continuation Agreement, and, in the event the employment of any individual
covered by such a Continuation Agreement is constructively terminated as a
result of the merger, then such individual will be entitled to receive the same
benefits upon reaching retirement age as that individual would have received had
that individual remained continuously employed until such age. Further, Margaret
Torres is a party to a Severance Agreement, and, as a result of the merger, if
Ms. Torres's employment is terminated within six months prior to or within 12
months following the merger, or Ms. Torres leaves the employment of Eldorado for
any reason within 12 months following the effectiveness of the merger, Ms.
Torres will be entitled to, among other things, a lump sum payment equal to one
years' salary and an amount equal to 100% of her last annual bonus.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. The Merger Agreement
provides that, in the event of any threatened or actual claim or proceeding in
which any person who is or has been a director, officer or employee of Antelope
is, or is threatened to be, made a party based in whole or in part on, or
pertaining to (i) the fact that such person was a director, officer or employee
of Antelope or (ii) the Merger Agreement or any of the transactions contemplated
thereby, Eldorado will, subject to the conditions set forth in the Merger
Agreement, indemnify such person to the fullest extent
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permitted by law against any liability or expense incurred in connection with
any such claim or proceeding. The Merger Agreement provides that Eldorado's
indemnification obligation will continue for a period of six years following the
effectiveness of the merger, provided the rights to indemnification in respect
of any claim asserted or made within such period will continue until final
disposition of such claim. The Merger Agreement further provides that Eldorado
will cause the persons serving as directors and officers of Antelope immediately
prior to the merger to be covered for a period of at least three years following
the effectiveness of the merger by Antelope's directors' and officers' liability
insurance policy provided that Eldorado will not be required to expend more than
150% of the amount expended by Antelope to procure such insurance for the 1998
policy year.
INTEREST OF ELDORADO PRESIDENT AND CHIEF EXECUTIVE OFFICER. Pursuant to the
terms of his employment agreement, Robert P. Keller, President and Chief
Executive Officer of Eldorado, will receive 86,029 shares of Eldorado Common
Stock upon completion of the merger. Such shares will be subject to certain
restrictions set forth in Mr. Keller's employment agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
By virtue of the merger, Antelope will merge with a wholly owned subsidiary
of Eldorado, AVB Acquisition Co., Inc. Antelope will be the surviving
corporation in the merger and will be operated separately from Eldorado Bank,
Eldorado's only banking subsidiary. Antelope will maintain its charter, but will
adopt the bylaws of AVB Acquisition Co., Inc. After the completion of the
offering, the Antelope Board will initially be fixed at five persons who shall
initially be Clyde G. Golding, Jack D. Seefus, William Walsh IV and A.C.
Warnack, all current Antelope directors, and Robert P. Keller, the President and
Chief Executive Officer of Eldorado.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material Federal income tax
consequences of the merger. It is intended to provide only a summary and does
not include a complete analysis of all the potential federal income tax
consequences or consequences that may vary with or are contingent upon the
individual circumstances of particular Antelope shareholders such as financial
institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies, foreign taxpayers and other special status
taxpayers. This discussion does not address any aspects of state, local or
foreign tax laws or any federal tax laws other than those pertaining to income
tax. Antelope shareholders who are individuals should be aware that the federal
income tax rate on long-term capital gains of individuals is significantly lower
than the tax rate that may apply to ordinary income or short-term capital gains
of individuals, and that the amount of long-term capital gain, short-term
capital gain or ordinary income that may be realized by a particular Antelope
shareholder as a result of the merger may vary depending on a shareholders'
particular circumstances. Each Antelope shareholder is advised to consult his or
her own tax advisor concerning the specific tax consequences of the merger to
such shareholder.
No ruling has been requested from the Internal Revenue Service (the
"Service") with respect to any of the matters discussed in this summary.
It is a condition to the obligation of Antelope to consummate the merger
that Antelope receive an opinion from Grant Thornton LLP, tax advisors for
Antelope, concluding that the merger qualifies as a tax-free reorganization
within the meaning of Section 368(a) of the Code. In addition, it is a condition
to the obligation of Eldorado to consummate the merger that Eldorado receive a
similar opinion from its tax counsel, Nutter, McClennen & Fish, LLP. Antelope
shareholders should be aware that the opinion of the tax advisors represents the
best judgment of such advisors, but is not binding on the Service or the courts.
If the opinion from Grant Thornton LLP cannot be issued and the material federal
income tax consequences are materially different from as described in this Proxy
Statement/ Prospectus, Antelope will resolicit shareholders prior to proceeding
with the merger.
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The following summary is based upon the continued accuracy of the
representations made by Antelope and Eldorado with respect to the merger,
including representations regarding the intended actions of Antelope and certain
Antelope shareholders following the merger. If any of these representations is
inaccurate, the tax consequences of the merger could differ from those described
in this summary.
Subject to the assumptions discussed above, the federal income tax
consequences of the merger to a shareholder of Antelope are as follows:
RECEIPT OF ELDORADO COMMON STOCK IN EXCHANGE FOR ANTELOPE SHARES. A
shareholder of Antelope who receives shares of Eldorado Common Stock in
exchange for all his or her shares of Antelope will recognize no gain or
loss as a result of the merger. The basis of the Eldorado Common Stock
received by that shareholder will be the same as the basis of the shares of
the Antelope common shares exchanged therefor, and the holding period of
these shares of Eldorado Common Stock will include the holding period of the
Antelope common shares surrendered in the exchange, provided the latter
shares were held by the shareholder as a capital asset at the effective time
of the merger.
FEDERAL INCOME TAX TREATMENT OF DISSENTING SHAREHOLDERS. The receipt of
a cash payment in respect of dissenting shares by a dissenting Antelope
shareholder will be a taxable event for federal income tax purposes, and any
such shareholder should consult with his or her federal tax advisor with
respect to the impact of such cash payment in his or her individual
situation. Based upon the current ruling position of the Service, any
shareholder of Antelope who effectively dissents from the merger and who
receives cash for his or her shares will be treated as receiving a
distribution in redemption of their Antelope common shares. In general, a
distribution in redemption of stock will be treated as a payment in exchange
for the shares. As a result of the distribution, Antelope shareholders who
receive cash under their dissenters' rights, will recognize a gain (or loss)
for federal income tax purposes equal to the difference between the cash
received for those shares and the shareholder's tax basis for the shares.
The amount of that gain (or loss), if any, will be treated as ordinary
income (or loss) or long-term or short-term capital gain (or loss) depending
on the length of time the shares are held by the dissenter and whether the
shares are held as a capital asset.
INFORMATION REPORTING AND BACK-UP WITHHOLDING. Shareholders of Antelope
will be required to provide their social security number or their taxpayer
identification number or, in some circumstances, certain other information
in order to avoid the "backup withholding" requirements that might otherwise
apply under the Code. If an Antelope shareholder is subject to backup
withholding, tax will be withheld at the rate of 31% on any cash
consideration received by such shareholder (e.g., payment in lieu of
fractional shares or payment to dissenting Antelope shareholders) in the
merger. Any amount paid as backup withholding will be credited against the
holder's federal income tax liability. Antelope shareholders who receive
Eldorado Common Stock must also comply with the information reporting
requirements of the Treasury regulations under Section 368 of the Code.
The foregoing discussion of the expected federal income tax consequences of
the merger is based on the Code, the regulations thereunder, and the judicial
and administrative interpretations thereof, all in effect on the date thereof.
There is no assurance that subsequent legislative, regulatory, administrative or
judicial decisions may not be forthcoming that would significantly change these
expected consequences. Any such changes may or may not be retroactive with
respect to transactions prior to the date of those changes.
Each shareholder should consult his or her own tax advisor as to the specific
tax consequences
of the merger applicable to him or her, including the application and effect of
federal,
state, local and other tax laws.
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ACCOUNTING TREATMENT
A condition to the closing of the merger is that it will be accounted for as
a pooling of interests. In addition, Eldorado and Antelope must each receive
letters from their respective independent auditors, PricewaterhouseCoopers LLP
and Grant Thornton LLP, that the transactions contemplated by the Merger
Agreement qualify for pooling of interests accounting treatment. Under the
pooling of interests method of accounting, the recorded amounts of the assets
and liabilities of Eldorado and Antelope will be carried forward at their
previously recorded amounts and no goodwill will be created. Revenues and
expenses will be retroactively presented as if Eldorado and Antelope were
combined for the entire fiscal period in which the merger occurs and for all
periods prior to the merger at previously recorded amounts.
In order for the merger to qualify for pooling of interests accounting
treatment, substantially all of the outstanding Antelope common stock must be
exchanged for Eldorado common stock with substantially similar terms. Eldorado
and Antelope have agreed to use their best efforts to cause the merger to
qualify for pooling of interests accounting treatment. See "Proposal One: The
Merger -- Conditions to the Consummation of the Merger."
In order, among other things, to assure the availability of pooling of
interests accounting treatment, there are certain conditions relating to the
exchange of Antelope common stock for Eldorado Common Stock by Affiliates (as
defined below) of Antelope. In addition, the transferability of the Eldorado
Common Stock to be received by such Affiliates will be restricted. For more
information concerning such conditions and restrictions, see "-- Resales by
Affiliates."
RIGHT OF DISSENTING STOCKHOLDERS
GENERAL. If the Merger is approved and consummated, dissenters' rights will
be available to holders of Antelope Common Stock who exercise such rights in
accordance with Chapter 13 of the CGCL ("Chapter 13"). THE REQUIRED PROCEDURE
SET FORTH IN CHAPTER 13 MUST BE FOLLOWED EXACTLY OR ANY DISSENTERS' RIGHTS MAY
BE LOST. The information set forth below is a general summary of dissenters'
rights and is qualified in its entirety by reference to Chapter 13, a copy of
which is attached hereto as Exhibit D. Shareholders should read Exhibit D in its
entirety for more complete information concerning dissenters' rights.
Each holder of shares of Antelope common stock which were outstanding as of
the Record Date who follows the procedures set forth in Chapter 13 and who votes
against the proposal to approve the Merger Agreement will be entitled to demand
the purchase of such holder's shares of Antelope common stock for a cash
purchase price equal to the fair market value of such holder's shares. The fair
market value of shares of Antelope common stock will be determined as of
September 15, 1998, the day before the public announcement of the Merger
Agreement, excluding any appreciation or depreciation as a consequence of the
proposed merger, but adjusted for any stock split, reverse stock split or share
dividend which becomes effective after that date.
In order to be entitled to exercise dissenters' rights, a shareholder of
Antelope must vote "AGAINST" the Merger Agreement and the merger. Thus, any
shareholder who wishes to dissent and executes and returns a proxy in the
accompanying form must specify that such holder's shares are to be voted
"AGAINST" the proposal to approve the Merger Agreement and the merger. If the
shareholder returns a proxy without voting instructions or with instructions to
vote "FOR" or to "ABSTAIN" on the proposal to approve the Merger Agreement and
the merger, such holder's shares will not be voted against the Merger Agreement
and the merger and the shareholder will lose his or her dissenters' rights.
A shareholder of Antelope electing to exercise dissenters' rights must also
make written demand upon Antelope for the purchase of dissenting shares and
payment to such shareholder in cash of their
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fair market value. However, no such demand by a shareholder of Antelope will be
effective for any purpose unless it is received by Antelope or Antelope's
transfer agent on or prior to the date of the Antelope Meeting. The demand
should specify the number of shares held of record by such shareholder which the
shareholder demands to be purchased and a statement of what the shareholder
claims to be the fair market value of those shares as of September 15, 1998.
Such statement of the fair market value of the shares of Antelope common stock
constitutes an offer by the shareholder to sell the shares at that price.
Antelope's transfer agent is ChaseMellon Shareholder Services L.L.C., and its
address is 85 Challenger Road, Ridgefield Park, New Jersey 97660.
If the Merger Agreement is approved by Antelope's shareholders, Antelope
will have ten days after such approval to mail a notice of such approval to each
shareholder of Antelope who voted against the Merger Agreement, together with a
copy of Sections 1300 to 1304 of Chapter 13, a statement of the price determined
by Antelope to represent the fair market value of the dissenting shares as of
September 15, 1998 and a brief description of the procedure to be followed if
the shareholder desires to exercise dissenters' rights.
Within 30 days after the date on which notice of the approval of the Merger
Agreement is mailed, the dissenting shareholder must surrender to Antelope, at
its principal office or at the office of Antelope's transfer agent, the
certificates representing the dissenting shares to be stamped or endorsed with a
statement that they are dissenting shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed. Any shares of Antelope common
stock that are transferred prior to their submission for endorsement lose their
status as dissenting shares.
If Antelope and the dissenting shareholder agree that the surrendered shares
are dissenting shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price with interest thereon at the
legal rate on judgments from the date of such agreement (set by law in
California at 10% per annum). Subject to the restrictions imposed under the CGCL
on the ability of Antelope to purchase its outstanding shares, payment of the
fair market value of the dissenting shares shall be made within 30 days after
the amount thereof has been agreed upon or 30 days after any statutory or
contractual conditions to the merger have been satisfied, whichever is later,
subject to the surrender of the certificates therefor, unless provided otherwise
by agreement.
If Antelope denies that the shares surrendered are dissenting shares, or if
Antelope and the dissenting shareholder fail to agree upon a fair market value
of such shares of Antelope common stock, then the dissenting shareholder must,
within six months after the notice of approval of the Merger Agreement and the
merger is mailed, file a complaint in the Superior Court of Orange County,
California requesting the court to make such determinations or intervene in any
pending action brought by any other dissenting shareholder. If the complaint is
not filed or intervention in a pending action is not made within the specified
six-month period, the dissenter's rights will be lost. If the fair market value
of the dissenting shares is at issue, the court will determine, or will appoint
one or more impartial appraisers to determine, such fair market value. Any such
determination of the fair market value of any dissenting shares of Antelope
maybe more than, less than or equal to the fair market value of the shares of
Antelope common stock as of the date of the Antelope Meeting or as of the
effective time of the merger.
No dissenting shareholder who has elected to proceed under Chapter 13 may
withdraw his or her dissent or demand for payment unless Antelope consents to
such withdrawal.
Eldorado's obligation to consummate the merger is conditioned on the number
of shares of Antelope common stock whose holders have made demand for purchase
under Chapter 13 constituting less than 5% of the outstanding shares of Antelope
common stock.
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RESALES BY AFFILIATES
Shares of Eldorado Common Stock to be issued to stockholders of Antelope in
connection with the merger will have been registered with the SEC under the
Securities Act. Thus, all shares of Eldorado Common Stock to be received by
holders of Antelope common stock upon consummation of the merger will be freely
transferable by those stockholders of Antelope not deemed to be "Affiliates" of
Eldorado or Antelope. Under the Securities Act, "Affiliates" generally are
defined as persons (often considered to include, but not necessarily limited to,
executive officers, directors and 10% stockholders) who control, are controlled
by, or are under common control with (i) Eldorado or Antelope at the time of the
Antelope Meeting or (ii) Eldorado at or after the consummation of the merger.
Rule 145 promulgated by the SEC under the Securities Act restricts the sale
of Eldorado Common Stock received in the merger by former Affiliates of Antelope
and certain of their family members and related interests. Generally speaking,
during the first year following the consummation of the merger, Affiliates of
Antelope, may publicly resell the Eldorado Common Stock received by them in the
merger provided that such sales comply with Rule 145 limitations as to the
amount of Eldorado Common Stock sold in any three-month period and as to the
manner of sale. After the one-year period, such former Affiliates of Antelope
who are not Affiliates of Eldorado may resell their shares without any
restriction. Persons who are affiliates of Eldorado after the Effective Time
generally will remain subject to limitations and restrictions under SEC Rule 144
with respect to shares they may receive in connection with the merger, so long
as they continue to be Affiliates.
Affiliates of Antelope will be permitted to resell Eldorado Common Stock
received in the merger without any restrictions provided that such sales are
made pursuant to an effective registration statement filed with the SEC under
the Securities Act or by means of another available exemption from the
Securities Act registration requirements. This Proxy Statement/Prospectus may
not be used to effectuate any resales of Eldorado common stock received by
persons who may be deemed to be Affiliates of Eldorado or Antelope.
SEC guidelines with respect to the qualification of the Merger for pooling
of interests accounting treatment limit sales of shares of the acquiring and
acquired companies by Affiliates of either company in a business combination.
SEC guidelines indicate further that the pooling of interests method of
accounting generally will not be challenged on the basis of sales by Affiliates
of the acquiring or acquired company if they do not dispose of any of the shares
of the corporation they own or shares of a corporation they receive in
connection with a merger during the period beginning 30 days before the merger
and ending when financial results ("Post-Merger Financial Results") covering at
least 30 days of post-merger operations of the combined entity have been
published. Each Affiliate of Antelope and Eldorado has agreed not to sell,
transfer or otherwise dispose of, or reduce the risk of ownership with respect
to any shares of Antelope common stock held by such Affiliate, or any shares of
Eldorado Common Stock in violation of these guidelines.
HOW TO SURRENDER AND RECEIVE ELDORADO COMMON STOCK IN EXCHANGE FOR ANTELOPE
COMMON STOCK
Within five days after the effective date of the merger, Antelope will
provide for the mailing to each holder of record of shares of Antelope common
stock a letter of transmittal and instructions for use in effecting the
surrender of stock certificates which, immediately prior to the effective date
of the merger represented shares of Antelope common stock, in exchange for the
Merger Consideration. Upon the proper surrender of such stock certificate(s),
together with a properly completed and duly executed letter of transmittal, the
holder of such stock certificate(s) shall be entitled to receive, in exchange
therefor, a certificate representing a number of shares of Eldorado Common Stock
equal to the number of shares of Antelope common stock represented by such
Antelope stock certificate(s) multiplied by 3.625 (as well as consideration in
the form of cash for any fractional shares which a
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holder possesses), and any such Antelope stock certificate(s) so surrendered
shall forthwith be canceled. No interest will be paid or accrued on the Merger
Consideration.
ANTELOPE SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR STOCK
CERTIFICATE(S) FOR EXCHANGE UNTIL THEY HAVE RECEIVED SUCH
INSTRUCTIONS AND LETTER OF TRANSMITTAL AND HAVE COMPLETED THE
LETTER OF TRANSMITTAL.
In the event of a transfer of ownership of any shares of Antelope common
stock that has not been registered in the transfer records of Antelope prior to
the effective date of the merger, a certificate for Eldorado Common Stock
representing the Merger Consideration may be issued to the transferee if the
stock certificate(s) representing such shares of Antelope common stock is
presented accompanied by documents sufficient, in the reasonable discretion of
Eldorado and its exchange agent, to evidence and effect such transfer and to
evidence that all applicable stock transfer taxes have been paid.
From and after the effective date of the merger, there shall be no transfers
on the stock transfer records of Antelope of any shares of Antelope common stock
that were outstanding immediately prior to the effective date of the merger. If,
after the effective date of the merger, any stock certificate(s) representing
such shares is presented, the stock certificate(s) shall be canceled and
exchanged for the Merger Consideration deliverable in respect thereof in
accordance with the procedures set forth in the Merger Agreement.
Any portion of the aggregate Merger Consideration that remains unclaimed by
Antelope shareholders for six months after the effective date of the merger
shall be redelivered to Eldorado, upon demand. Any Antelope shareholders who
have not theretofore complied with the procedures regarding exchange of their
shares in accordance with the Merger Agreement shall thereafter look only to
Eldorado for delivery of the Merger Consideration in respect of each share of
Antelope common stock such shareholder holds as determined pursuant to the
Merger Agreement, without any interest thereon. Notwithstanding the foregoing,
none of Eldorado, Antelope nor any other person shall be liable to any former
holder of Antelope common stock for any amount delivered to a public official
pursuant to applicable abandoned property laws.
In the event any Antelope stock certificate(s) shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such stock certificate(s) to be lost, stolen or destroyed and, if
required by Eldorado, the posting by such person of a bond in such amount as
Eldorado may direct as indemnity against any claim that may be made against it
with respect to such stock certificate(s), such person will be issued in
exchange for such lost, stolen or destroyed stock certificate(s), the Merger
Consideration deliverable in respect thereof pursuant to the Merger Agreement.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of each party to consummate the merger are subject to the
conditions that the merger shall have been approved by the holders of a majority
of Antelope common stock, that no legal or administrative proceedings shall be
pending to restrain or prohibit the merger and that all required regulatory
approvals shall have been obtained. See "-- Regulatory Approvals Required for
the Merger."
The obligations of Eldorado to consummate the merger are subject to certain
additional conditions, including:
- the accuracy of the representations and warranties made by Antelope in
the Merger Agreement both as of the date of the Merger Agreement and,
with certain exceptions, as of the Closing Date (which representations
include the absence of any material adverse change in the financial
condition or results of operations of Antelope),
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- the performance by Antelope of the agreements and covenants to be
performed by it on or prior to the Closing Date,
- the receipt of legal and accountants' opinions (including an opinion that
the merger will qualify for "pooling of interests" accounting treatment),
- the receipt of all third party consents which are necessary to permit the
merger,
- the absence of any "unsatisfactory" rating with respect to Antelope
pursuant to any regulatory examination,
- the absence of any change in the number of outstanding shares of Antelope
common stock,
- the execution of non-competition agreements by certain of Antelope's
directors, and
- the requirement that the aggregate number of shares of the Antelope
common stock whose holders have made demand for purchase of those shares
under Chapter 13 constitute less than 5.0% of all shares of Antelope
common stock outstanding as of the date of the Antelope Meeting.
The obligations of Antelope to consummate the merger are subject to certain
additional conditions, including:
- the accuracy of the representations and warranties made by Eldorado in
the Merger Agreement both as of the date of the Merger Agreement and,
with certain exceptions, as of the Closing Date,
- the performance by Eldorado of the agreements and covenants to be
performed by it on or prior to the Closing Date,
- the receipt of legal and accountants' opinions (including an opinion
generally to the effect that the tax treatment of the merger and the
Merger Consideration will be as described under "-- Certain Federal
Income Tax Consequences," and an opinion that the merger will qualify for
"pooling of interests" accounting treatment), and
- the receipt by the Exchange Agent of the aggregate Merger Consideration
from Eldorado.
CONDUCT OF BUSINESS PENDING THE MERGER
Between the date of the Merger Agreement and the Closing Date, Antelope has,
among other things, agreed to:
- refrain from negotiations with any other entity concerning an acquisition
proposal;
- make available to Eldorado all information regarding Antelope that
Eldorado may reasonably request;
- use its best efforts to bring about the specific conditions of the Merger
Agreement;
- advise Eldorado of any material change in Antelope's financial condition,
business prospects and various other matters;
- promptly provide Eldorado with current information about Antelope;
- conduct its business only in the normal course, with certain events or
contemplated actions requiring the prior written consent of Eldorado, and
use all commercially reasonable efforts to preserve its present business
organization and business relationships, and to retain the services of
its officers and key employees;
- refrain from paying any dividend;
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- refrain from issuing any additional securities or making any change in
its capital structure;
- refrain from selling, leasing, assigning or otherwise disposing of any
property or asset, with certain exceptions;
- from increasing the compensation or fringe benefits payable to any
officer or employee, subject to certain exceptions in the usual and
ordinary course of business; and
- refrain from making, amending or renewing, or entering into any
commitment to make, amend or renew, any loan exceeding certain dollar
thresholds without the prior consent of Eldorado, subject to certain
exceptions.
Between the date of the Merger Agreement and the Closing Date, Eldorado has
agreed, among other things, to:
- use its best efforts to bring about the specific conditions of the Merger
Agreement;
- advise Antelope promptly of any material adverse change to the capital,
financial condition or business prospects of Eldorado; and
- obtain a continuation of or replacement for Antelope's existing
Directors' and Officers' liability insurance for a period of three years
following the Closing (so-called "tail" coverage), subject to certain
limitations, and
- use all commercially reasonable efforts to cause the Eldorado Common
Stock issued in the merger to be listed on the National Market System of
The Nasdaq Stock Market as soon as practical following the Closing.
Each party has agreed to take all corporate actions required of it and to
prepare and file all applications for regulatory approvals with respect to the
merger, to cooperate fully with the other party in the preparation of the other
party's applications and to seek all necessary consents from third parties.
EXPENSES
Except as provided with respect to termination, each of Antelope and
Eldorado is responsible for its own costs and expenses incurred in connection
with the merger.
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TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated by Eldorado under the following
circumstances:
- Antelope has materially breached any representation or warranty contained
in the Merger Agreement (including the representation that nothing has
occurred prior to the Closing Date which has had, or could reasonably
expected to have, a material adverse effect on Antelope or Antelope's
ability to consummate the Merger) or materially failed to satisfy or
comply with any of its agreements and covenants in the Merger Agreement,
and Antelope has not successfully corrected the grounds for termination
within 15 business days of the notice of breach or default;
- Antelope has not reaffirmed its intent to proceed with the merger
following Antelope's receipt of a Qualifying Strategic Transaction
Proposal, as defined below, or the Antelope Board fails to recommend
approval of the Merger Agreement and the merger to Antelope's
shareholders or withdraws its recommendation of approval prior to the
Antelope Meeting; or
- Antelope fails to meet all the conditions to Eldorado's performance as
specified in the Merger Agreement.
The Merger Agreement may be terminated by Antelope under the following
circumstances:
- Eldorado has failed to satisfy or comply with, in any material respect,
any of its agreements and covenants in the Merger Agreement and has not
successfully corrected the grounds for termination within 15 Business
Days of the notice of breach or default;
- Antelope receives a "Qualifying Strategic Transaction Proposal," as
defined below, provided that it has paid the Termination Fee (as defined
below) to Eldorado;
- Antelope's shareholders fail to approve the Merger Agreement and the
merger, provided that the Antelope Board of Directors has given and not
withdrawn its recommendation of approval; or
- Eldorado fails to meet all the conditions to Antelope's performance as
specified in the Merger Agreement.
The Merger Agreement may be terminated by either party:
- upon the denial of any required regulatory approval; or
- if the Closing has not occurred by April 30, 1999, provided that a party
may not terminate the Merger Agreement if the reason the Closing has not
occurred is due to the breach by such party of any of its
representations, warranties, covenants or agreements contained in the
Merger Agreement.
The Merger Agreement may be amended or terminated at any time by the mutual
written agreement of the parties.
Antelope has agreed to pay Eldorado a termination fee if the Merger
Agreement and the merger are terminated under certain circumstances. In the
event that a termination occurs because Antelope has received a "Qualifying
Strategic Transaction Proposal," as defined below, or in the event the Merger
Agreement and the merger are terminated by Eldorado because the Antelope Board
failed to give its recommendation of approval or withdrew its recommendation of
approval to the shareholders, then Antelope has agreed (i) to pay to Eldorado
cash in the amount of $500,000, plus Eldorado's expenses incurred in connection
with the Merger Agreement and the merger (collectively, the "Termination Fee"),
and (ii) that a stock option previously issued by Antelope to Eldorado to
purchase shares of Antelope common stock shall become immediately exercisable.
See "-- Stock Option Agreement."
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In the event the Merger Agreement and the merger are terminated by Antelope
because Antelope's shareholders have affirmatively voted not to approve the
merger, then Antelope has agreed to pay the Termination Fee to Eldorado. The
timely payment by Antelope of the Termination Fee (together with the
exerciseability of the stock option, if applicable) shall constitute the
exclusive remedy for Eldorado for any potential claims against Antelope under
the Merger Agreement, so long as Antelope has not breached the Merger Agreement
prior to the time the Merger Agreement is terminated.
For purposes of the Merger Agreement, a "Strategic Transaction Proposal"
means any proposal regarding any acquisition or purchase of all or a significant
(i.e., more than 20%) portion of the assets of Antelope or an equity interest of
more than 5% in Antelope, any merger or other business combination involving
Antelope, any recapitalization involving Antelope resulting in an extraordinary
dividend or distribution to Antelope's shareholders or a self-tender for or
redemption of Antelope common stock. Although Antelope is generally prohibited
from soliciting or encouraging, directly or indirectly, any Strategic
Transaction Proposals, the Merger Agreement anticipates the possibility that
Antelope may receive a "Qualifying Strategic Transaction Proposal." A
"Qualifying Strategic Transaction Proposal" is a Strategic Transaction Proposal
as to which the Antelope Board has determined that, because of the fiduciary
duties owed by the Antelope Board to Antelope's shareholders, Antelope is
required to engage in discussions or negotiations with the third party which has
made the proposal and otherwise pursue the proposal, including possibly
withdrawing the Antelope Board's recommendation of approval of the Merger
Agreement and the merger and/or terminating the Merger Agreement. The
determination by the Antelope Board that a Strategic Transaction Proposal
qualifies as a Qualifying Strategic Transaction Proposal must be made after
consultation with Antelope's legal counsel and after receipt of a written
opinion of Antelope's financial advisors that the financial terms of such
proposal are, from the perspective of Antelope's shareholders, financially
superior to the Merger Consideration.
STOCK OPTION AGREEMENT
One condition to the Merger Agreement was that Antelope enter into a Stock
Option Agreement with Eldorado, dated September 16, 1998 (the "Stock Option
Agreement"). The following is a summary of the terms and conditions of the Stock
Option Agreement, and is qualified in its entirety by reference to the Stock
Option Agreement, a copy of which is attached to this Proxy Statement/Prospectus
as Exhibit B.
Pursuant to the Stock Option Agreement, Antelope has granted to Eldorado an
option (the "Option") to purchase up to 152,700 shares of Antelope common stock
(representing approximately 19.9% of the issued and outstanding shares of
Antelope common stock, without taking into account the shares of Common Stock
issuable upon exercise of the Option, or 16.6% of the Antelope Common Stock
taking into account the issuance of those shares). The exercise price per share
under the Stock Option Agreement is $43.25 per share (the "Option Price"). The
Option is exercisable only following the occurrence of two events, referred to
as an "Initial Triggering Event" and a "Subsequent Triggering Event," before the
expiration of the Option. Exercise of the Option by Eldorado may be subject to
the prior approval of certain regulatory authorities.
While the term is defined more precisely in the Stock Option Agreement, an
"Initial Triggering Event" is defined generally to be the occurrence of any of
the following events without Eldorado's prior consent: (i) an agreement by
Antelope to engage in, or a recommendation by the Antelope Board for the
approval of, a merger, consolidation, sale of all or substantially all of its
assets, or any similar transaction with any third party, or any transaction in
which a third party will acquire securities representing 10% or more of the
voting power of Antelope; (ii) acquisition by any person of beneficial ownership
or the right to acquire beneficial ownership of 10% or more of the outstanding
shares of Antelope common stock, if such person owned beneficially less than 10%
of the outstanding shares of Antelope common stock on September 16, 1998, or the
acquisition, by any person who beneficially
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owned 10% or more of the outstanding Antelope common stock on September 16, 1998
of beneficial ownership of an additional 3% of the outstanding Antelope common
stock; (iii) after a public announcement (or after it otherwise becomes publicly
known) that any person other than Eldorado has made a bona-fide proposal to
Antelope or its stockholders to engage in an transaction of the nature described
above or has filed an application or notice with the Federal Reserve Board or
other federal or state bank regulatory authority for approval of a transaction
of the nature described above, either (A) the Antelope stockholders do not
approve the Merger and the Merger Agreement at the Antelope Meeting, or (B) the
Antelope Meeting is not held or is canceled prior to the termination of the
Merger Agreement, or (C) the Antelope Board withdraws its recommendation with
respect to the Merger Agreement or modifies that recommendation in a manner
adverse to Eldorado; (iv) after any person has made a proposal to Antelope or
its shareholders to engage in a transaction of the nature described above,
Antelope breaches any covenant or obligation contained in the Merger Agreement,
and such breach is of a nature that would entitle Eldorado to terminate the
Merger Agreement and is not remedied within specified periods; or (v)
commencement of a tender offer or exchange offer for, or filing of a
registration statement under the Securities Act with respect to, the purchase of
any shares of Antelope common stock such that, upon consummation of the proposed
offer, the offeror would own or control 50% or more of the then outstanding
shares of Antelope common stock.
While the term is defined more precisely in the Stock Option Agreement, a
"Subsequent Triggering Event" is defined generally to be the purchase or
acquisition by any person (including by merger, share exchange or similar
transaction) of 15% or more of the outstanding Antelope Common Stock or 15% or
more of the voting power with respect to the Antelope common stock prior to the
date on which the Merger Agreement is terminated.
The Option will expire, and will never become exercisable, if the Merger
Agreement is terminated in accordance with its terms prior to the occurrence of
an Initial Triggering Event. If an Initial Triggering Event occurs before the
termination of the Merger Agreement, the Option will continue in effect for a
period of 12 months following the termination of the Merger Agreement in
accordance with its terms, whether or not a Subsequent Triggering Event has also
occurred prior to such termination. The Option will also terminate upon the
closing of the merger.
As of the date of this Proxy Statement/Prospectus, to the knowledge of
Eldorado and Antelope, no Initial Triggering Event or Subsequent Triggering
Event has occurred.
If both an Initial Triggering Event and a Subsequent Triggering Event occur
prior to the termination of the Option, Eldorado may require Antelope to
repurchase the Option at a price (the "Option Repurchase Price") equal to the
amount by which the "market/offer price" (as described below) exceeds the
exercise price of the Option, multiplied by the number of shares for which the
Option may then be exercised. The repurchase of the Option by Antelope pursuant
to the terms of the Stock Option Agreement may be subject to the prior approval
of certain regulatory authorities. See "-- Regulatory Approvals Required for the
Merger." If Eldorado has exercised the Option, Eldorado may also require
Antelope to repurchase all or any portion of the shares issued upon exercise at
a price equal to the greater of the market/offer price or the average exercise
price per share paid with respect to the shares to be repurchased, and/or may
require Antelope to register the shares issued upon exercise for resale in
accordance with the Securities Act. Under the terms of the Stock Option
Agreement, Eldorado is generally permitted to assign both its rights under the
Option and its rights with respect to shares purchased upon exercise of the
Option to a third party
As defined in the Stock Option Agreement, the term "market/offer price"
consists generally of the highest of (i) the price per share of Antelope Common
Stock at which a tender offer or exchange offer for such shares has been made,
(ii) the price per share of Antelope common stock to be paid by any person
pursuant to an agreement with Antelope, (iii) the highest sale price for shares
of Antelope common stock within the six-month period immediately preceding the
required repurchase of the
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Option or Option Shares, as the case may be, or (iv) in the event of a sale of
all or substantially all of Antelope's assets, the sum of the price paid in such
sale for such assets and the value of the remaining assets of Antelope, divided
by the number of shares of Antelope common stock outstanding at the time of such
sale.
In the event that, prior to the expiration of the Option, Antelope enters
into any agreement (i) to consolidate with or merge into any person other than
Eldorado or one of its subsidiaries and is not the surviving corporation, (ii)
to permit any person (other than Eldorado or any of its subsidiaries) to merge
into Antelope and, although Antelope is the surviving corporation, Antelope
common stock is exchanged for stock or other securities of the other person or
for cash or other property, or the shares of Antelope common stock outstanding
right before the merger represent less than 50% of the outstanding shares of
Antelope after the merger, or (iii) to sell or otherwise transfer all or
substantially all of Antelope's assets to any person (other than Eldorado or any
of its subsidiaries), then such agreement must provide that the Option will be
converted into a substitute option to purchase a corresponding number of shares
of the corporation resulting from such transaction (or the corporate parent of
such surviving corporation). The holder of such substitute option has the right,
prior to the expiration of the Option, to require the issuer of the substitute
option (whether Antelope or a surviving corporation) to repurchase such
substitute option or the securities issuable upon the exercise of such
substitute option.
The Stock Option Agreement is intended to increase the likelihood that the
merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement might have the
effect of discouraging persons who might now be, or who might prior to the
Effective Time become interested in acquiring all of, or a significant interest
in, Antelope, from considering or proposing such an acquisition, even if such
persons were prepared to pay a higher price per share for Antelope common stock
than the then-current market price for such shares. The acquisition of Antelope,
or an interest in Antelope, or an agreement to do either, could cause the Option
to become exercisable. The existence of the Stock Option Agreement could
significantly increase the cost to a potential acquiror of acquiring Antelope.
Such increased cost might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire Antelope than it might otherwise have
proposed to pay.
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ELDORADO BANCSHARES, INC.
ELDORADO BANCORP, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Effective June 6, 1997, Eldorado completed the acquisition of 100% of the
outstanding stock of Eldorado Bancorp ("Bancorp") for cash consideration of
$23.00 per share (the "Eldorado Acquisition"). Contemporaneously with the
Eldorado Acquisition, each Bancorp stock option that had not previously been
exercised (collectively, the "Bancorp Options") was cancelled in return for the
payment by Bancorp of the difference between the $23.00 per share merger
consideration and the exercise price of such option. The aggregate consideration
paid to holders of Bancorp common stock and Bancorp Options (net of the tax
benefit arising out of the Bancorp Options) was approximately $90.3 million and
was accounted for using the purchase accounting method for business
combinations. Bancorp had total assets of approximately $400 million at March
31, 1997.
As of September 22, 1998, Eldorado and Antelope entered the Merger
Agreement. Pursuant to such agreement and upon consumation of the merger,
Eldorado will issue an aggregate of approximately 2.8 million shares of its
common stock to shareholders of Antelope and Eldorado will account for the
transaction using the pooling of interests accounting method. As of June 30,
1998, Antelope had total assets of $200.9 million.
The following Unaudited Pro Forma Combined Condensed Financial Information
combines the historical Consolidated Condensed Financial Statements of Eldorado,
Antelope and Bancorp giving effect to the Eldorado Acquisition and the merger as
if each had been effective as of January 1, 1997 with respect to the Pro Forma
Combined Condensed Statements of Operations. This information is presented under
the purchase method of accounting for business combinations for the Eldorado
Acquisition and the pooling of interests method for the merger after giving
effect to the one-for-two reverse split of shares of Eldorado common stock that
was effected by Eldorado on September 4, 1998. This information should be read
in conjunction with the historical consolidated financial statements of
Eldorado, Antelope and Bancorp, including their respective notes thereto, which
appear in Annexes I through V delivered with this Proxy Statement/Prospectus and
in conjunction with the condensed historical selected financial data of Eldorado
and other pro forma combined condensed financial information, including the
notes thereto, appearing elsewhere in this Proxy Statement/Prospectus.
Since merger and reorganization costs are nonrecurring, they have not been
reflected in the Unaudited Pro Forma Combined Condensed Statement of Operations.
The Unaudited Pro Forma Combined Condensed Financial Information does not give
effect to any anticipated operating efficiencies of the Eldorado Acquisition or
the merger. The Unaudited Pro Forma Combined Condensed Statement of Operations
is not necessarily indicative of the results that would have occurred had the
Eldorado Acquisition and the merger been consummated on January 1, 1997 or that
may be achieved in the future. The actual results of operations will differ,
perhaps significantly, from the pro forma amounts reflected herein because of a
variety of factors, including changes in interest rates and other changes in
operating results. For information regarding the uncertainty of assumptions,
estimates and expectations reflected herein, see "Summary -- Cautionary
Statement Regarding Forward-looking Information."
45
<PAGE>
ELDORADO BANCSHARES, INC.
ELDORADO BANCORP, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL PRO FORMA ANTELOPE/
---------------------- ANTELOPE/ HISTORICAL BANCORP/
ELDORADO ANTELOPE ELDORADO BANCORP ADJUSTMENTS(2) ELDORADO
---------- ---------- ------------ ----------- -------------- ------------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans............. $ 43,103 $ 10,408 $ 53,511 $ 9,388 $ -- $ 62,899
Interest from lease finance
receivables.......................... 4,127 -- 4,127 -- -- 4,127
Interest on Federal funds sold......... 1,286 451 1,737 455 (381)a 1,811
Interest on investments................ 4,979 2,505 7,484 2,691 -- 10,175
---------- ---------- ------------ ----------- -------------- ------------
Total interest income................ 53,495 13,364 66,859 12,534 (381) 79,012
Interest expense:
Interest on deposits................... 18,143 3,481 21,624 3,116 -- 24,740
Debentures............................. 1,908 -- 1,908 -- 1,389b 3,297
Federal funds purchased................ 563 -- 563 63 -- 626
---------- ---------- ------------ ----------- -------------- ------------
Total interest expense............... 20,614 3,481 24,095 3,179 1,389 28,663
---------- ---------- ------------ ----------- -------------- ------------
Net interest income.................... 32,881 9,883 42,764 9,355 (1,770) 50,349
Provision for loan and lease losses...... 1,495 1,054 2,549 -- -- 2,549
---------- ---------- ------------ ----------- -------------- ------------
Net interest income after provision for
loan and lease losses.................. 31,386 8,829 40,215 9,355 (1,770) 47,800
Non-interest income:
Service charges on deposit accounts.... 2,675 2,887 5,562 965 -- 6,527
Gain on sale of mortgage loans......... 6,887 -- 6,887 -- -- 6,887
Other income........................... 5,342 1,338 6,680 798 -- 7,478
---------- ---------- ------------ ----------- -------------- ------------
Total noninterest income............. 14,904 4,225 19,129 1,763 -- 20,892
Non-interest expense:
Salaries and employee benefits......... 16,172 4,818 20,990 3,508 -- 24,498
Occupancy and equipment................ 5,959 1,053 7,012 1,274 -- 8,286
Provision for recourse obligation...... 2,021 -- 2,021 -- -- 2,021
Amortization of goodwill and other
intangibles.......................... 2,514 367 2,881 257 1,040c 4,178
Other.................................. 13,022 4,474 17,496 2,640 -- 20,136
---------- ---------- ------------ ----------- -------------- ------------
Total noninterest expense............ 39,688 10,712 50,400 7,679 1,040 59,119
---------- ---------- ------------ ----------- -------------- ------------
Net income (loss) before taxes........... 6,602 2,342 8,944 3,439 (2,810) 9,573
Income tax benefit (provision)........... (3,612) (422) (4,034) (1,335) 806d (4,563)
---------- ---------- ------------ ----------- -------------- ------------
Net income (loss)........................ $ 2,990 $ 1,920 $ 4,910 $ 2,104 $ (2,004) $ 5,010
---------- ---------- ------------ ----------- -------------- ------------
---------- ---------- ------------ ----------- -------------- ------------
Net income (loss) available to common.... $ 2,259 $ 1,920 $ 4,179 $ 2,104 $ (2,552)e $ 3,731
Weighted average shares outstanding
Basic.................................. 7,406,062 2,781,615 10,187,677 1,939,634 12,127,311
Diluted................................ 8,634,651 2,781,615 11,416,266 1,212,326 12,628,592
Earnings per share
Basic.................................. $ .31 $ .69 $ .41 $ .31
Diluted................................ $ .26 $ .69 $ .37 $ .30
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
46
<PAGE>
ELDORADO BANCSHARES, INC.
ELDORADO BANCORP, INC.
ANTELOPE VALLEY BANK
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
Certain historical data of Bancorp has been reclassified on a pro forma
basis to conform to Eldorado's classifications.
NOTE 2: ADJUSTMENTS
<TABLE>
<S> <C> <C>
a -- Represents the foregone interest on the dividend of $17 million from
Eldorado Bank to its parent Eldorado Bancorp, Inc. to partially fund the
purchase by Eldorado and pay certain expense obligations incurred in
conjunction with the Eldorado Acquisition.
b -- Represents the additional interest that would have been paid on the
subordinated debentures issued in conjunction with the Eldorado Acquisition
at a rate of 11.75% per annum, had they been issued on January 1, 1997.
c -- Reflects the additional amortization of the excess cost over net assets
acquired in the Bancorp Acquisition over a useful life of twenty years
utilizing the straight line method. The annual amortization of the Bancorp
goodwill and other intangibles will be approximately $2.5 million.
d -- Reflects tax benefit related to the deductible expenses incurred in
conjunction with the Eldorado Acquisition computed using the combined
federal and state tax rate of 42%.
e -- Reflects the additional preferred dividend that would have been made to the
holders of the Series B preferred stock issued in conjunction with the
Eldorado Acquisition at a rate of 11.00% per annum, had they been issued on
January 1, 1997
</TABLE>
NOTE 3:
Per share data is based upon the exchange ratio of 3.625 shares of Eldorado
Common Stock for each share of Antelope common stock and have also been
retroactively restated to reflect the one-for-two reverse split of all classes
of Eldorado common stock effective September 4, 1998.
47
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Financial Information
combines the historical Consolidated Condensed Financial Statements of Eldorado
and Antelope giving effect to the merger as if it had been effective on June 30,
1998 and December 31, 1997, respectively, with respect to the Pro Forma Combined
Condensed Statement of Condition, and as of the beginning of the respective
periods indicated, with respect to the Pro Forma Combined Condensed Statements
of Operations. This information is presented under pooling of interests
accounting method after giving effect to the one-for-two reverse split of
Eldorado common stock effective September 4, 1998. This information should be
read in conjunction with the historical consolidated financial statements of
Eldorado and Antelope, including the respective notes thereto, which appear in
Annexes I through IV delivered with this Proxy Statement/Prospectus, and in
conjunction with the historical Selected Financial Data and Pro Forma Combined
Summary Financial Data, including the Notes thereto, appearing elsewhere in this
Proxy Statement Prospectus.
The effect of estimated merger and reorganization costs expected to be
incurred in connection with the merger has been reflected in the Unaudited Pro
Forma Combined Condensed Statement of Condition; however, because the estimated
costs are nonrecurring, they have not been reflected in the Unaudited Pro Forma
Combined Condensed Statements of Operation. The Unaudited Pro Forma Combined
Condensed Financial Information does not give effect to any anticipated
operating efficiencies in conjunction with the merger. The Unaudited Pro Forma
Combined Condensed Financial Information is provided for informational purposes
only. The Unaudited Pro Forma Combined Condensed Statement of Condition is not
necessarily indicative of the actual financial position that would have existed
had the merger been consummated on June 30, 1998, or that may exist in the
future. The Unaudited Pro Forma Combined Condensed Statements of Operation are
not necessarily indicative of the results that would have occurred had the
merger been consummated on the dates indicated or that may be achieved in the
future. Assuming the consummation of the merger, the actual financial position
and results of operations will differ, perhaps significantly, from the pro forma
amounts reflected herein because of a variety of factors, including changes in
value and changes in operating results between the dates of the pro forma
financial data presented herein and the date on which the merger takes place.
For information regarding the uncertainty of assumptions, estimates and
expectations reflected herein, see "Summary -- Cautionary Statement Regarding
Forward-looking Information."
48
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
POOLING-OF-INTERESTS METHOD
JUNE 30, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- -----------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
------------ ----------- --------------- ------------
(IN THOUSANDS)
--------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks................................. $ 160,245 $ 16,863 $ -- $ 177,108
Federal funds sold...................................... -- 15,060 -- 15,060
Interest bearing deposits in other banks................ -- 1,566 -- 1,566
Securities available for sale........................... 61,054 35,823 -- 96,877
Mortgage loans held for sale............................ 187,603 -- -- 187,603
Loans and leases, net................................... 500,874 118,822 -- 619,696
Loan and servicing sale receivable...................... 4,655 -- -- 4,655
Premise and equipment................................... 9,539 2,786 -- 12,325
Other real estate owned................................. 1,499 20 -- 1,519
Goodwill and other intangibles.......................... 65,078 3,874 -- 68,952
Other assets............................................ 32,763 6,102 -- 38,865
------------ ----------- --------------- ------------
Total assets............................................ $ 1,023,310 $ 200,916 $ -- $ 1,224,226
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing................................. $ 256,166 $ 54,542 $ -- $ 310,708
Interest bearing.................................... 620,436 123,583 -- 744,019
------------ ----------- --------------- ------------
Total deposits.................................... 876,602 178,125 -- 1,054,727
Federal funds purchased............................... 3,374 -- -- 3,374
Subordinated debentures............................... 27,657 -- -- 27,657
Due to related parties................................ 473 -- -- 473
Accrued expenses and other liabilities................ 17,513 2,177 2,004 21,694
------------ ----------- --------------- ------------
Total liabilities................................... 925,619 180,302 2,004 1,107,925
Shareholders' equity:
Preferred stock....................................... 11,659 -- -- 11,659
Common stock.......................................... 84,038 3,625 -- 87,663
Retained earnings..................................... 3,311 16,796 (2,004) 18,103
Unearned compensation................................. (1,258) -- -- (1,258)
Accumulated other comprehensive income................ (59) 193 -- 134
------------ ----------- --------------- ------------
Total shareholders' equity.......................... 97,691 20,614 (2,004) 116,301
------------ ----------- --------------- ------------
Total liabilities and shareholders' equity.............. $ 1,023,310 $ 200,916 $ -- $ 1,224,226
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
49
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
POOLING-OF-INTERESTS METHOD
DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- -----------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
---------- ---------- --------------- ------------
(IN THOUSANDS)
-----------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks................................... $ 81,030 $ 18,447 $ -- $ 99,477
Federal funds sold........................................ 40,000 4,380 -- 44,380
Interest bearing deposits in other banks.................. -- 1,962 -- 1,962
Securities available for sale............................. 67,295 36,641 -- 103,936
Mortgage loans held for sale.............................. 96,230 -- -- 96,230
Loans and leases, net..................................... 509,653 116,127 -- 625,780
Loan and servicing sale receivable........................ 1,247 -- -- 1,247
Premise and equipment..................................... 11,232 2,527 -- 13,759
Other real estate owned................................... 2,740 20 -- 2,760
Goodwill and other intangibles............................ 66,769 4,134 -- 70,903
Other assets.............................................. 26,159 5,421 -- 31,580
---------- ---------- --------------- ------------
Total assets.............................................. $ 902,355 $ 189,659 $ -- $ 1,092,014
---------- ---------- --------------- ------------
---------- ---------- --------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing................................... $ 289,344 $ 48,856 $ -- $ 338,200
Interest bearing...................................... 475,859 119,011 -- 594,870
---------- ---------- --------------- ------------
Total deposits.................................... 765,203 167,867 -- 933,070
Federal funds purchased................................. 2,050 -- -- 2,050
Subordinated debentures................................. 27,657 -- -- 27,657
Mandatory convertible debentures........................ 537 -- -- 537
Accrued expenses and other liabilities.................. 12,172 2,112 2,004 16,288
---------- ---------- --------------- ------------
Total liabilities..................................... 807,619 169,979 2,004 979,602
Shareholders' equity:
Preferred stock......................................... 11,659 -- -- 11,659
Common stock............................................ 84,038 3,625 -- 87,663
Retained earnings....................................... 524 15,935 (2,004) 14,455
Unearned compensation................................... (1,509) -- -- (1,509)
Accumulated other comprehensive income.................. 24 120 -- 144
---------- ---------- --------------- ------------
Total shareholders' equity............................ 94,736 19,680 (2,004) 112,412
---------- ---------- --------------- ------------
Total liabilities and shareholders' equity................ $ 902,355 $ 189,659 $ -- $ 1,092,014
---------- ---------- --------------- ------------
---------- ---------- --------------- ------------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
50
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- ------------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
------------ ------------ --------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans......................... $ 43,103 $ 10,408 $ -- $ 53,511
Income from lease finance receivables.............. 4,127 -- -- 4,127
Interest and dividend on securities................ 4,979 2,351 -- 7,330
Interest on Federal funds sold..................... 1,286 451 -- 1,737
Interest on deposits with other financial
institutions..................................... -- 154 -- 154
------------ ------------ --------------- -------------
Total interest income............................ 53,495 13,364 -- 66,859
Interest expense:
Interest on deposits............................... 18,143 3,481 -- 21,624
Debentures......................................... 1,908 -- -- 1,908
Federal funds purchased............................ 563 -- -- 563
------------ ------------ --------------- -------------
Total interest expense........................... 20,614 3,481 -- 24,095
------------ ------------ --------------- -------------
Net interest income............................ 32,881 9,883 -- 42,764
Provision for loan and lease losses.................. 1,495 1,054 -- 2,549
------------ ------------ --------------- -------------
Net interest income after provision for loan and
lease losses....................................... 31,386 8,829 -- 40,215
Noninterest income:
Service charges on deposit accounts................ 2,675 2,887 -- 5,562
Gain on sale of mortgage loans..................... 6,887 -- -- 6,887
Other income....................................... 5,342 1,338 -- 6,680
------------ ------------ --------------- -------------
Total noninterest income......................... 14,904 4,225 -- 19,129
Noninterest expense:
Salaries and employee benefits..................... 16,172 4,818 -- 20,990
Occupancy and equipment............................ 5,959 1,053 -- 7,012
Provision for recourse obligation.................. 2,021 -- -- 2,021
Amortization of goodwill and other intangibles..... 2,514 367 -- 2,881
Other.............................................. 13,022 4,474 -- 17,496
------------ ------------ --------------- -------------
Total noninterest expense............................ 39,688 10,712 -- 50,400
------------ ------------ --------------- -------------
Income before taxes.................................. 6,602 2,342 -- 8,944
Income tax provision................................. (3,612) (422) -- (4,034)
------------ ------------ --------------- -------------
Net income........................................... $ 2,990 $ 1,920 $ -- $ 4,910
------------ ------------ --------------- -------------
------------ ------------ --------------- -------------
Net income available to common....................... $ 2,259 $ 1,920 $ -- $ 4,179
Weighted average shares outstanding
Basic.............................................. 7,406,062 2,781,615 -- 10,187,677
Diluted............................................ 8,634,651 2,781,615 -- 11,416,266
Earnings per share
Basic.............................................. $ .31 $ .69 $ -- $ .41
Diluted............................................ $ .26 $ .69 $ -- $ .37
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
51
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
------------ ------------ --------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
---------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans........................... $ 14,782 $ 8,766 $ -- $ 23,548
Income from lease finance receivables................ 1,601 -- -- 1,601
Interest and dividend on securities.................. 1,968 1,516 -- 3,484
Interest on Federal funds sold....................... 934 424 -- 1,358
Interest on deposits with other financial
institutions....................................... 67 101 -- 168
------------ ------------ --------------- ------------
Total interest income.............................. 19,352 10,807 -- 30,159
Interest expense:
Interest on deposits................................. 7,570 2,741 -- 10,311
Debentures........................................... 74 -- -- 74
------------ ------------ --------------- ------------
Total interest expense............................. 7,644 2,741 -- 10,385
------------ ------------ --------------- ------------
Net interest income.............................. 11,708 8,066 -- 19,774
Provision for loan and lease losses.................... 515 700 -- 1,215
------------ ------------ --------------- ------------
Net interest income after provision for loan and lease
losses............................................... 11,193 7,366 -- 18,559
Noninterest income:
Service charges on deposit accounts.................. 2,911 2,224 -- 5,135
Gain on sale of mortgage loans....................... 1,727 -- -- 1,727
Other income......................................... 261 2,293 -- 2,554
------------ ------------ --------------- ------------
Total noninterest income........................... 4,899 4,517 -- 9,416
Noninterest expense:
Salaries and employee benefits....................... 6,816 4,160 -- 10,976
Occupancy and equipment.............................. 2,726 1,050 -- 3,776
Amortization of goodwill and other intangibles....... 268 -- -- 268
Other................................................ 5,460 3,449 -- 8,909
------------ ------------ --------------- ------------
Total noninterest expense.............................. 15,270 8,659 -- 23,929
------------ ------------ --------------- ------------
Income before taxes.................................... 822 3,224 -- 4,046
Income tax benefit (provision)......................... 1,503 (1,130) -- 373
------------ ------------ --------------- ------------
Net income............................................. $ 2,325 $ 2,094 $ -- $ $4,419
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
Net income available to common......................... $ 2,325 $ 2,094 $ -- $ 4,419
Weighted average shares outstanding
Basic................................................ 2,650,386 2,781,615 -- 5,432,001
Diluted.............................................. 2,650,386 2,781,615 -- 5,432,001
Earnings per share
Basic................................................ $ .88 $ .75 $ -- $ .81
Diluted.............................................. $ .88 $ .75 $ -- $ .81
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
52
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- -----------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
----------- ------------ --------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans............................ $ 4,086 $ 8,740 $ -- $ 12,826
Interest and dividend on securities................... 311 1,436 -- 1,747
Interest on Federal funds sold........................ 117 344 -- 461
Interest on deposits with other financial
institutions........................................ 54 67 -- 121
----------- ------------ --------------- ------------
Total interest income............................... 4,568 10,587 -- 15,155
Interest expense:
Interest on deposits.................................. 1,570 2,435 -- 4,005
Debentures............................................ 181 -- -- 181
----------- ------------ --------------- ------------
Total interest expense.............................. 1,751 2,435 -- 4,186
----------- ------------ --------------- ------------
Net interest income............................... 2,817 8,152 -- 10,969
Provision for loan and lease losses..................... 295 1,040 -- 1,335
----------- ------------ --------------- ------------
Net interest income after provision for loan and lease
losses................................................ 2,522 7,112 -- 9,634
Noninterest income:
Service charges on deposit accounts................... 464 2,221 -- 2,685
Other income.......................................... 232 1,888 -- 2,120
----------- ------------ --------------- ------------
Total noninterest income............................ 696 4,109 -- 4,805
Noninterest expense:
Salaries and employee benefits........................ 1,811 4,514 -- 6,325
Occupancy and equipment............................... 861 1,491 -- 2,352
Other................................................. 1,619 2,846 -- 4,465
----------- ------------ --------------- ------------
Total noninterest expense............................... 4,291 8,851 -- 13,142
----------- ------------ --------------- ------------
Income before taxes and extraordinary item.............. (1,073) 2,370 -- 1,297
Income tax benefit (provision).......................... 443 (720) -- (277)
----------- ------------ --------------- ------------
Income before extraordinary item........................ (630) 1,650 -- 1,020
Extraordinary item...................................... 625 -- -- 625
----------- ------------ --------------- ------------
Net income.............................................. $ (5) $ $1,650 $ -- $ 1,645
----------- ------------ --------------- ------------
----------- ------------ --------------- ------------
Net income available to common.......................... $ (5) $ 1,650 $ -- $ 1,645
Weighted average shares outstanding
Basic................................................. 134,099 2,781,615 -- 2,915,714
Diluted............................................... 134,099 2,781,615 -- 2,915,714
Earnings per share
Basic................................................. $ (.04) $ .59 $ -- $ .56
Diluted............................................... $ (.04) $ .59 $ -- $ .56
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
53
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- ------------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
------------- ------------ --------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans........................ $ 31,253 $ 5,792 $ -- $ 37,045
Income from lease finance receivables............. 2,582 -- -- 2,582
Interest and dividend on securities............... 1,919 1,005 -- 2,924
Interest on Federal funds sold.................... 320 291 -- 611
Interest on deposits with other financial
institutions.................................... -- 48 -- 48
------------- ------------ ------- -------------
Total interest income........................... 36,074 7,136 -- 43,210
Interest expense:
Interest on deposits.............................. 11,550 1,793 -- 13,343
Debentures........................................ 1,658 -- -- 1,658
Federal funds purchased........................... 662 -- -- 662
------------- ------------ ------- -------------
Total interest expense.......................... 13,870 1,793 -- 15,663
------------- ------------ ------- -------------
Net interest income............................. 22,204 5,343 -- 27,547
Provision for loan and lease losses................. 1,922 540 -- 2,462
------------- ------------ ------- -------------
Net interest income after provision for loan and
lease losses...................................... 20,282 4,803 -- 25,085
Noninterest income:
Service charges on deposit accounts............... 1,780 1,541 -- 3,321
Gain on sale of mortgage loans.................... 6,710 -- -- 6,710
Other income...................................... 2,871 541 -- 3,412
------------- ------------ ------- -------------
Total noninterest income........................ 11,361 2,082 -- 13,443
Noninterest expense:
Salaries and employee benefits.................... 10,457 2,724 -- 13,181
Occupancy and equipment........................... 3,504 509 -- 4,013
Amortization of goodwill and other intangibles.... 1,739 223 -- 1,962
Other............................................. 8,777 2,287 -- 11,064
------------- ------------ ------- -------------
Total noninterest expense........................... 24,477 5,743 -- 30,220
------------- ------------ ------- -------------
Income before taxes................................. 7,166 1,142 -- 8,308
Income tax provision................................ (3,743) (281) -- (4,024)
------------- ------------ ------- -------------
Net income.......................................... $ 3,423 $ 861 $ -- $ 4,284
------------- ------------ ------- -------------
------------- ------------ ------- -------------
Net income available to common...................... $ 2,787 $ 861 $ -- $ 3,648
Weighted average shares outstanding
Basic............................................. 9,173,698 2,781,615 -- 11,955,313
Diluted........................................... 10,294,675 2,781,615 -- 13,076,290
Earnings per share
Basic............................................. $ .30 $ .31 $ -- $ .31
Diluted........................................... $ .27 $ .31 $ -- $ .28
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
54
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
POOLING-OF-INTERESTS METHOD
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
ELDORADO ANTELOPE ADJUSTMENTS (2) ELDORADO
------------ ------------ --------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans........................... $ 15,463 $ 4,814 $ -- $ 20,277
Income from lease finance receivables................ 2,168 -- -- 2,168
Interest and dividend on securities.................. 1,693 1,206 -- 2,899
Interest on Federal funds sold....................... 673 232 -- 905
Interest on deposits with other financial
institutions....................................... -- 88 -- 88
------------ ------------ ------- ------------
Total interest income.............................. 19,997 6,340 -- 26,337
Interest expense:
Interest on deposits................................. 7,372 1,630 -- 9,002
Debentures........................................... 233 -- -- 233
Federal funds purchased.............................. 107 -- -- 107
------------ ------------ ------- ------------
Total interest expense............................. 7,712 1,630 -- 9,342
------------ ------------ ------- ------------
Net interest income.............................. 12,285 4,710 -- 16,995
Provision for loan and lease losses.................... 715 450 -- 1,165
------------ ------------ ------- ------------
Net interest income after provision for loan and lease
losses............................................... 11,570 4,260 -- 15,830
Noninterest income:
Service charges on deposit accounts.................. 652 1,373 -- 2,025
Gain on sale of mortgage loans....................... 3,452 -- -- 3,452
Other income......................................... 1,885 696 -- 2,581
------------ ------------ ------- ------------
Total noninterest income........................... 5,989 2,069 -- 8,058
Noninterest expense:
Salaries and employee benefits....................... 6,650 2,281 -- 8,931
Occupancy and equipment.............................. 2,491 516 -- 3,007
Provision for recourse obligation.................... 905 -- -- 905
Amortization of goodwill and other intangibles....... 705 145 -- 850
Other................................................ 5,341 2,197 -- 7,538
------------ ------------ ------- ------------
Total noninterest expense.............................. 16,092 5,139 -- 21,231
Income before taxes.................................... 1,467 1,190 -- 2,657
Income tax provision................................... (912) (366) -- (1,278)
------------ ------------ ------- ------------
Net income............................................. $ 555 $ 824 $ -- $ 1,379
------------ ------------ ------- ------------
------------ ------------ ------- ------------
Net income available to common......................... $ 470 $ 824 $ -- $ 1,294
Weighted average shares outstanding
Basic................................................ 5,449,466 2,781,615 -- 8,231,081
Diluted.............................................. 5,449,466 2,781,615 -- 8,231,081
Earnings per share
Basic................................................ $ .09 $ .30 $ -- $ .16
Diluted.............................................. $ .09 $ .30 $ -- $ .16
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
55
<PAGE>
ELDORADO BANCSHARES, INC.
ANTELOPE VALLEY BANK
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
POOLING-OF-INTERESTS ACCOUNTING
NOTE 1: BASIS OF PRESENTATION
Certain historical data of Antelope has been reclassified on a pro forma
basis to conform to Eldorado's classifications.
NOTE 2: MERGER COSTS
Reflects management's current estimate, for purposes of pro forma
presentation, of the aggregate estimated merger costs of $2.6 million ($2.0
million net of taxes, computed using the combined federal and state tax rate of
42%) expected to be incurred in connection with the merger. While a portion of
these costs may be required to be recognized over time, the current estimate of
these costs has been recorded in the pro forma combined balance sheet in order
to disclose the aggregate effect of these activities on Eldorado's pro forma
combined financial position. The estimated aggregate costs, primarily comprised
of anticipated cash charges, include the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
<S> <C>
Investment banking and other professional fees................................ $ 1,250
Employee reduction costs and conversion....................................... 1,300
------
Total..................................................................... $ 2,550
------
------
</TABLE>
Management's cost estimates are forward looking. While the costs represent
management's current estimate of merger and restructuring costs that will be
incurred, the ultimate level and timing of recognition of such costs will be
based on the final merger and integration plan to be completed prior to
consummation of the merger. The completion of this merger and integration plan
and the resulting management plans detailing actions to be undertaken to effect
the merger will effect these estimates; the type and amount of actual costs
incurred could vary materially from these estimates if future developments
differ from the underlying assumptions used by management in determining its
current estimate of these costs.
NOTE 3:
Per share data is based on the exchange ratio of 3.625 shares of Eldorado
Common Stock for each share of Antelope common stock.
56
<PAGE>
INFORMATION REGARDING ANTELOPE
GENERAL
Antelope is a community bank conducting a general commercial banking
business within the Antelope Valley of Southern California, which is located
approximately 50 miles northeast of Los Angeles. Antelope targets as its
customers the commercial and retail accounts of small to medium sized
businesses, professionals and executives. In addition to its main office located
in Lancaster, California, Antelope has seven full service branch offices located
in the Antelope Valley of California, including branches in Palmdale,
Wrightwood, Frazier Park, Quartz Hill, Rosamond, Lake Los Angeles and Acton. A
California chartered, commercial bank, Antelope commenced operations in 1981.
As of June 30, 1998, Antelope had total assets of $200.9 million and
deposits of $178.1 million. Antelope's total shareholders' equity as of June 30,
1998 was $20.6 million, resulting in a Tier 1 Leverage Ratio of 8.6%, a Tier 1
Risk-Weighted Ratio of 11.8% and a Total Risk-Weighted Ratio of 12.9%. Antelope
had total gross loans as of June 30, 1998 of $128.5 million, 59% of which were
consumer loans, 13% of which were real estate loans and 28% of which were
commercial and industrial loans. Antelope's lending focuses primarily on
indirect automobile finance, which constituted approximately 70% of Antelope's
total portfolio loans as of June 30, 1998. Loans to finance the purchase of used
automobiles constituted a majority of Antelope's total automobile loans at June
30, 1998. See "Unaudited Pro Forma Combined Condensed Financial Statements" and
Annexes I and II for Antelope historical financial information incorporated in
this Proxy Statement/Prospectus by reference.
Antelope's branches have a significant market share of the deposit base in
the communities they serve. According to the most recent FDIC reporting
concerning branch deposits (June 1997), in four of the communities in which it
has branches (Acton, Frazier Park, Lake Los Angeles and Rosamond), Antelope is
the only bank and has a 100% share of the bank deposit market. In Lancaster and
Palmdale, the two largest markets it serves, Antelope has a market share of
23.3% and 15.3%, respectively. Antelope's Wrightwood location has a 55.1% share
of the deposit market. Antelope's eighth location in Quartz Hill is a new branch
that opened for operation in June 1998.
In the past two years Antelope has experienced relatively strong balance
sheet growth, including growth in total assets of approximately 29% in 1997 and
6% in the first six months of 1998. The growth has been generated both
internally and through the opening of new branch offices, with the acquisition
of three branch offices acquired from Wells Fargo Bank in February 1997, and
with the recent opening of the Quartz Hill branch.
Antelope's deposits are insured up to the maximum limits by the FDIC
pursuant to the Federal Deposit Insurance Act. Antelope is not a member of the
Federal Reserve System.
Antelope's principal executive offices are located at 831 West Lancaster
Blvd., Lancaster, California 93534. Its telephone number is (805) 945-4511.
PROPERTIES
Antelope owns the building and land on which its Lancaster, Palmdale,
Wrightwood, Frazier Park and Quartz Hill branches are located. Antelope owns
each of these properties in fee simple free of any liens or encumbrances.
Antelope owns the building, and leases the land, on which its Lake Los Angeles
branch is located. The Lake Los Angeles building is owned in fee simple free of
any liens and encumbrances.
Antelope leases the premises for its Acton branch pursuant to a lease
expiring in February 2003 at a current monthly rental of $2,077, with one five
year option to renew. Antelope leases the premises for its Rosamond branch
pursuant to a lease expiring October 1999 at a current monthly rent of $2,167,
with one three year option to renew.
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<PAGE>
In the opinion of management of Antelope, all properties owned and leased by
Antelope are adequately covered by insurance.
YEAR 2000 PREPAREDNESS
The Year 2000 issue is a computer programming concern that may affect many
electronic processing systems. Until relatively recently, in order to minimize
the length of data fields, most computer programs eliminated the first two
digits of the year. This problem could affect computers leaving them unable to
distinguish dates in the twentieth and twenty-first centuries. For example,
date-sensitive calculations that treat "00" as the year 1900, rather than 2000.
Secondly, years that end in "00" are not leap years, except for an anomaly in
the year 2000. This anomaly could result in miscalculations when processing
critical date-sensitive information relating to periods after December 31, 1999.
The Year 2000 issue may adversely affect Antelope's information technology
systems, such as its item and data processing applications. The Year 2000 issue
also may affect so-called embedded technology, such as microprocessors that
control some of Antelope's security systems and telecommunication equipment.
Antelope's management has established a task force to mitigate the adverse
effects that the Year 2000 issue will have on Antelope's computer systems and
applications. Antelope has implemented the five-step discovery, planning and
implementation process with respect to the Year 2000 outlined by the Financial
Institutions Examination Counsel ("FFIEC"). In addition to its in-house efforts,
Antelope has contracted with an independent firm to assist it in addressing the
Year 2000 issue. All of Antelope's computer hardware has been tested to assure
that the Year 2000 issue will not have a material adverse effect on such
hardware. Antelope anticipates that the testing of its computer software for
Year 2000 readiness will be completed before the FDIC's required completion date
of December 31, 1998. Antelope is also working with its vendors to assess their
Year 2000 preparedness. Antelope expects to incur significant internal staff
costs as well as consulting and other expenses related to the preparation of all
its systems and applications for the Year 2000. Antelope estimates its total
costs during the period from January 1, 1998 through December 31, 1999 will be
less than $250,000. In addition, there can be no assurance that the customer and
vendor base of Antelope will be able to complete their individual Year 2000
initiatives in a timely manner, which could possibly cause disruption of
Antelope's own activities.
MANAGEMENT OF ANTELOPE
DIRECTORS AND EXECUTIVE OFFICERS. The Board of Directors of Antelope
currently consists of eight members. Directors are elected annually at each
annual meeting of shareholders. The following table sets forth certain
information as of September 30, 1998 with respect to the directors and executive
officers of Antelope, including business experience and beneficial ownership of
Antelope common stock held by (i) each of the current directors of Antelope,
(ii) each of the executive officers(1) of Antelope, and (iii) the directors and
executive officers(1) of Antelope as a group. Except as set forth in the table
below, management of Antelope knows of no person who, as of September 30, 1998,
owned beneficially more than five percent of the outstanding Antelope common
stock.
58
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
YEAR FIRST AS OF SEPTEMBER 30, 1998
ELECTED OR ------------------------------------
NAMES AND OFFICES PRINCIPAL OCCUPATION APPOINTED NUMBER OF PERCENTAGE OF SHARES
HELD WITH ANTELOPE FOR PAST FIVE YEARS AGE DIRECTOR SHARES(2) OUTSTANDING
- ------------------------------- ------------------------------- --- --------------- ----------- -----------------------
<S> <C> <C> <C> <C> <C>
Clyde G. Golding............... President, AVIA Corp. (General 71 1980 34,379 4.5%
Chairman of the Board of Insurance)
Directors
E. Gordon Harrison(3).......... President, Desert News Co. 73 1987 45,868 6.0%
Director
John F. Murphy................. Retired Businessman 72 1980 4,839 *
Director
Michael G. Schafer............. Owner and Manager, Antelope 50 1980 5,545(4) *
Director Valley Van & Storage Co.
Jack D. Seefus................. President and Chief Executive 63 1980 736 *
President, Chief Executive Officer, Antelope
Officer and Director
Roy J. Simi.................... Retired Rancher 81 1980 12,852 1.7%
Corporate Secretary and
Director
William Walsh IV............... Attorney, Walsh, Delaney & 58 1991 8,845 1.2%
Director Yep, Attorneys at Law
A.C. Warnack(3)................ Owner, Antelope Valley 69 1980 122,774 16.0%
Director Aggregate, Inc.
George E. Nagy................. Executive Vice President and 53 n/a 7 *
Executive Vice President and Chief Lending Officer,
Chief Lending Officer Antelope
Margaret A. Torres............. Executive Vice President and 48 n/a -0- n/a
Executive Vice President and Chief Financial Officer,
Chief Financial Officer Antelope
James J. Hennager.............. Senior Vice President/ Consumer 64 n/a -0- n/a
Senior Vice President/ Loan Officer, Antelope
Consumer Loan Officer
Richard A. Little.............. Senior Vice President/Real 50 n/a -0- n/a
Senior Vice President/ Real Estate Loan Officer, Antelope
Estate Loan Officer
Michael P. McCullough.......... Senior Vice President/ 38 n/a -0- n./a
Senior Vice President/ Commercial Loan Officer,
Commercial Loan Officer Antelope
Directors and Executive
Officers as a Group
(12 Persons)................. 235,845 30.7%
</TABLE>
- ------------------------
* Less than 1%.
(1) The term "executive officer" means President/Chief Executive Officer,
Executive Vice President/ Chief Lending Officer, Executive Vice
President/Chief Financial Officer, Senior Vice President/
59
<PAGE>
Consumer Loan Officer, Senior Vice President/Real Estate Loan Officer, and
Senior Vice President/Commercial Loan Officer.
(2) Except as otherwise noted, may include (i) shares held by such person(1)s
spouse (except where legally separated) and minor children, (ii) shares held
by any other relative of such person who has the same home, (iii) shares
held by a family or retirement trust as to which such person is a
beneficiary and trustee with sole voting and investment power (or shared
power with a spouse), (iv) shares held in street name for the benefit of
such person, or (v) shares held in an Individual Retirement Account as to
which such person has pass-through voting rights and investment power.
(3) Mr. Harrison's address is 206 East Avenue K-4, Lancaster, California 93535
and Mr. Warnack's address is Post Office Box 1409, Lancaster, California
93584. The address of all other directors is c/o Antelope Valley Bank, 831
West Lancaster Blvd., Lancaster, CA 93534.
(4) Includes 802 shares held by Antelope Valley Van & Storage Co., of which Mr.
Schafer is President and sole owner, as to which shares he has sole voting
and investment power.
BOARD OF DIRECTORS AND COMMITTEES. The Board of Directors of Antelope has,
among others, a standing Audit Committee, of which directors Simi (Chairman),
Golding, Harrison and Murphy are members. During the fiscal year ended December
31, 1997, the Audit Committee held a total of 12 meetings. The purpose of the
Audit Committee is to review all external audits of Antelope and all monthly
financial information prior to presentation to the Board of Directors. In
addition, it is the responsibility of the Audit Committee to recommend to the
Board of Directors the selection of independent accountants and to make certain
that the independent accountants have the necessary freedom and independence to
freely examine all Antelope records.
The Board of Directors has no standing compensation committee; however, it
does have a standing Executive Committee which performs similar functions. The
Executive Committee is comprised of directors Golding (Chairman), Walsh, Warnack
and Harrison (alternate), and met four times during 1997. The purpose of the
Executive Committee, with respect to compensation, is to establish Antelope
compensation and personnel policies.
Antelope has no standing nominating committee; however, the procedures for
nominating directors, other than by the Board of Directors itself, are set forth
in Antelope's Bylaws.
During the fiscal year ended December 31, 1997, the Board of Directors of
Antelope held a total of 14 meetings. All of the incumbent directors of Antelope
who were directors of Antelope during 1997 attended at least 75% of the
aggregate of (a) the total number of such meetings and (b) the total number of
meetings held by all committees of the Board on which such director served
during 1997.
EXECUTIVE COMPENSATION. The table below sets forth certain summary
compensation information, for the fiscal year ended December 31, 1997, with
respect to the President/Chief Executive Officer of Antelope and the only other
two officers of Antelope whose total gross annual salary and bonus paid, accrued
or distributed, for the fiscal year ended December 31, 1997, exceeded $100,000
(the "Named Executive Officers"):
60
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------------------------------------------------------ --------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Jack D. Seefus.................................................... $ 149,734(1) $ 55,907 $ 144,366(2)
President and Chief 1997 1996 $ 130,000(1) $ 56,485 $ 77,725(2)
Executive Officer 1995 $ 129,133(1) $51,287 $ 38,9482(2)
George E. Nagy.................................................... $ 108,844(1) $ 17,212 $ 24,718(3)
Executive Vice President and 1997 1996 $ 92,250(1) $ 17,360 $ 13,826(3)
Chief Lending Officer 1995 $ 89,040(1) $ 14,572 $ 9,645(3)
Margaret A. Torres................................................ $ 103,387(1) $ 19,617 $ 16,246(4)
Executive Vice President and 1997 1996 $ 90,200(1) $ 17,365 $ 10,068(4)
Chief Financial Officer 1995 $ 86,333(1) $ 14,572 $ 7,025(4)
</TABLE>
- ------------------------
(1) Includes amounts deferred by these individuals pursuant to Antelope's Salary
Deferral Plan (the "401(k) Plan"). The 401(k) Plan permits all participants
to contribute between 2% and 15% of their annual salary on a pre-tax basis
(subject to a statutory maximum), which contributions vest immediately when
made. Employer contributions are made in varying amounts at the discretion
of the Antelope Board, and become vested over a period of six years at the
rate of twenty percent (20%) per year beginning after the second full year
of service. Antelope's policy is to match 50% of employee contributions up
to 6% of annual salary.
(2) Consists of (i) Antelope contributions to Mr. Seefus' account pursuant to
Antelope's 401(k) Plan in the amounts of $3,902, $3,900 and $3,250 for the
years 1997, 1996 and 1995, respectively; (ii) term life insurance premiums
paid by Antelope in the amounts of $2,246, $1,104 and $438 for the years
1997, 1996 and 1995, respectively; and (iii) accruals by Antelope on behalf
of Mr. Seefus in the amounts of $138,218, $72,720, and $35,260 for the years
1997, 1996 and 1995, respectively, in connection with Antelope's Salary
Continuation Plan. See "-- Salary Continuation Plan."
(3) Consists of (i) Antelope contributions to Mr. Nagy's account pursuant to
Antelope's 401(k) Plan in the amounts of $2,824, $2,768 and $2,671 for the
years 1997, 1996 and 1995, respectively; (ii) term life insurance premiums
paid by Antelope in the amounts of $795, $491 and $252 for the years 1997,
1996 and 1995, respectively; and (iii) accruals by Antelope on behalf of Mr.
Nagy in the amounts of $21,099, $10,567 and $6,722 for the years 1997, 1996
and 1995, respectively, in connection with Antelope's Salary Continuation
Plan. See "-- Salary Continuation Plan."
(4) Consists of (i) Antelope contributions to Ms. Torres' account pursuant to
Antelope's 401(k) Plan in the amounts of $2,778, $2,706 and $2,460 for the
years 1997, 1996 and 1995, respectively; (ii) term life insurance premiums
paid by Antelope in the amounts of $534, $302 and $110 for the years 1997,
1996 and 1995, respectively; and (iii) accruals by Antelope on behalf of Ms.
Torres in the amounts of $12,934, $7,060 and $4,455 for the years 1997, 1996
and 1995, respectively, in connection with Antelope's Salary Continuation
Plan. See "-- Salary Continuation Plan."
SALARY CONTINUATION PLAN. Antelope has adopted a Salary Continuation Plan
for Antelope's executive officers pursuant to which each individual granted
benefits thereunder has entered into a Salary Continuation Agreement
("Continuation Agreement") with Antelope, effective January 2, 1997. The
Continuation Agreements specify that each of the Named Executive Officers will
receive benefits for a period of 15 years upon retirement, provided that he or
she was continuously employed by Antelope from January 2, 1997 until the
retirement date (age 65 in the case of the Named Executive Officers). The annual
benefits for each of the Named Executive Officers are $100,000, $80,000 and
$80,000 for Mr. Seefus, Mr. Nagy and Ms. Torres, respectively. In the event of
death prior to retirement, the same benefits will be paid to the participant's
beneficiary for fifteen years following such death. In the event of disability
prior to retirement, the participant will receive the same benefits upon
reaching age 65 as if he or she had remained employed by Antelope. In the event
of termination of employment other than for death or disability, the participant
will receive, upon reaching age 65, that portion of such participant's benefits
as had vested as of the termination date. (In the case of Margaret Torres, such
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<PAGE>
benefits were 60% vested as of December 31, 1997, and will continue to vest at
the rate of 10% per year until fully vested; provided that such benefits will be
100% vested if the merger is completed. In the case of Messrs. Seefus and Nagy,
such benefits are currently 100% vested.)
In the event of a merger or similar transaction (including an acquisition of
at least 51% of the outstanding common stock of Antelope), the retirement
benefits under the Continuation Agreements will become 100% vested, and the
successor or acquiror, as the case may be, will be bound by all of the terms and
conditions of each Continuation Agreement. If in connection with such
transaction a participant is actually or constructively terminated or demoted by
Antelope, then the participant will be entitled to receive the same benefits
upon reaching the retirement age as that individual would have received if he or
she had reached the retirement date while continuously employed by Antelope.
Antelope intends to fund its obligations under the Continuation Agreements
through the proceeds of single premium life insurance policies that name
Antelope as beneficiary. The cost of making payments under the Continuation
Agreements is accrued for annually by Antelope in amounts determined by the
utilization of interest method. Antelope will eventually be reimbursed, however,
for payments made under the Continuation Agreements through the proceeds of the
life insurance policies referred to above. The amounts accrued by Antelope for
each of the Named Executive Officers for fiscal years 1995 through 1997 are set
forth in the Summary Compensation Table above. See "-- Executive Compensation"
herein.
CHANGE IN CONTROL AND SEVERANCE COMPENSATION AGREEMENTS. Each of George E.
Nagy, Jack D. Seefus, James J. Hennager and Margaret A. Torres have entered into
Change in Control Severance Compensation Agreements with Antelope. Except as
modified as described below, these agreements provide that if a change in
control of Antelope occurs, and either (i) the executive's employment is
terminated by Antelope (A) not more than six months prior to and in
contemplation of a change in control and such termination was not for cause or
(B) within one year following such change in control or (ii) the executive
leaves the employment of Antelope for any reason within one year following the
change in control, the executive will be entitled to severance compensation.
Each of such executive officers would receive as severance compensation, payable
in one lump sum payment (i) 12 month's salary for such individual (18 months in
the case of Mr. Seefus), (ii) 100% of such individual's last annual bonus (150%
in the case of Mr. Seefus), (iii) payment of such individuals continuing health
benefits for a 12 month period following termination (18 months in the case of
Mr. Seefus) and (iv) Antelope would pay off any remaining lease payments on the
automobile driven by such executive and transfer title to such automobile to the
executive. At the same time that Antelope and Eldorado entered into the merger
agreement, Messrs. Seefus, Hennager and Nagy agreed with Antelope and Eldorado
to amend their Change in Control Severance Agreements, effective if and only if
the merger is completed. The amendment to those agreements, as described in more
detail elsewhere in this Proxy Statement--Prospectus, will eliminate the right
of each such officer to receive a severance payment if, for a period of two
years after the merger, Antelope does not actually or constructively terminate
such officer's employment. See "Proposal One: The Merger -- Interests of Certain
Persons in the Merger."
COMPENSATION OF DIRECTORS. Each non-employee director (with the exception
of the Chairman of the Board) received $750 for each regular board meeting and
the Annual Meeting of Shareholders, whether or not attended, and the Chairman of
the Board received $1,500 for each regular board meeting and the Annual Meeting
of Shareholders, whether or not attended. Additionally, all non-employee
directors (with the exception of the Chairman of the Board) received $375 for
each special board meeting, only if attended, and the Chairman of the Board
received $750 for each special board meeting, only if attended. Furthermore,
each member of the Executive Committee and the Audit Committee and each member
of the Loan/Investment Committee (with the exception of Mr. Seefus) received
$250 for each meeting attended.
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<PAGE>
CERTAIN TRANSACTIONS. Some of the executive officers and directors of
Antelope and the companies with which they are associated have been customers
of, and have had banking transactions with Antelope in the ordinary course of
Antelope's business since January 1, 1997, and Antelope expects to continue to
have such banking transactions in the future. All loans and commitments to lend
included in such transactions have been made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with persons of similar creditworthiness, and, in the
opinion of Antelope's management, have not involved more than the normal risk of
repayment or presented any other unfavorable features. The largest aggregate
amount of indebtedness owed by the executive officers and directors of Antelope
(including associated companies) to Antelope at any time since January 1, 1997
was $3.0 million, constituting approximately 18% of Antelope's equity capital
accounts at that time. The amount of such indebtedness outstanding as of
September 30, 1998 was $2.0 million, constituting approximately 12% of
Antelope's equity capital accounts at that time.
The insurance agent for most of Antelope's insurance policies is AVIA Corp.,
of which Clyde G. Golding, the Chairman of the Board of Antelope, is the
President and majority shareholder. Antelope paid AVIA Corp. insurance premiums
of approximately $220,859 during 1997 and approximately $252,957 during the
first nine months of 1998. It is the opinion of Management of Antelope that the
amounts of such insurance agency premiums are no less favorable to Antelope than
those which would have been paid for comparable services from non-affiliated
persons.
The law offices of Walsh, Delaney & Yep, of which William Walsh IV, a
director of Antelope, is a partner, have rendered certain legal services to
Antelope from time to time. It is the opinion of Management of Antelope that the
fees charged and paid for such services, which amounted to approximately $27,171
in 1997, and $25,870 in the first nine months of 1998, were no less favorable to
Antelope than those which would have been charged for comparable legal services
by non-affiliated persons.
CERTAIN INFORMATION INCORPORATED BY REFERENCE AND DELIVERED
HEREWITH. Additional information relating to Antelope, including information
relating to the business, properties, financial condition and results of
operations of Antelope, is included in Annexes I and II delivered with and
incorporated by reference into this Proxy Statement/Prospectus. See "Where You
Can Find More Information."
63
<PAGE>
INFORMATION REGARDING ELDORADO
GENERAL
Eldorado (formerly known as Commerce Security Bancorp, Inc.) is a bank
holding company. Through its sole operating subsidiary, Eldorado Bank, Eldorado
offers a broad range of commercial banking products and services to business and
retail customers from 17 full service branches located primarily in the Orange
County, San Diego County and Sacramento areas of California. Eldorado Bank also
operates nine loan production offices, five of which are located in California
and four of which are located in contiguous states. Eldorado augments its
traditional banking products and services with specialized products including
residential mortgage loans originated for resale into the secondary market and
equipment leases to small and medium-sized businesses.
Eldorado markets its products and services through three divisions:
- COMMUNITY BANKING DIVISION -- focusing primarily on small and
medium-sized businesses located in Eldorado's California markets.
Products include commercial, consumer and real estate loans (with a
particular emphasis on the origination and servicing of Small Business
Administration ("SBA") loans), and a broad range of deposit products and
other non-deposit banking services.
- MORTGAGE BANKING DIVISION -- originating residential mortgage loans in
California, Arizona, Nevada and Oregon through nine loan production
offices and a network of wholesale brokers for sale in the secondary
market.
- EQUIPMENT LEASING DIVISION -- generating equipment leases primarily
through wholesale sources located throughout the United States, servicing
those leases and from time to time selling blocks of leases to other
institutions.
The key elements of Eldorado's strategic plan have been and continue to be
the establishment and enhancement of an attractive community banking franchise
through the acquisition of community banks primarily, but not exclusively, in
and around its Southern California base, improving core profitability and
maintaining a strong balance sheet. Since 1995, Eldorado has acquired three
community banks with total assets of approximately $779 million. See "Unaudited
Pro Forma Combined Condensed Financial Information."
BUILDING AND ENHANCING AN ATTRACTIVE COMMUNITY BANK FRANCHISE. Eldorado
is continually engaged in the identification and evaluation of potential
acquisitions of community banks in California. Eldorado focuses primarily on
community banks that have underperformed relative to their peer group but
have strong lending franchises, niche business lines or low cost deposits
that would complement Eldorado's existing operations and branch network and
also provide opportunities for cost savings through branch overlap and
back-office consolidation. In particular, Eldorado seeks to acquire and
develop both traditional and non-traditional community banking businesses
that provide opportunities for multiple relationships with small and
medium-sized business customers, which Eldorado considers to be businesses
with annual revenue of up to $50 million. As an integral part of this
strategy, Eldorado emphasizes building a solid management team through a
combination of senior officers retained from acquired banks and experienced
specialists hired to enhance Eldorado's competency in various areas, such as
mortgage banking and equipment leasing.
IMPROVING CORE PROFITABILITY. Eldorado's strategy to increase
profitability is premised primarily on (i) increasing the sources and volume
of fee income, including fees derived from originating and servicing SBA
loans, selling and servicing equipment leases, and originating and selling
residential mortgage loans, (ii) maintaining and diversifying its base of
relatively low cost funds, (iii) utilizing its asset generation capability
to increase the volume of commercial loans and leases
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that it retains in its portfolio, particularly SBA loans, equipment leases
and commercial loans to its small business customers, and (iv) actively
seeking to improve operating efficiencies.
MAINTAINING A STRONG BALANCE SHEET. Eldorado seeks to maintain a strong
balance sheet by managing the risk of credit-related losses and by striving
to maintain a capital base sufficient to support its strategic plan.
Eldorado seeks to improve the asset quality of the banks it acquires by
implementing underwriting standards in such banks' loan and lease
origination programs that place greater emphasis on cash flow than
collateral coverage as the primary source of repayment on its loans. To
maintain a capital base sufficient to support Eldorado's existing businesses
and to permit it to continue to expand through acquisitions, Eldorado's plan
is to continue to meet the "well capitalized" regulatory standards. At June
30, 1998, Eldorado was well capitalized for regulatory purposes, with Tier 1
and Total Risk-Weighted Ratios (as defined herein) of 8.9% and 10.0%,
respectively, and a Tier 1 Leverage Ratio (as defined herein) of 6.6%.
Prior to September 1995, Eldorado's predecessor, SDN Bancorp, Inc. ("SDN"),
owned a single bank with approximately $56 million in assets which was
categorized as "critically undercapitalized" by federal regulators. In September
1995, SDN was recapitalized by Dartmouth Capital Group, L.P. ("DCG"), a bank
holding company organized by Robert P. Keller, Eldorado's President and Chief
Executive Officer. Following that recapitalization, Mr. Keller assumed control
of SDN, installed new management and began implementing policies to improve
asset quality and operating performance. DCG is controlled by Mr. Keller and a
majority of Eldorado's directors. As of September 30, 1998 DCG owned % of the
outstanding Eldorado common stock, and DCG and its affiliates will own, in the
aggregate, % of the outstanding Eldorado common stock.
Since DCG acquired control, the size and scope of Eldorado's business and
operations have changed substantially as a consequence of its acquisitions,
including its most recent acquisition of Eldorado Bancorp and its subsidiary
Eldorado Bank (the "Eldorado Acquisition"). Completed in June 1997, the Eldorado
Acquisition nearly doubled Eldorado's assets. Following the Eldorado
Acquisition, Eldorado consolidated into Eldorado Bank the respective operations
of its other subsidiaries. In addition, each of Eldorado's acquisitions has been
accounted for as a purchase, and accordingly, the operating results of each
acquired company are included in Eldorado's financial statements only from the
date of acquisition. As a result of such acquisitions and the accounting
treatment therefor, Eldorado's historical operating results prior to June 30,
1997 are of limited relevance in evaluating Eldorado's historical financial
performance and predicting its future operating results.
Eldorado Bank is incorporated under the laws of the State of California and
is licensed by the California State Department of Financial Institutions. It
also is a member of the Federal Reserve System. Eldorado Bank's deposits are
insured up to applicable limits by the FDIC.
Eldorado's principal place of business is 24012 Calle de la Plata, Suite
150, Laguna Hills, CA 92653; its telephone number at that address is (949)
699-4344.
RECENT DEVELOPMENTS
On August 28, 1998, the Company amended its charter to change its name from
Commerce Security Bancorp, Inc. to Eldorado Bancshares, Inc. and to provide for
a one-for-two reverse stock split of its Common Stock effective September 4,
1998.
On August 14, 1998, Eldorado filed a registration statement on Form S-1 with
the SEC relating to a public offering of approximately $50 million of Eldorado
Common Stock. As a result of recent volatility in the stock market, the
completion of the offering has been delayed indefinitely. Although Eldorado
intends to pursue such offering, we can provide no assurance that the offering
will be completed or that an active trading market in Eldorado Common Stock will
ever exist. See "Risk Factors -- Illiquidity of Eldorado Common Stock" and "--
Dilution."
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CERTAIN INFORMATION INCORPORATED BY REFERENCE AND DELIVERED
HEREWITH. Additional information relating to Eldorado, including information
relating to the business, properties, financial condition and results of
operations of Eldorado, is included in Annexes III through V delivered with and
incorporated by reference into this Proxy Statement/Prospectus by reference.
See "Where You Can Find More Information."
COMPARATIVE PER SHARE DATA AND DIVIDEND INFORMATION
Trading in Eldorado and Antelope common stock has been extremely limited and
cannot be characterized as amounting to an established public trading market.
Each company's common stock is registered with the National Association of
Securities Dealers and has been traded only over-the-counter. Neither of the
companies is listed on an exchange or is quoted on Nasdaq. As a result, we
believe that any comparative pricing information relating to Eldorado and
Antelope common stock would be of limited use. See "Risk Factors -- Illiquidity
of Eldorado Common Stock" and "-- Volatility of Stock Price."
DESCRIPTION OF ELDORADO CAPITAL STOCK
The following summary of the terms of the Eldorado common stock and
preferred stock does not purport to be complete and is subject to, and is
qualified in its entirety by, the provisions of and the Eldorado's Certificate
of Incorporation, as amended to date.
COMMON STOCK
GENERALLY. The common stock of Eldorado consists of four classes, each
having a par value of $.01 per share: Voting Special Common Stock, Non-Voting
Special Common Stock, Class B Common Stock and Class C Common Stock. The Voting
Special Common Stock and Non-Voting Special Common Stock are referred to
collectively as the "Special Common Stock." The Class B Common Stock and Class C
Common Stock are referred to collectively as the "Regular Common Stock." The
Voting Special Common Stock and Class B Common Stock are referred to
collectively as the "Voting Common Stock." The powers, preferences and rights of
each of the classes of Common Stock are summarized below.
Pursuant to the terms of the Merger Agreement, Eldorado would be issuing
Class B Common Stock to the Antelope shareholders. As of October 12, 1998,
Eldorado had the following shares of capital stock outstanding: 1,485,033 shares
of Voting Special Common Stock, 927,826 shares of Non-Voting Special Common
Stock, 7,305,849 shares of Class B Common Stock and no shares of Class C Common
Stock.
SPECIAL COMMON STOCK. The Special Common Stock is entitled to a liquidation
preference over the Regular Common Stock, entitling the holders of Special
Common Stock to payment, in any liquidation of Eldorado (including any merger,
reorganization or other transaction which constitutes a change in control of
Eldorado, as set forth in the Certificate of Incorporation, and in which the
holders of the Common Stock are entitled to receive consideration on account of
their shares), of $9.62 per share before the holders of the Regular Common Stock
may receive any payment. After the holders of both the Special Common Stock and
the Regular Common Stock have received $9.62 per share, each share of Special
Common Stock and Regular Common Stock will participate equally in any remaining
consideration available to holders of Eldorado common stock.
The Special Common Stock is convertible into Regular Common Stock on a
share-for-share basis without the payment of any additional consideration, at
any time at the election of the holder, and is mandatorily convertible into
Regular Common Stock upon the consummation of a Qualified Offering. As used
herein, a "Qualified Offering" means the closing of a firm-commitment
underwritten public
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offering pursuant to an effective registration statement under the Securities
Act, covering the offer and sale of Class B Common Stock to the public at an
offering price per share of at least 200% of the Initial Purchase Price (as
hereinafter defined), in which offering either (x) the aggregate offering price
of the shares sold by Eldorado is not less than $25 million, or (y) the
aggregate offering price of all shares sold in the offering, including those
sold by Eldorado and those sold by other stockholders, is not less than $30
million of which the aggregate offering price of the shares sold by Eldorado is
not less than $20 million. For purposes of this definition, the "Initial
Purchase Price" means $9.62 per share, as adjusted for any stock split, stock
dividend or other similar distribution on the Class B Common Stock.
Except with respect to the issuance of additional capital stock senior to or
PARI PASSU with the Special Common Stock in liquidation preference or senior to
the Special Common Stock in redemption rights, and amendments to Eldorado's
Certificate of Incorporation that adversely affect the rights of the Special
Common Stock (in each of which cases the Special Common Stock has separate
voting rights), the Voting Special Common Stock and the Class B Common Stock are
entitled to vote together as a single class on all matters with respect to which
holders of common stock are entitled to vote under the Delaware General
Corporation Law (the "DGCL"). The holders of the Non-Voting Special Common Stock
are not entitled to vote with respect to any matter, excepting only (i) those
matters described in the immediately preceding sentence as to which the Special
Common Stock votes as a separate class, and (ii) any other amendment of
Eldorado's Certificate of Incorporation adversely affecting the Non-Voting
Special Common Stock.
In all other respects the Special Common Stock is identical to the Regular
Common Stock.
REGULAR COMMON STOCK, AND RIGHTS SHARED BY ALL ELDORADO COMMON STOCK. The
Class B Common Stock and Class C Common Stock, except as provided below, have
rights, powers and preferences comparable to shares of common stock generally
under the DGCL, including the following:
DIVIDENDS. Except as limited by the terms of the Series B Preferred Stock
or any other series of Preferred Stock that may hereafter be issued, and by the
terms of the Subordinated Debentures (as defined herein) (which prohibits
dividends on Eldorado common stock during certain periods), Eldorado may pay
dividends on the Regular Common Stock as declared from time to time by its Board
of Directors out of funds legally available therefor. See "-- Effect of Capital
Securities on Common Stock" below. With certain exceptions, a Delaware
corporation (such as Eldorado) may pay dividends only out of (i) its surplus (as
defined under the DGCL), or (ii) if there is no surplus, out of net profits for
the fiscal year in which the dividend is declared and/or the preceding year.
Eldorado's principal source of cash flow for the payment of dividends will be
dividends from its banking subsidiary, Eldorado Bank, which is subject to
substantial regulatory restrictions on the payment of dividends.
VOTING RIGHTS. Except as is provided with respect to the Series B Preferred
Stock or as may be provided with respect to any other series of Eldorado
preferred stock that may hereafter be issued, the holders of the Voting Common
Stock possess exclusive voting rights. The Class C Common Stock is not entitled
to vote in any matter, excepting only amendments to Eldorado's Certificate of
Incorporation adversely affecting the rights of the Class C Common Stock. Each
holder of Voting Common Stock is entitled to one vote for each share held on all
matters voted upon by shareholders. Shareholders are not permitted to cumulate
votes in elections of directors.
LIQUIDATION. Subject to any prior rights that may be granted to the holders
of any shares of Eldorado preferred stock that may be outstanding as of the
applicable time, and the preferential rights of the Special Common Stock over
the Regular Common Stock discussed above, in the event of any liquidation,
dissolution or winding up of Eldorado, the holders of Eldorado common stock
would be entitled to receive, after payment of all debts and liabilities of
Eldorado (including all deposit accounts
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and accrued interest thereon and including the Subordinated Debentures), all
assets of Eldorado that are available for distribution.
PREFERRED STOCK
SERIES B PREFERRED STOCK. The Series B Preferred Stock constitutes
non-voting, non-participating, non-cumulative perpetual preferred stock. It has
a liquidation preference of $100 per share (the "Series B Liquidation Value").
The terms of the Series B Preferred Stock provide that the holders will be paid
a quarterly cash dividend at a rate of 11.0% per annum, although a failure of
Eldorado to declare and pay such dividend in cash does not, except under the
limited circumstances described below, give rise to any liability by Eldorado.
However, certain other rights accrue to the holders of the Series B Preferred
Stock if quarterly dividends thereon are not paid in full in cash, as discussed
below, thereby giving Eldorado certain economic incentives to pay such cash
dividends.
If or to the extent dividends are not paid in cash on the Series B Preferred
Stock, Eldorado is obligated (subject to certain limitations) to issue shares of
Regular Common Stock (so-called pay-in-equity shares or "PIE Shares") based on a
formula that results in an effective yield of 14.0% per annum on the Series B
Preferred Stock. The number of PIE Shares that Eldorado is authorized to issue
is limited, such that Eldorado can issue PIE Shares in lieu of paying cash
dividends on the Series B Preferred Stock for an aggregate of approximately 12
calendar quarters. If Eldorado exhausts all PIE Shares that it is authorized to
issue, Eldorado will be legally obligated to pay all subsequent dividends on the
Series B Preferred Stock in cash, excepting only if Eldorado's financial
condition falls below certain thresholds or if it is legally prohibited from
doing so (or if comparable impediments exist with respect to Eldorado's banking
subsidiary).
The Series B Preferred Stock is not currently convertible into Common Stock,
but upon the sixth quarter (whether or not consecutive) with respect to which
Eldorado fails to pay dividends on the Series B Preferred Stock in full in cash,
the Series B Preferred Stock will become convertible into Regular Common Stock
at a price of $8.00 per share (valuing the Series B Preferred Stock at its
Redemption Price (as defined herein)). Further, the Series B Preferred Stock
will become convertible into Regular Common Stock, also at $8.00 per share, upon
the earlier of a change in control of Eldorado or June 6, 2002.
The Series B Preferred Stock is redeemable at the election of Eldorado, at
any time and in whole or in part, except that any redemption after the Series B
has become convertible into Regular Common Stock must be in whole. Any such
redemption will be at a price (the "Series B Redemption Price") of 103% of the
Series B Liquidation Value plus accrued and unpaid dividends for the calendar
quarter in which the redemption is effected.
The holders of the Series B Preferred Stock are entitled to certain limited
voting rights, including a requirement that Eldorado obtain the approval of the
holders of two-thirds of the shares of Series B Preferred Stock prior to (i) a
payment of cash dividends to the holders of Eldorado common stock if certain
financial criteria are not met, (ii) any redemption of Eldorado common stock
(subject to limited exceptions), (iii) any issuance of Eldorado preferred stock
senior to or PARI PASSU with the Series B Preferred Stock or debt securities
(other than the Subordinated Debentures) to a trust or other financing entity in
connection with such entity's issuance of securities comparable to the Capital
Securities (as defined herein), or (iv) any incurrence of Indebtedness (as
defined herein) in excess of certain limits. As used herein, "Indebtedness"
means, whether recourse as to all or a portion of the assets of Eldorado and
whether or not contingent: (t) every obligation of Eldorado for money borrowed;
(u) every obligation of Eldorado evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (v) every reimbursement
obligation of Eldorado with respect to letters of credit, bankers' acceptances
or similar facilities issued for the account of Eldorado; (w) every obligation
of Eldorado issued or assumed as the
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deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (x)
every capital lease obligation of Eldorado; (y) every obligation of the type
referred to in clauses (t) through (x) of another person and all dividends of
another person the payment of which, in either case, Eldorado has guaranteed or
is responsible or liable, directly or indirectly, as obligor or otherwise; and
(z) all indebtedness of Eldorado for claims (as defined in Section 101(4) of the
United States Bankruptcy Code of 1978, as amended) in respect of derivative
products such as interest and foreign exchange rate contracts, commodity
contracts and similar arrangements.
OTHER SERIES OF PREFERRED STOCK. Eldorado's Board of Directors has the
authority to determine the powers, rights and preferences of any other series of
Eldorado preferred stock issued by Eldorado without the approval of the holders
of Eldorado common stock, at the time of the issuance, which may include, among
other things, rights in liquidation, rights to participating dividends, voting
rights and rights to convert to Eldorado common stock. As noted above, however,
Eldorado may not issue any additional shares of Eldorado preferred stock having
a liquidation preference senior to the Series B Preferred Stock without the
consent of two-thirds of the then-outstanding shares of Series B Preferred
Stock, and as also noted above, Eldorado may not issue any additional shares of
Eldorado preferred stock having a liquidation preference senior to or PARI PASSU
with the Special Common Stock without the consent of two-thirds of the
then-outstanding shares of Special Common Stock.
EFFECT OF CAPITAL SECURITIES ON COMMON STOCK
GENERAL. In connection with the Eldorado Acquisition, CSBI Capital Trust I,
a subsidiary of Eldorado (the "Trust"), issued an aggregate principal amount of
$27.7 million in 11% Subordinated Capital Income Securities, Series A (the
"Capital Securities"), which represent undivided beneficial ownership interests
in the assets of the Trust. The sole asset of the Trust is $28.5 million of 11%
Junior Subordinated Debentures (the "Subordinated Debentures") issued by the
Company to the Trust. The terms of the Subordinated Debentures and the Capital
Securities are materially the same, and payments to the Trust under the
Subordinated Debentures are passed through the Trust to the holders of the
Capital Securities. In addition to its obligations under the Subordinated
Debentures, Eldorado has also guaranteed certain payments on the Capital
Securities to the extent the Trust has funds available therefor.
ACCOUNTING AND REGULATORY TREATMENT. For financial reporting purposes, the
Trust is treated as a subsidiary of Eldorado and, accordingly, the accounts of
the Trust are included in the consolidated financial statements of Eldorado. The
Capital Securities are presented as a liability in the consolidated balance
street of Eldorado as a separate line item under the caption "Subordinated
Debentures" and disclosure about the Capital Securities and the Subordinated
Debentures are included in the notes to the consolidated financial statements.
For financial reporting purposes, Eldorado records distributions payable on the
Capital Securities as an interest expense in its consolidated statements of
income.
Under current Federal Reserve regulations, the Capital Securities are
treated as Tier 1 capital of Eldorado for regulatory capital purposes.
LIQUIDATION PREFERENCE RELATIVE TO ELDORADO COMMON STOCK. In the event of
any liquidation, dissolution or winding up of Eldorado, the holders of the
Capital Securities are entitled to receive payment prior to the holders of
Eldorado common stock.
DISTRIBUTIONS PAYABLE ON CAPITAL SECURITIES. Interest is payable by
Eldorado on the Subordinated Debentures (and, in turn, distributions are payable
by the Trust on the Capital Securities) on a quarterly basis at an annual rate
of 11%. Eldorado has the right to defer payment of interest on the Subordinated
Debentures for a period not to exceed 20 consecutive quarterly periods. As a
consequence of any such extension, quarterly distributions on the Capital
Securities will be deferred by the
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Trust for such period. During any such deferral period, Eldorado may not, among
other things, declare or pay any dividend or distribution on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of
Eldorado's capital stock, including, without limitation, Eldorado common stock.
REDEMPTION. The Capital Securities will be redeemed upon the redemption of
the Subordinated Debentures. The Subordinated Debentures are redeemable at the
option of Eldorado after June 6, 2007 at a redemption premium initially equal to
105.875% of the liquidation amount of the securities (the principal amount plus
accrued and unpaid interest) and declining over 10 years ratably to 100%
thereof. In addition, upon the occurrence of a Regulatory Capital Event (a
regulatory shift impacting Eldorado's ability to treat the Capital Securities as
Tier 1 Capital), a Tax Event (a regulatory shift impacting Eldorado's ability,
among other things, to deduct interest payable on the Subordinated Debentures)
or an Investment Company Event (a regulatory shift whereby the Trust would be
required to be treated as an investment company under the Investment Company
Act), Eldorado would be required to repurchase the Subordinated Debentures at
the greater of their principal amount or the present value of their principal
amount plus scheduled interest payments for their remaining life and the premium
payable upon the optional redemption thereof.
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COMPARISON OF THE RIGHTS OF HOLDERS OF ELDORADO COMMON STOCK AND
HOLDERS OF ANTELOPE COMMON STOCK
INTRODUCTION
Antelope is a banking corporation incorporated under the laws of the State
of California in accordance with the provisions of the California Corporations
Code (the "California Code"). Eldorado is a business corporation organized under
the Delaware General Corporation Code (the "Delaware Code"). Upon the
consummation of the merger, those Antelope shareholders receiving Eldorado
Common Stock will become shareholders of an issuer (Eldorado) organized under
the Delaware Code.
Differences between the California Code and the Delaware Code, and between
the respective charters and Bylaws of Antelope and Eldorado, will result in
several changes in the rights of the Antelope shareholders if the merger is
effected. Certain differences between the rights of holders of shares of
Eldorado Common Stock and shares of Antelope Common Stock are summarized below.
The following summary does not purport to be a complete statement of the
rights of shareholders under the California Code and Antelope's charter and
Bylaws as compared with the rights of the shareholders of Eldorado under the
Delaware Code and Eldorado's charter and Bylaws, or a complete description of
the specific provisions referred to herein. The identification of specific
differences is not meant to indicate that other equally or more significant
differences do not exist. The summary is qualified in its entirety by reference
to the Delaware Code and the California Code and the governing corporate
instruments of Eldorado and Antelope, to which Antelope shareholders are
referred. Copies of the charter and Bylaws of, respectively, Antelope and
Eldorado may be obtained from Antelope upon request.
CERTAIN VOTING RIGHTS
The California Code generally requires approval of any reorganization (which
includes a merger, certain exchange reorganizations and certain sale-of-asset
reorganizations) or sale of all or substantially all of the assets of a
corporation by the affirmative vote of the holders of a majority (unless the
charter requires a higher percentage) of the outstanding shares of each class of
capital stock of the corporation entitled to vote thereon. The Antelope charter
does not require a higher percentage. Under the Delaware Code, any merger,
consolidation or sale of all or substantially all of the assets of a corporation
requires the approval of the holders of a majority (unless the charter requires
a higher percentage) of the outstanding shares of such corporation entitled to
vote thereon. The Eldorado charter does not require a higher percentage.
In general, under the California Code, no approval of a reorganization is
required by the holders of the outstanding shares in the case of any corporation
if such corporation, or its shareholders immediately before such reorganization,
or both, own, immediately after such reorganization, equity securities (other
than warrants or rights) of the surviving or acquiring corporation, or the
parent of each of the constituent corporations, possessing more than five-sixths
of the voting power of such surviving or acquiring corporation or such parent.
The Antelope charter does not require shareholder authorization for mergers of
the type described in the preceding sentence unless the level of dilution
described above has occurred. The Delaware Code provides that (unless required
by the certificate of incorporation) no authorization by shareholders of a
surviving or acquiring corporation is necessary for a merger if (i) the merger
does not amend the certificate of incorporation of the corporation, (ii) each
share of stock of the corporation outstanding prior to the merger remains
identical after the merger, and (iii) the authorized unissued shares or the
treasury shares of common stock of the corporation to be issued or delivered
under the merger plus shares issuable upon conversion of any other shares,
securities or obligations to be issued or delivered under the merger do not
exceed 20% of the shares of common stock of the corporation outstanding prior to
the merger. The Eldorado charter does not require shareholder authorization for
mergers of the type described in the preceding sentence.
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Under the California Code, a parent corporation may, without shareholder
approval, merge into itself any subsidiary of which it owns at least 90% of the
outstanding shares of each class of stock. Similarly, the Delaware Code permits
a merger of a 90% owned subsidiary corporation into its parent without
shareholder approval so long as the resolution of the board of directors of the
parent providing for the merger states the terms and conditions of the merger,
including the consideration to be given by the parent in exchange for the
subsidiary shares not owned by the parent.
DIVIDENDS
Generally, under California law, a bank may only declare a cash dividend out
of a bank's net profits up to the lesser of a bank's retained earnings or a
bank's net income for the last three fiscal years (less any distributions to
shareholders made during such period). In the event that a bank has no retained
earnings or net income for the prior three fiscal years, cash dividends may be
paid in an amount not exceeding the greatest of (i) net income for such bank's
last preceding fiscal year, (ii) net income for such bank's current fiscal year
or (iii) retained earnings of such bank, upon obtaining the prior approval of
the Commissioner.
Under the Delaware Code, a corporation may pay dividends out of surplus or
out of its net profits for the fiscal year in which the dividend is declared or
its net profits for the preceding fiscal year, subject to certain limitations
for the benefit of certain preference shares.
ELECTION OF DIRECTORS
Under the California Code, with limited exceptions inapplicable to Antelope,
any shareholder of a corporation is entitled to cumulate his votes for the
election of directors provided that at least one shareholder has given notice at
the meeting prior to the voting of such shareholder's intention to cumulate his
or her votes. Cumulative votes may only be cast for candidates who have been
nominated before the voting. Accordingly, Antelope shareholders are entitled to
cumulative votes for the election of directors.
The Delaware Code permits cumulative voting in the election of directors of
a corporation only if the charter of such corporation provides for cumulative
voting. Eldorado's charter does not provide for cumulative voting.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the California Code, the holders of at least 10% of the number of
outstanding shares of any class of stock may initiate a court action to remove
any director for cause. In addition, any or all of the directors of a California
corporation may be removed without cause by the affirmative vote of a majority
of the outstanding shares entitled to vote. However, no director may be removed
(unless the entire board is removed) when the votes cast against removal would
be sufficient to elect the director if voted cumulatively at an election at
which the same total number of votes were cast and the entire number of the
directors authorized at the time of the director's most recent election were
then being elected.
Under the Delaware Code and the Eldorado charter, any or all directors of a
corporation may be removed, with or without cause, by the holders of a majority
of the shares entitled to vote at an election of directors.
Under the California Code (unless otherwise provided in the charter or
bylaws and except for a vacancy created by the removal of a director), vacancies
on the board of directors may be filled by approval of the board. The Antelope
charter and Bylaws contain no provisions to the contrary. In addition, any
vacancy not filled by the directors and any vacancies on the board resulting
from the removal of directors may be filled by the vote of the majority of
shares entitled to vote.
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Under the Delaware Code and Eldorado's Bylaws, vacancies and newly-created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDERS ACTION BY WRITTEN CONSENT
Under the California Code, a special meeting of shareholders may be called
by the board of directors, the chairman of the board, the president or the
holders of shares entitled to cast not less than 10% of the votes at the
meeting, or by such additional persons as may be provided in the charter or
bylaws. Neither the Antelope charter nor its Bylaws permit any other person to
call a special meeting.
Under the Delaware Code, a special meeting may be called by the board of
directors or such other persons as may be authorized by the charter or bylaws.
The Eldorado bylaws provide that a special meeting may also be called by the
president, and shall be called by the secretary at the request in writing of
shareholders owning at least 10% of the outstanding shares entitled to vote at
the meeting.
Under the California Code and Antelope's Bylaws, any action which may be
taken at a meeting of shareholders may also be taken by the written consent of
the holders of at least the same proportion of outstanding shares as would be
necessary to take such action at a meeting at which all shares entitled to vote
were present and voted, except that the election of directors by written consent
generally requires the unanimous consent of all shares entitled to vote.
Under the Delaware Code (unless otherwise provided in the charter), any
action which is required to be taken or may be taken at a meeting of
shareholders, including the election of directors, may be taken by a written
consent signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to take such action at a
meeting. Eldorado's charter contains no provisions to the contrary.
AMENDMENT OF BYLAWS
Under the California Code and Antelope's Bylaws, bylaws may be adopted,
amended or repealed either by the vote of a majority of the outstanding shares
entitled to vote thereon or (subject to any restrictions in the charter or
bylaws) by the approval of the board of directors, except that amendments to the
bylaws specifying or changing a fixed number of directors or the maximum or
minimum number or changing from a fixed to a variable board or vice versa may
only be adopted by approval of the outstanding shares.
Under the Delaware Code, the power to adopt, amend or repeal bylaws is
vested in the shareholders unless the charter confers the power to adopt, amend
or repeal bylaws upon the directors as well. Eldorado's charter confers such
powers on Eldorado's board of directors except with regard to bylaws that, by
their express terms, may be altered or repealed only by the shareholders.
AMENDMENT OF CHARTER
Under both the California Code and the Delaware Code, unless the charter
requires a greater vote, amendments to the charter of a corporation generally
require approval by vote of the board of directors and the holders of a majority
of outstanding shares entitled to vote thereon and, where their rights are
affected, by the holders of a majority of the outstanding shares of a class,
whether or not such class is entitled to vote thereon by the provision of the
charter. Antelope's charter does not require any vote greater than that required
under the California Code. Eldorado's charter does not require any vote greater
than that required under the Delaware Code.
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DISSENTERS' RIGHTS
Under the California Code, in connection with the merger of a corporation
for which the approval of outstanding shares is required, dissenting
shareholders of such corporation who follow prescribed statutory procedures are
entitled to receive payment of the fair market value of their shares. No such
rights are available, however, if the shares are listed on a national securities
exchange certified by the California Commissioner of Corporations or appear on
the Federal Reserve list of over-the-counter margin stocks unless (i) such
shares are subject to certain restrictions on transfer or (ii) the holders of at
least 5% of such shares elect dissenters' rights.
Under the Delaware Code, appraisal rights are generally available for the
shares of any class or series of stock of a corporation in a merger or
consolidation; however, no appraisal rights are available for the shares of any
class or series of stock which, at the record date for the meeting held to
approve such transactions, were either (i) listed on a national securities
exchange or (ii) held of record by more than 2,000 shareholders. Furthermore, no
appraisal rights are available to shareholders of the surviving corporation (or,
in limited circumstances, to shareholders of the non-surviving corporation if
the merger is between a parent and its subsidiary) if the merger did not require
shareholder approval. Appraisal rights are, however, available for such class or
series if the holders thereof receive in the merger or consolidation anything
except: (i) shares of stock of the corporation surviving or resulting from such
merger or consolidation; (ii) shares of stock of any other corporation which at
the effective date of the merger or consolidation is either listed on a national
securities exchange or held of record by more than 2,000 shareholders; (iii)
cash in lieu of fractional shares; or (iv) any combination of the foregoing.
CERTAIN BUSINESS COMBINATIONS AND REORGANIZATIONS
Under the California Code, if a party that makes a tender offer or proposes
to acquire a corporation by a reorganization or certain sales of assets is
controlled by such corporation or an officer or director of such corporation, or
if a director or executive officer of such corporation has a material financial
interest in such party (each an "Interested Party Proposal"), (a) an affirmative
opinion in writing as to the fairness of the consideration to the shareholders
of such corporation must be delivered to shareholders of such corporation and
(b) such shareholders must be (x) informed of certain later tender offers or
written proposals for a reorganization or sale of assets made by other persons
and (y) afforded a reasonable opportunity to withdraw any vote, consent or proxy
previously given or shares previously tendered in connection with the Interested
Party Proposal.
In addition, in connection with any merger transaction, the California Code
generally requires that, unless all shareholders of a class or series consent,
each share of such class or series must be treated equally with respect to any
distribution of cash, property, rights or securities. The California Code also
provides generally that if a corporation that is party to a merger, or its
parent, owns more than 50% but less than 90% of the voting power of the other
corporation that is party to such merger, the nonredeemable shares of common
stock of the controlled corporation may be converted only into nonredeemable
shares of the surviving corporation or a parent party unless all of the
shareholders of the class consent.
Unless otherwise provided in the corporation's charter, the Delaware Code
would prevent an "Interested Stockholder" (defined as a person beneficially
owning 15% or more of a corporation's voting stock) from engaging in a Business
Combination (as defined in Section 203 of the Delaware Code) with a corporation
for three years following the date such person became an Interested Stockholder
unless: (i) before such person became an Interested Stockholder, the board of
directors of such corporation approved the transaction in which the Interested
Stockholders became an Interested Stockholder; (ii) upon consummation of the
transaction which resulted in the Interested Stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of
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such corporation outstanding at the time the transaction commenced (excluding
stock held by directors who are also officers and employee stock ownership plans
that do not provide for confidential voting by plan participants); or (iii)
following the transaction in which such person became an Interested Stockholder,
the Business Combination is (x) approved by the board of directors of such
corporation and (y) authorized at a meeting of shareholders by the affirmative
vote of the holders of at least two-thirds of the outstanding voting stock of
such corporation not owned by the Interested Stockholder. Eldorado's charter
provides that Eldorado shall not be governed by the provisions of Section 203 of
the Delaware Code.
LEGAL MATTERS
The validity of the shares of Eldorado common stock to be issued in
connection with the Merger will be passed upon by Nutter, McClennen & Fish, LLP,
Boston, Massachusetts. Michael K. Krebs, the Secretary of the Company, is a
partner of Nutter, McClennen & Fish, LLP.
EXPERTS
The financial statements of Eldorado Bancshares, Inc. (formerly known as
Commerce Security Bancorp, Inc.) as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 incorporated by
reference in this Proxy Statement/Prospectus have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Eldorado Bancorp and its subsidiary as of
December 31, 1996 and 1995 and the three year period ended December 31, 1996
incorporated by reference in this Proxy Statement/Prospectus have been so
incorporated in reliance on the report of KPMG Peat Marwick LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Antelope Valley Bank as of December
31, 1997 and 1996 and for each of the years in the three year period ended
December 31, 1997 incorporated by reference in this Proxy Statement/Prospectus
have been so incorporated in reliance on the report of Grant Thornton LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the Antelope Board of
Directors knows of no matters that will be presented for consideration at the
Antelope Meeting other than as described in this Proxy Statement/Prospectus. If
any other matters shall properly come before the Antelope Meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the management of Antelope.
WHERE YOU CAN FIND MORE INFORMATION
Eldorado files annual, quarterly and special reports and other information
with the SEC. You may read and copy any reports, statements or other information
we file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov." Eldorado is currently not
required and has not previously delivered annual reports to its shareholders.
Upon completion of the merger, Eldorado will become obligated to file proxy
statements with the SEC and will, under certain circumstances, be required to
deliver annual
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reports to its shareholders. Eldorado will deliver to any shareholder, upon
request, a copy of its annual reports filed with the SEC.
Antelope files annual, quarterly and special reports, proxy statements and
other information with the FDIC. You may read and copy any reports, statements
or other information we file at the FDIC's Registration and Disclosure Section,
1776 F Street, N.W., 6th Floor, Washington D.C. 20006. You can also request such
documents by calling the FDIC at 1-202-898-8920 or by fax 1-202-898-3909.
Of the filings Antelope and Eldorado have made with the FDIC and SEC,
respectively, the following reports have been delivered with the Proxy
Statement/Prospectus as Annexes I through V, respectively:
<TABLE>
<S> <C>
Annex I: Antelope's Annual Report on Form 10-KSB, as amended, for the year ended
December 31, 1997.
Annex II: Antelope's Quarterly Report on Form 10-QSB, as amended, for the fiscal
quarter ended June 30, 1998.
Annex III: Eldorado's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1997.
Annex IV: Eldorado's Quarterly Reports on Form 10-Q, as amended, for the fiscal
quarters ended June 30, 1998.
Annex V: The consolidated financial statements of Eldorado Bancorp and its
subsidiary as of December 31, 1996 and 1995 and for each of the years in
the three year period ended December 31, 1996.
</TABLE>
There have been no material changes in the Eldorado's or Antelope's affairs
since June 30, 1998, the period covered by each of Eldorado's and Antelope's
latest Quarterly Report on Form 10-Q and Form 10-QSB, respectively.
Eldorado filed a Registration Statement on Form S-4 to register with the SEC
the Eldorado common stock to be issued to Antelope stockholders in the Merger.
This Proxy Statement/Prospectus is a part of that Registration Statement and
constitutes a prospectus of Eldorado in addition to being a proxy statement of
Antelope for the Antelope Meeting. As allowed by SEC rules, this Proxy
Statement/ Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
The SEC and FDIC allows us to "incorporate by reference" information into
this Proxy Statement-Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC or FDIC. The information incorporated by reference is deemed to be part
of this Proxy Statement-Prospectus, except for any information superseded by
information in this Proxy Statement-Prospectus. This Proxy Statement-Prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC or FDIC. These documents contain important information about
our companies and their finances.
<TABLE>
<S> <C>
ELDORADO SEC FILINGS (FILE NO. 2-76555)
- --------------------------------------------- PERIOD
---------------------------------------------
Annual Report on Form 10-K................... Year ended December 31, 1997, as amended on
October 13, 1998
Quarterly Reports on Form 10-Q............... Quarter ended March 31, 1998;
Quarter ended June 30, 1998, as amended on
October 13, 1998
Current Reports on Form 8-K.................. Filed on each of June 25, 1997 (as amended on
July 11 and August 6, 1997), April 10, 1998,
August 21, 1998, September 18, 1998,
September 22, 1998 and October 13, 1998
</TABLE>
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<TABLE>
<S> <C>
ANTELOPE FDIC FILINGS
- --------------------------------------------- PERIOD
---------------------------------------------
Annual Report on Form 10-KSB................. Year ended December 31, 1997, as amended on
October 13, 1998 (filed as exhibit 99.1 to
Eldorado's Current Report on Form 8-K filed
on October 13, 1998)
Quarterly Reports on Form 10-QSB............. Quarter ended March 31, 1998;
Quarter ended June 30, 1998, as amended on
October 13, 1998 (filed as exhibit 99.2 to
Eldorado's Current Report on Form 8-K filed
on October 13, 1998)
Current Reports on Form 8-K.................. Filed on September 24, 1998
</TABLE>
We are also incorporating by reference additional documents that we may file
with the SEC and FDIC between the date of this Proxy Statement/Prospectus and
the date of the Antelope Meeting.
Eldorado has supplied all information contained or incorporated by reference
in this Proxy Statement/Prospectus relating to Eldorado and Antelope has
supplied all such information relating to Antelope.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC
or FDIC. Documents incorporated by reference are available from us without
charge, excluding all exhibits unless we have specifically incorporated by
reference an exhibit in this Proxy Statement-Prospectus. Stockholders may obtain
documents incorporated by reference in this Proxy Statement-Prospectus by
requesting them in writing or by telephone from the appropriate party at the
following addresses:
<TABLE>
<S> <C>
Eldorado Bancshares, Inc. Antelope Valley Bank
Attention: John L. Gordon Attention: Margaret A. Torres
24012 Calle de la Plata, Suite 150 831 West Lancaster Boulevard
Laguna Hills, California 92653 Lancaster, California 93534
Telephone: (949) 699-4344 Telephone: (805) 945-4511
</TABLE>
If you would like to request documents from us, please do so by November 30,
1998 to receive them before the Antelope Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED [ , 1998]. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN [ ,
1998], AND NEITHER THE MAILING OF THE PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS
NOR THE ISSUANCE OF ELDORADO COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ELDORADO BANCSHARES, INC.
AND
ANTELOPE VALLEY BANK
DATED AS OF SEPTEMBER 22, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C> <C> <C>
ARTICLE I. Definitions............................................................................... A-1
1.1 Definitions.................................................................... A-1
1.2 Rules of Construction.......................................................... A-5
1.2.1.......................................................................... A-5
1.2.2.......................................................................... A-5
1.2.3.......................................................................... A-5
1.2.4.......................................................................... A-6
1.2.5.......................................................................... A-6
1.2.6.......................................................................... A-6
1.2.7.......................................................................... A-6
1.2.8.......................................................................... A-6
ARTICLE II. The Merger................................................................................ A-6
2.1 The Merger..................................................................... A-6
2.2 Corporate Documents, Directors and Officers.................................... A-6
2.3 Treatment of SUBJECT BANK Common Stock......................................... A-6
2.3.1 Conversion of Common Stock............................................. A-6
2.3.2 Dissenting SUBJECT BANK Shares......................................... A-7
2.3.3 Fractional Shares...................................................... A-7
2.3.4 Delivery of Shares and Cash to Exchange Agent.......................... A-7
2.4 Exchange of Certificates....................................................... A-7
2.4.1 SUBJECT BANK Common Stock Exchange Procedures.......................... A-7
2.4.2 Certain Taxes.......................................................... A-8
2.4.3 Lost, Stolen or Destroyed Certificates................................. A-8
2.4.4 Unclaimed Merger Consideration......................................... A-8
2.5 Closing of SUBJECT BANK Transfer Books......................................... A-8
2.6 Anti-Dilution.................................................................. A-8
2.7 Tax Consequences............................................................... A-9
ARTICLE III. Representations and Warranties............................................................ A-9
3.1 By SUBJECT BANK................................................................ A-9
3.1.1 Organization, Standing and Power....................................... A-9
3.1.2 Capital Structure...................................................... A-9
3.1.3 Interests in Other Entities............................................ A-10
3.1.4 Authority and Related Matters.......................................... A-10
3.1.5 Voting Agreement....................................................... A-10
3.1.6 Conflicts.............................................................. A-11
3.1.7 Consents............................................................... A-11
3.1.8 Financial Statements; Exchange Act Filings; S-1 Disclosure............. A-11
3.1.9 Regulatory Filings and Agreements...................................... A-12
3.1.10 Undisclosed Liabilities................................................ A-12
3.1.11 Loans, Classified and OLEM Assets, Reserves and Certain
Other Assets............................................................ A-12
3.1.12 Investment Securities; Derivatives..................................... A-13
3.1.13 Absence of Certain Changes or Events................................... A-14
3.1.14 Compliance with Applicable Laws........................................ A-14
3.1.15 Litigation and Other Disputes.......................................... A-14
3.1.16 Administration of Fiduciary Accounts................................... A-14
3.1.17 Taxes.................................................................. A-15
</TABLE>
i
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PAGE
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3.1.18 Certain Agreements..................................................... A-15
3.1.19 Employees and Employee Benefit Plans................................... A-16
3.1.20 Properties............................................................. A-18
3.1.21 Environmental.......................................................... A-18
3.1.22 Intellectual Property.................................................. A-19
3.1.23 Capitalization......................................................... A-19
3.1.24 CRA.................................................................... A-19
3.1.25 Year 2000.............................................................. A-19
3.1.26 Pooling of Interests Treatment; Tax Free Reorganization................ A-20
3.1.27 Fairness Opinion....................................................... A-20
3.1.28 Brokers................................................................ A-20
3.1.29 Disclosure of All Material Matters..................................... A-20
3.2 By the Company................................................................. A-20
3.2.1 Organization, Standing and Power....................................... A-20
3.2.2 Authority and Related Matters.......................................... A-21
3.2.3 Conflicts.............................................................. A-21
3.2.4 Consents............................................................... A-21
3.2.5 Registration Statement................................................. A-22
3.2.6 Absence of Certain Changes or Events................................... A-22
3.2.7 Pooling of Interests Treatment; Tax Free Reorganization................ A-22
3.2.8 NASDAQ................................................................. A-22
ARTICLE IV. Additional Agreements..................................................................... A-22
4.1 Discussions with Third Parties................................................. A-22
4.1.1.......................................................................... A-22
4.1.2.......................................................................... A-23
4.1.3.......................................................................... A-23
4.2 Joint Proxy Statement -- Prospectus and S-4 Registration Statement; Shareholder
Approval....................................................................... A-23
4.2.1.......................................................................... A-23
4.2.2.......................................................................... A-24
4.2.3.......................................................................... A-24
4.2.4.......................................................................... A-24
4.2.5.......................................................................... A-24
4.2.6.......................................................................... A-25
4.2.7.......................................................................... A-25
4.2.8.......................................................................... A-25
4.3 Access......................................................................... A-25
4.3.1 With Respect to SUBJECT BANK........................................... A-25
4.3.2 With Respect to the Company............................................ A-26
4.3.3 Confidentiality........................................................ A-26
4.4 Prosecution of Regulatory Filings; Cooperation................................. A-27
4.5 Advice of Changes.............................................................. A-27
4.6 Current Information............................................................ A-28
4.7 Interim and Annual Financial Statements........................................ A-28
4.8 Conduct of Business............................................................ A-28
4.9 Certain Operating Covenants.................................................... A-29
4.9.1.......................................................................... A-29
4.9.2.......................................................................... A-29
4.9.3.......................................................................... A-29
4.9.4.......................................................................... A-29
</TABLE>
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<CAPTION>
PAGE
<S> <C> <C> <C>
4.9.5.......................................................................... A-29
4.9.6.......................................................................... A-29
4.9.7.......................................................................... A-29
4.9.8.......................................................................... A-29
4.9.9.......................................................................... A-29
4.9.10......................................................................... A-29
4.9.11......................................................................... A-30
4.9.12......................................................................... A-30
4.9.13......................................................................... A-30
4.9.14......................................................................... A-30
4.9.15......................................................................... A-30
4.10 Certain Covenants of the Company............................................... A-30
4.11 Covenants Regarding Employees, Directors and Officers.......................... A-31
4.11.1 Employee Benefit Plans................................................. A-31
4.11.2 Indemnification........................................................ A-31
4.11.3 Tail Insurance......................................................... A-32
ARTICLE V. Conditions to Closing..................................................................... A-33
5.1 Conditions to Obligations of Both Parties...................................... A-33
5.1.1 Approval by Shareholders................................................ A-33
5.1.2 Regulatory Approvals.................................................... A-33
5.1.3 Effectiveness of S-4 Registration Statement; Listing of Stock........... A-33
5.1.4 No Pending or Threatened Claims......................................... A-33
5.2 Conditions to the Obligations of the Company................................... A-33
5.2.1 Accuracy of Representations and Warranties; Compliance with Covenants... A-33
5.2.2 Bringdown of Representations and Warranties............................. A-33
5.2.3 SUBJECT BANK Common Stock Outstanding................................... A-33
5.2.4 Dissenting SUBJECT BANK Shares.......................................... A-33
5.2.5 Unsatisfactory Regulatory Review........................................ A-34
5.2.6 Tax and Accounting Opinions............................................. A-34
5.2.7 Third Party Consents.................................................... A-34
5.2.8 Receipt of Officers' Certificates....................................... A-34
5.2.9 Noncompetition Agreement................................................ A-34
5.2.10 Documents and Instruments in Satisfactory Form.......................... A-34
5.3 Conditions to the Obligations of SUBJECT BANK.................................. A-35
5.3.1 Accuracy of Representations and Warranties;
Compliance with Covenants................................................ A-35
5.3.2 Bringdown of Representations and Warranties............................. A-35
5.3.3 Delivery of Shares to Exchange Agent.................................... A-35
5.3.4 Tax and Accounting Opinions............................................. A-35
5.3.5 Receipt of Officers' Certificate........................................ A-35
5.3.6 Documents and Instruments in Satisfactory Form.......................... A-35
ARTICLE VI. Termination; Termination Fee.............................................................. A-36
6.1 By Mutual Agreement............................................................ A-36
6.2 Regulatory Impediment.......................................................... A-36
6.3 By the Company................................................................. A-36
6.3.1.......................................................................... A-36
6.3.2.......................................................................... A-36
6.3.3.......................................................................... A-36
</TABLE>
iii
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<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
6.3.4.......................................................................... A-36
6.4 By SUBJECT BANK................................................................ A-36
6.4.1.......................................................................... A-36
6.4.2.......................................................................... A-36
6.4.3.......................................................................... A-37
6.4.4.......................................................................... A-37
6.4.5.......................................................................... A-37
6.5 Termination Fee................................................................ A-37
6.6 Effect of Termination; Remedies................................................ A-37
6.6.1 General................................................................. A-37
6.6.2 Remedies Cumulative Generally........................................... A-37
ARTICLE VII. Miscellaneous............................................................................. A-37
7.1 Closing........................................................................ A-37
7.2 Expenses....................................................................... A-37
7.3 Publicity...................................................................... A-37
7.4 Notices........................................................................ A-38
7.5 Entire Agreement............................................................... A-39
7.6 Non-Survival of Representations, Warranties and Agreements..................... A-39
7.7 Benefits; Binding Effect; Assignment and Designation........................... A-39
7.8 Waiver......................................................................... A-39
7.9 No Third Party Beneficiary..................................................... A-39
7.10 Severability................................................................... A-39
7.11 Counterparts................................................................... A-39
7.12 Applicable Law; Consent to Jurisdiction........................................ A-39
7.13 Waiver of Jury Trial........................................................... A-40
</TABLE>
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APPENDIX A
AGREEMENT AND PLAN OF MERGER(1)
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 22, 1998, is by and
between Eldorado Bancshares, Inc., a Delaware corporation formerly known as
Commerce Security Bancorp, Inc. (the "Company"), and Antelope Valley Bank, a
California banking corporation ("SUBJECT BANK").
WHEREAS, the respective Boards of Directors of the Company and SUBJECT BANK
have deemed it advisable and in the best interests of their respective companies
and shareholders to consummate the transactions contemplated herein, pursuant to
which, subject to the terms and conditions set forth herein and for the
consideration set forth herein, a subsidiary of the Company ("Merger Sub") shall
merge with and into SUBJECT BANK (as more fully defined herein, the "Merger"),
in consideration of which all of the then outstanding shares of SUBJECT BANK
Common Stock shall be exchanged for Company Common Stock (each as hereinafter
defined);
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and that as a consequence the SUBJECT BANK
Shareholders will not recognize income or loss for federal income tax purposes
except to the extent they receive cash in lieu of fractional shares; and
WHEREAS, the Company and SUBJECT BANK desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, as contained herein;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and other agreements set forth herein,
and intending to be legally bound hereby, the Company and SUBJECT BANK hereby
agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms contained in this Agreement and not
defined in the preamble or the recitals above shall have the meanings set forth
in this Section 1.1:
"AFFILIATE" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. As used in
this definition, "CONTROL" (including, with its correlative meanings,
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, directly
or indirectly, of power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Agreement and Plan of Merger, including the
Disclosure Schedule and all Annexes hereto, as the same may be hereafter
amended.
"ASSOCIATE" shall have the meaning ascribed thereto in Rule 14a-1 under the
Exchange Act.
"AVERAGE PRICE" means the average of the last sale prices of Company Common
Stock as reported on the National Association of Securities Dealers Automated
Quotation system over the ten (10) consecutive trading day period immediately
preceding the fifth trading day prior to the Effective Time.
"BALANCE SHEET DATE" means June 30, 1998.
"BANK" means Eldorado Bank, a California banking corporation and a
wholly-owned subsidiary of the Company.
"BANK REGULATORS" means any and all Federal or state Governmental Entities
charged with the supervision or regulation of banks, bank holding companies or
industrial loan companies, or engaged in the insurance of bank deposits.
- ------------------------
(1) The text of the Merger Agreement, as set forth in this Appendix A, has been
amended and restated to reflect its re-execution by the parties on September 22,
1998 and the subsequent amendment dated October , 1998.
A-1
<PAGE>
"BENEFIT PLAN" means any employee benefit plan (including any "employee
benefit plan" as defined in Section 3(3) of ERISA) maintained or contributed to
by the applicable entity.
"BORROWER GROUP OBLIGATIONS" means all loans from SUBJECT BANK to, and other
obligations to SUBJECT BANK of, (a) the applicable borrower, (b) all guarantors
of such borrower, and (c) all affiliates and associates of such borrower and
guarantors.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday or Friday
that banks in Los Angeles, California are not required by Law to be closed.
"CLASSIFIED ASSET" means (a) any loan or lease asset that is classified on
the books and records of the applicable entity as "Substandard", "Doubtful" or
"Loss", and (b) any property classified on the books and records of the
applicable entity as OREO.
"CLOSING" means the closing of the Merger, to be held on the Closing Date at
a location fixed pursuant to Section 7.1.
"CLOSING DATE" shall mean the date as of which the Closing of the Merger
occurs, as the same may be fixed pursuant to Section 7.1.
"COMPANY" means Eldorado Bancshares, Inc., a Delaware business corporation,
including, unless the context clearly indicates otherwise, all direct and
indirect subsidiaries of the Company as of the applicable time.
"COMPANY COMMON STOCK" means the voting common stock of the Company, par
value $.01 per share.
"COMPANY GOVERNMENTAL APPROVALS" means the approvals listed on Disclosure
Schedule Section 3.2.4.
"COMPANY INTERIM FINANCIAL STATEMENTS" means, the Company's unaudited
balance sheets, income statements and cash flow statements, prepared in
accordance with GAAP, as at June 30, 1998 and for the six months then ended.
"CRITICIZED ASSET" means any Classified Asset and any other loan or lease
asset of the applicable Party classified on the books and records of the
applicable Party as "Other Loans Especially Mentioned", "Special Mention",
"Classified", Criticized", "Credit Risk Assets", "Concerned Loans" or by words
of similar import.
"DISCLOSURE SCHEDULE" means, collectively, the two schedules delivered prior
to the execution of this Agreement by, respectively, SUBJECT BANK and the
Company to one another, as supplemented hereafter from time to time by the
applicable Party in accordance with Section 4.5.
"DISSENTING SUBJECT BANK SHARES" means all shares of SUBJECT BANK Common
Stock whose holders have perfected dissenters' rights under Section 1300 et seq.
of the California Corporations Code.
"EFFECTIVE TIME" means the time as of which the Merger is deemed to have
become effective, as agreed upon by the Parties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" means ChaseMellon Shareholder Services, L.L.C. or a banking
institution, corporate trust company or entity regularly engaged in a stock
transfer business that the Company shall appoint, after consultation with
SUBJECT BANK, to act as exchange agent hereunder.
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"EXCHANGE RATIO" means 3.625 shares of Company Common Stock for each share
of SUBJECT BANK Common Stock, unless such ratio is increased in the Company's
sole discretion under the circumstances described in Section 6.4.7.
"EXCLUDED SHARES" means shares of SUBJECT BANK Common Stock owned as of the
Effective Time by the Company other than shares owned in a fiduciary capacity or
as a result of debts previously contracted.
"EXPENSES" means all legal, accounting, consulting, investment banking and
other fees and expenses incurred by the applicable Party in connection with the
Merger (including expenses incurred in connection with the preparation of this
Agreement and all negotiations, due diligence and other activities conducted
prior hereto, and including all broker's, finder's and similar fees and
expenses).
"FDIC" means the Federal Deposit Insurance Corporation.
"FINAL APPROVAL DATE" means the later of (a) the date on which the final
Governmental Approval is received, and (b) the date on which the SUBJECT BANK
Shareholders approve the Merger.
"1997 FINANCIAL STATEMENTS" means the applicable entity's audited balance
sheet, income statement, cash flow statement and statement of shareholders'
equity, with footnotes, prepared in accordance with GAAP, as at December 31,
1997 and for the year then ended, as audited by the applicable entity's
independent auditors.
"GAAP" means Generally Accepted Accounting Principles as in effect in the
United States, consistently applied.
"GOVERNMENTAL APPROVAL" means the approval of, or effectiveness of a filing
or registration with, a Governmental Entity necessary or desirable for the
consummation of the Merger (including the expiration of any waiting period
imposed thereby), including the SUBJECT BANK Governmental Approvals and the
Company Governmental Approvals.
"GOVERNMENTAL ENTITY" means any administrative agency, commission, court or
other governmental authority or instrumentality, domestic or foreign, including
any government-sponsored corporation having regulatory authority under law.
"HAZARDOUS MATERIAL" means any pollutant, contaminant, waste or hazardous or
toxic substance regulated by Law as such, and petroleum or petroleum products.
"INTERIM BALANCE SHEET" means the applicable entity's unaudited consolidated
balance sheet, prepared in accordance with GAAP, as at June 30, 1998.
"IRS" means the United States Internal Revenue Service.
"JOINT PROXY STATEMENT -- PROSPECTUS" means the Joint Proxy
Statement -- Prospectus by which SUBJECT BANK will solicit proxies from the
SUBJECT BANK Shareholders to vote such SUBJECT BANK Shareholders' shares in
favor of the Merger at a meeting of SUBJECT BANK Shareholders held for such
purpose and by which the Company will either solicit proxies from the holders of
Company Common Stock to vote such shareholders' shares of Company Common Stock
in favor of the Merger at a meeting of Company shareholders held for such
purpose or provide information to the holders of Company Common Stock in
connection with a written consent by such shareholders approving the Merger.
"LAW" means any statute, law, ordinance, rule or regulation of any
Governmental Entity that is applicable to the referenced Person.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the business, properties, assets, liabilities, results of
operations or financial condition of such Person (including such an effect
caused indirectly through any of its subsidiaries), or on the ability of such
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Person to consummate the Merger on the terms hereof; PROVIDED, HOWEVER, that a
Material Adverse Effect does not include a change with respect to, or effect on,
such Person resulting from a change in Law, GAAP, RAP, or a change with respect
to, or effect on, such Person resulting from any other matter having a
comparable effect on financial institutions or their holding companies
generally.
"MERGER" means the merger of Merger Sub with and into SUBJECT BANK, as more
particularly described in Section 2.1.
"MERGER CONSIDERATION" shall have the meaning given that term in Section
2.3.1.
"MONTHLY FINANCIAL STATEMENTS" shall have the meaning given that term in
Section 4.7.
"OLEM ASSET" means any loan or lease asset of the applicable entity
classified on the books and records of the applicable entity as "Other Loans
Especially Mentioned", "Special Mention", "Criticized", "Credit Risk Assets",
"Concerned Loans" or by words of similar import.
"OREO" means real property (i) acquired by the applicable entity, in the
ordinary course of the applicable entity's banking business, through purchase at
a foreclosure sale conducted on a lien in favor of the applicable entity (or a
comparable sale by a trustee under a deed of trust) or by acceptance of a deed
in lieu of foreclosure or (ii) any asset of the applicable entity classified as
"in-substance foreclosure" on the books and records of the applicable entity.
"PARTIES" means, collectively, the Company and SUBJECT BANK.
"PERSON" means any natural person, corporation, limited liability company,
general or limited partnership, limited liability partnership, joint venture,
joint stock company, trust, unincorporated organization, association, sole
proprietorship, governmental body, or agency or political subdivision of any
government.
"PRINCIPAL SHAREHOLDER" means a holder of five percent (5%) or more of the
outstanding common stock of the referenced entity.
"QUALIFYING STRATEGIC TRANSACTION PROPOSAL" shall have the meaning given
that term in Section 4.1.2.
"RAP" means Regulatory Accounting Principles, as interpreted by the
applicable entity's principal Federal Bank Regulator.
"RECORDS" means all books, records and original documents in SUBJECT BANK's
possession which pertain to and are utilized by SUBJECT BANK or any of its
subsidiaries to administer, reflect, monitor, evidence or record information
respecting its business and operations, including but not limited to all books,
records and documents relating to (a) corporate, regulatory, supervisory and
litigation matters, (b) tax planning and payment of taxes, (c) personnel and
employment matters, and (d) the business or conduct of the business of SUBJECT
BANK or any of its subsidiaries.
"S-1 REGISTRATION STATEMENT" shall have the meaning given that term in
Section 3.2.5.
"S-4 REGISTRATION STATEMENT" shall have the meaning given that term in
Section 4.2.1.
"REGULATORY AGREEMENT" means any regulatory agreement, memorandum of
understanding or similar agreement with, any cease and desist or similar order
or directive entered or issued by, commitment letter or similar undertaking to,
any extraordinary supervisory letter from, any Bank Regulator.
"REPRESENTATIVES" means each of the applicable Person's directors, officers,
employees, agents, representatives and advisors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"STRATEGIC TRANSACTION" means any acquisition or purchase of all or a
significant (i.e., more than 20%) portion of the assets of, or a more than 5%
equity interest in, SUBJECT BANK, or any merger or other business combination
involving SUBJECT BANK or any recapitalization involving SUBJECT BANK resulting
in an extraordinary dividend or distribution to SUBJECT BANK Shareholders or a
self-tender for or the redemption of some or all of the SUBJECT BANK Common
Stock.
"STRATEGIC TRANSACTION PROPOSAL" means any proposal regarding a Strategic
Transaction.
"SUBJECT BANK" means SUBJECT BANK including, unless the context clearly
indicates otherwise, all direct and indirect subsidiaries of SUBJECT BANK as of
the applicable time.
"SUBJECT BANK COMMON STOCK" means the common stock of SUBJECT BANK, no par
value per share.
"SUBJECT BANK GOVERNMENTAL APPROVALS" means the approvals listed on
Disclosure Schedule Section 3.1.7.
"SUBJECT BANK INTERIM FINANCIAL STATEMENTS" means SUBJECT BANK's unaudited
balance sheet, income statement and cash flow statement, prepared in accordance
with GAAP, as at June 30, 1998 and for the six months then ended.
"SUBJECT BANK SHAREHOLDER" means a holder of SUBJECT BANK Common Stock as of
the relevant time.
"SUBJECT BANK STOCK OPTION AGREEMENT" means the Stock Option Agreement
entered into between the Company and SUBJECT BANK contemporaneously with this
Agreement that would entitle the Company, under the circumstances described
therein, to purchase shares of SUBJECT BANK Common Stock constituting 19.9% of
the shares of SUBJECT BANK Common Stock outstanding as of the date of this
Agreement.
"TAX" means, except where the context otherwise requires, all Federal,
state, local and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise, ad valorem, transfer,
license, occupancy, stamp and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts.
"VIOLATION" means a conflict with, violation of, default under, creation of
a right of termination under, cancellation of, acceleration of any obligation
under, loss of a material benefit under, or creation of any lien, pledge,
security interest, charge or other encumbrance on assets under, the referenced
Law, organic document, agreement or other instrument, in each case with or
without notice or lapse of time, or both.
1.2 RULES OF CONSTRUCTION. The following rules of construction shall apply
to the interpretation of this Agreement:
1.2.1 Any reference to any event, change or effect being "material"
with respect to any Person means an event, change or effect which is
material in relation to the condition (financial or otherwise), properties,
assets, liabilities, businesses or operations of such entity and its
subsidiaries taken as a whole.
1.2.2 Disclosure of any matter in the Disclosure Schedule hereto shall
not be deemed to imply that such matter is or is not material, and shall not
constitute an admission or raise any inference that such matter constitutes
a violation of law or an admission of liability or facts supporting
liability.
1.2.3 Whenever used in this Agreement, the word "including" shall be
non-exclusive and shall mean "including without limitation."
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1.2.4 All references to Sections, Articles and sections of the
Disclosure Schedule shall, unless another agreement is expressly referenced,
mean the applicable sections or articles of, or section of the Disclosure
Schedule to, this Agreement.
1.2.5 The section titles and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
1.2.6 The terms "herein", "hereunder", and terms of similar import
refer to this Agreement as a whole and not to the specific Section or
Article in which they are used.
1.2.7 The phrase "to the knowledge" of a Party (and phrases of similar
import) shall mean to the actual knowledge, after reasonable inquiry, of the
executive officers of the Company and SUBJECT BANK, as applicable.
1.2.8 This Agreement is the joint product of the Company and SUBJECT
BANK, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of such Parties, and shall not be construed for or
against any Party.
ARTICLE II.
THE MERGER
2.1 THE MERGER. SUBJECT BANK and Merger Sub shall be the constituent
corporations to the Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Merger shall be effected by means of a
merger (hereinafter sometimes referred to as the "Merger") of Merger Sub with
and into SUBJECT BANK in accordance with Section 1108 of the California
Corporation Code by the filing with the Secretary of State of California of an
Agreement of Merger substantially in the form attached hereto as Exhibit 2.1. In
accordance with such statute, at the Effective Time, the corporate existence of
Merger Sub shall be merged into SUBJECT BANK, and SUBJECT BANK shall be the
Surviving Corporation and shall continue its corporate existence under the laws
of the State of California. Also at the Effective Time, each share of Merger Sub
Common Stock which is outstanding immediately prior to the Effective Time of the
Merger shall be converted into one share of SUBJECT BANK Common Stock.
2.2 CORPORATE DOCUMENTS, DIRECTORS AND OFFICERS. From and after the
Effective Time and thereafter until amended as provided by law, the Articles of
Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of SUBJECT BANK as in effect immediately prior to the Effective
Time and the By-laws of the Surviving Corporation shall be the By-laws of Merger
Sub as in effect immediately prior to the Effective Time. The number of
directors of the Surviving Corporation initially shall be fixed at six (6), who
initially shall be the individuals listed on Exhibit 2.2 or if any of those
designees is unable to serve as of the Closing, a replacement mutually
acceptable to the Company and SUBJECT BANK. The Chief Executive Officer and
Chairman of the Board of Directors of the Surviving Corporation initially shall
be the Chief Executive Officer of the Company, and the President of the
Surviving Corporation shall be the President of SUBJECT BANK. Each such director
or officer shall serve until his or her successor has been duly elected or
appointed and qualified or until his or her earlier death, resignation or
removal in accordance with the terms of the Surviving Corporation's Articles of
Incorporation and By-laws.
2.3 TREATMENT OF SUBJECT BANK COMMON STOCK.
2.3.1 CONVERSION OF COMMON STOCK. At the Effective Time, each share of
SUBJECT BANK Common Stock issued and outstanding immediately prior to the
Effective Time, excluding Dissenting SUBJECT BANK Shares and Excluded
Shares, shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive a number of
shares
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of Company Common Stock equal to the Exchange Ratio and cash in lieu of any
fractional share interest (collectively, the "Merger Consideration"). All
shares of SUBJECT BANK Common Stock converted into the right to receive the
Merger Consideration pursuant to the preceding sentence shall, as of the
Effective Time, no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent only the right to
receive the Merger Consideration into which the shares of SUBJECT BANK
Common Stock represented by such certificate have been converted. As of the
Effective Time, all Excluded Shares shall cease to exist and the
certificates for such shares shall, as promptly as practicable thereafter,
be cancelled and no payments shall be made in consideration therefor.
2.3.2 DISSENTING SUBJECT BANK SHARES. Notwithstanding anything in this
Agreement to the contrary, Dissenting SUBJECT BANK Shares shall not be
converted into the right to receive, or be exchangeable for, the Merger
Consideration provided for in Section 2.3.1 hereof, but, instead, the
holders thereof shall be entitled to payment, by the Company on behalf of
SUBJECT BANK, of the value of such Dissenting SUBJECT BANK Shares as agreed
upon or determined in accordance with the provisions of Section 1300 et seq.
of the California Corporations Code.
2.3.3 FRACTIONAL SHARES. In the event the product of the Exchange Ratio
multiplied by the number of shares of SUBJECT BANK Common Stock held by any
holder of SUBJECT BANK Common Stock is other than a whole number, such
holder shall be entitled to receive, in exchange for such holder's SUBJECT
BANK Common Stock, the next lower whole number of shares of Company Common
Stock plus cash equal to such remaining fraction multiplied by the Average
Price of a share of Company Common Stock (rounded to the nearest cent). For
purposes of determining whether, and in what amounts, a particular holder of
SUBJECT BANK Common Stock would be entitled to receive cash adjustments
under this Section 2.3.3, shares of record held by such holder and
represented by two or more stock certificates shall be aggregated.
2.3.4 DELIVERY OF SHARES AND CASH TO EXCHANGE AGENT. Subject to the
terms and conditions hereof, immediately prior to the Closing the Company
shall issue and deliver to the Exchange Agent one or more certificates
representing such number of shares of Company Common Stock as is sufficient
to deliver the aggregate Merger Consideration which former SUBJECT BANK
Shareholders are entitled to receive pursuant to Section 2.3.1, including an
estimate of the aggregate amount of cash to be paid in lieu of fractional
share interests under Section 2.3.3. From time to time following the
Effective Time, upon request of the Exchange Agent, the Company shall
furnish to the Exchange Agent additional cash as necessary to make the cash
payments on account of fractional shares required under Section 2.3.3.
2.4 EXCHANGE OF CERTIFICATES.
2.4.1 SUBJECT BANK COMMON STOCK EXCHANGE PROCEDURES. After the
Effective Time, each holder of a certificate or certificates theretofore
representing shares of issued and outstanding SUBJECT BANK Common Stock
(other than the Dissenting SUBJECT BANK Shares and Excluded Shares) shall,
upon the surrender of such certificates to the Exchange Agent, be entitled
to receive in exchange therefor one or more certificates representing the
number of shares of Company Common Stock into which such shares of SUBJECT
BANK Common Stock have been converted pursuant to Section 2.3.1, without
interest and subject to any required withholding of Taxes. The holder of a
certificate that prior to the Merger represented issued and outstanding
shares of SUBJECT BANK Common Stock shall have no rights, after the
Effective Time, with respect to such shares except to surrender the
certificate in exchange for the Merger Consideration without interest
thereon or, if applicable, to perfect such rights as a holder of Dissenting
SUBJECT BANK Shares as such holder may have pursuant to the applicable
provisions of the California Corporations Code. As soon as practicable after
the Effective Time but in no event later than five (5) Business Days after
the Effective Time, the Company will send, or will cause the
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Exchange Agent to send, to each holder of SUBJECT BANK Common Stock at the
Effective Time a letter of transmittal for use in such exchange. No
dividends or other distributions declared after the Effective Time with
respect to Company Common Stock and payable to the holders of record thereof
shall be paid to the holder of any unsurrendered certificate representing
shares of SUBJECT BANK Common Stock outstanding immediately prior to the
Effective Time until the holder thereof shall surrender such certificate in
accordance with this Article II. After the surrender of such certificate in
accordance with this Article II, the record holder thereof shall be entitled
to receive any such dividends or other distributions, without any interest
thereon, which theretofore had become payable with respect to shares of
Company Common Stock represented by such certificates. No holder of an
unsurrendered certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of Company Common Stock into which his
SUBJECT BANK Common Stock shall have been converted.
2.4.2 CERTAIN TAXES. If any shares of Company Common Stock are to be
issued in exchange for SUBJECT BANK Common Stock in a name other than that
in which the certificate surrendered in exchange therefor is registered, it
shall be a condition of such issuance thereof that the certificate so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transferal and otherwise in proper form for transfer
(including, but not limited to, that the signature of the transferor shall
be properly guaranteed by a commercial bank, trust company, member firm of
the NASD or other eligible guarantor institution), and that the person
requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other Taxes required by reason of the issuance of a certificate
representing shares of Company Common Stock in any name other than that of
the registered holder of the certificate surrendered, or required for any
other reason, or shall establish to the reasonable satisfaction of the
Exchange Agent that such Tax has been paid or is not payable.
2.4.3 LOST, STOLEN OR DESTROYED CERTIFICATES. 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 the Company, the posting by such
Person of a bond in such amount as the Company 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 Company Common Stock deliverable in respect
thereof pursuant to Section 2.4.1.
2.4.4 UNCLAIMED MERGER CONSIDERATION. Any portion of the Merger
Consideration delivered to the Exchange Agent that remains unclaimed by the
SUBJECT BANK Shareholders pursuant to the provisions of Section 2.4.1 six
months after the Closing Date shall be returned to the Company, upon demand,
and any former SUBJECT BANK Shareholder who has not exchanged his, her or
its shares of SUBJECT BANK Common Stock for the Merger Consideration in
accordance with Section 2.4.1 prior to that time shall thereafter look
solely to the Company for receipt of the Merger Consideration.
Notwithstanding the foregoing, the Company shall not be liable to any
SUBJECT BANK Shareholder for any amount paid or any property delivered to a
public official pursuant to applicable abandoned property laws.
2.5 CLOSING OF SUBJECT BANK TRANSFER BOOKS. At the Effective Time, the
transfer books for SUBJECT BANK Common Stock shall be closed, and no transfer of
shares of SUBJECT BANK Common Stock shall thereafter be made on such books. If,
after the Effective Time, certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be cancelled and exchanged for
the Merger Consideration as provided in this Article II.
2.6 ANTI-DILUTION. In the event that, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of Company
Common Stock shall have been increased,
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decreased, changed into or exchanged for a different number of shares or
securities through reorganization of the Company's capitalization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other like changes in the Company's capitalization, other than
pursuant to this Agreement, as the case may be (a "Recapitalization"), then an
appropriate and proportionate adjustment shall be made to the Exchange Ratio so
that each holder of SUBJECT BANK Common Stock shall receive under Section 2.3.1
the number of shares of Company Common Stock (except for fractional shares) that
such holder would have held immediately following the Recapitalization if the
Merger had occurred immediately prior to the Recapitalization or the record date
therefor, as applicable. For purposes of this Section 2.6, in no event shall the
issuance of shares or securities by the Company in connection with the Company
acquiring directly or indirectly the stock or assets of any corporation, bank or
other entity be deemed to be a "Recapitalization".
2.7 TAX CONSEQUENCES. The Parties intend that the Merger shall constitute a
reorganization within the meaning of the Section 368(a) of the Code, and that
this Agreement shall constitute a "plan of reorganization" for the purpose of
Section 368 of the Code.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 BY SUBJECT BANK. SUBJECT BANK represents and warrants as follows,
except as specifically disclosed in the Disclosure Schedule:
3.1.1 ORGANIZATION, STANDING AND POWER. SUBJECT BANK is a banking
corporation duly organized, validly existing and in good standing under the
laws of the State of California. The deposit accounts of SUBJECT BANK are
insured by the FDIC through the Bank Insurance Fund, and all premiums and
assessments required in connection therewith have been paid by SUBJECT BANK
as the same have become due, and SUBJECT BANK has no current or future
liability (whether contingent or fixed) to the FDIC Savings Association
Insurance Fund or any predecessor thereto for "exit fees" or otherwise, and
no current or future liability (whether contingent or fixed) to the Bank
Insurance Fund for "entrance fees." SUBJECT BANK has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which a failure to be so qualified
could reasonably be expected to have a Material Adverse Effect on SUBJECT
BANK. Copies of the Articles of Incorporation and By-Laws of SUBJECT BANK,
including all amendments thereto as of the date of this Agreement, have been
delivered to the Company and are complete and correct. The minute books of
SUBJECT BANK accurately reflect in all material respects all corporate
actions held or taken by SUBJECT BANK Shareholders and SUBJECT BANK's Board
of Directors, including all committees of such Board of Directors.
3.1.2 CAPITAL STRUCTURE.
(a) CAPITAL STOCK OF SUBJECT BANK. As of the date hereof, the
authorized capital stock of SUBJECT BANK consists of 10,000,000 shares of
SUBJECT BANK Common Stock, no par value, of which 767,342 shares are
issued and outstanding. No shares are held in treasury by SUBJECT BANK,
and no shares are reserved for future issuance. All outstanding shares of
SUBJECT BANK Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable and are not subject to preemptive
rights. All of the issued and outstanding shares of SUBJECT BANK Common
Stock have been offered, issued and sold by SUBJECT BANK in compliance
with applicable federal and state securities laws and regulations and in
compliance with any preemptive right held by any Person. There are no
dividends which have accrued or been declared but are unpaid on the
SUBJECT BANK Common Stock. SUBJECT BANK has no contractual obligation to
register any shares of SUBJECT BANK Common Stock under the Securities
Act. SUBJECT BANK has delivered
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to the Company a true and correct list of all holders of SUBJECT BANK
Common Stock as of July 31, 1998.
(b) OTHER SECURITIES. There are no options, warrants, calls, rights,
commitments or agreements of any character, including any stock option or
equity incentive plan, outstanding or in existence as of the date hereof
to which SUBJECT BANK is a party or by which SUBJECT BANK is bound
obligating it to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other securities of
SUBJECT BANK or obligating SUBJECT BANK to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement. There are
no outstanding contractual obligations of SUBJECT BANK to repurchase,
redeem or otherwise acquire any shares of capital stock of SUBJECT BANK.
There are no bonds, debentures, notes or other instruments evidencing
indebtedness of SUBJECT BANK issued or outstanding that entitle the
holders thereof to vote on any matters on which SUBJECT BANK Shareholders
may vote.
3.1.3 INTERESTS IN OTHER ENTITIES. Except as set forth on Disclosure
Schedule Section 3.1.3(a), SUBJECT BANK has no subsidiaries and does not
otherwise hold more than 1% of the outstanding equity securities of any
corporation or other entity, is not a member of any partnership, joint
venture or similar entity or collectivity, and is not a party to any
partnership agreement or joint venture agreement, however named. Disclosure
Schedule Section 3.1.3(a) lists all of the documents governing or affecting
SUBJECT BANK's rights in its joint venture investment, true and correct
copies of which have been provided to the Company. Except as set forth on
Disclosure Schedule Section 3.1.3(b), SUBJECT BANK does not hold any
"Acquisition, Development and Construction" loans, as that term is used
under GAAP. SUBJECT BANK holds no shares of Company Common Stock, other than
any Company Common Stock owned in a fiduciary capacity or as a result of
debts previously contracted.
3.1.4 AUTHORITY AND RELATED MATTERS. Subject only to the approvals of
the holders of SUBJECT COMPANY Common Stock as specified in the immediately
following sentence, SUBJECT BANK (a) has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby (including the Merger), and (b) has duly authorized the
execution and delivery of this Agreement and the SUBJECT BANK Stock Option
Agreement, and the consummation of such transactions (including the Merger)
by all necessary corporate action on the part of SUBJECT BANK's Board of
Directors. The only vote of the holders of any class or series of SUBJECT
BANK's securities necessary to approve this Agreement or the consummation of
the Merger is the affirmative vote of the holders of a majority of the
outstanding shares of SUBJECT BANK Common Stock entitled to vote thereon
approving the Merger, and the Board of Directors has directed the officers
of SUBJECT BANK to submit the Merger and this Agreement to the SUBJECT BANK
Shareholders for approval at a meeting of such shareholders. No other
corporate proceedings on the part of SUBJECT BANK not heretofore taken are
necessary to approve this Agreement or to consummate the Merger. This
Agreement has been duly executed and delivered by SUBJECT BANK and, subject
to such approval by the SUBJECT BANK Shareholders and assuming due
authorization, execution and delivery by the Company, constitutes the valid
and binding obligation of SUBJECT BANK, enforceable in accordance with its
terms subject only to laws regarding bankruptcy, insolvency, reorganization,
moratorium or otherwise affecting creditors' rights generally, and to the
application of general principles of equity (whether considered in a
proceeding in law or at equity).
3.1.5 VOTING AGREEMENT. Each Director of SUBJECT BANK has executed and
delivered to the Company, and SUBJECT BANK has executed and delivered to the
Company, a valid and binding agreement in the form of Exhibit 3.1.5 (a
"Voting Agreement"), whereby each such Person has irrevocably agreed to vote
all shares of SUBJECT BANK Common Stock directly or beneficially owned by
such Person (including shares held as community property) or over which such
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Person has voting control, in favor of any facet of the Merger that may
require approval by the SUBJECT BANK Shareholders and against any competing
transaction.
3.1.6 CONFLICTS. The execution and delivery of this Agreement does not,
and the consummation of the Merger will not, result in any conflict with or
violation of any provision of the Articles of Incorporation or By-laws of
SUBJECT BANK. Except as set forth on Disclosure Schedule Section 3.1.6 and
subject only to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings included among the
SUBJECT BANK Governmental Approvals, the execution and delivery of this
Agreement does not, and the consummation of the Merger will not result in
any violation, conflict, default, creation of a right of termination,
cancellation, acceleration, or loss of a material benefit under any Law or
under any loan or credit agreement, note, mortgage, indenture, lease,
employee benefit plan or other agreement, obligation, instrument, permit,
concession, franchise or license, or any judgment, order or decree,
applicable to SUBJECT BANK or its properties or assets which violation,
conflict, default, creation of a right of termination, cancellation,
acceleration, or loss of a material benefit could reasonably be expected to
have a Material Adverse Effect on SUBJECT BANK.
3.1.7 CONSENTS. Except as disclosed on Disclosure Schedule Section
3.1.7 (collectively, the "SUBJECT BANK Governmental Approvals"), no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required in connection with SUBJECT BANK's
execution and delivery of this Agreement or its consummation of the Merger,
as to which the failure to obtain the same could reasonably be expected to
have a Material Adverse Effect on SUBJECT BANK or materially interfere with
SUBJECT BANK's ability to consummate the Merger.
3.1.8 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; S-1 DISCLOSURE.
(a) SUBJECT BANK has provided to the Company the SUBJECT BANK Interim
Financial Statements, the SUBJECT BANK 1997 Financial Statements, audited
by Grant Thornton LLP, as well as audited financial statements for
SUBJECT BANK for the years ended December 31, 1996 and December 31, 1995.
The SUBJECT BANK Interim Financial Statements, the SUBJECT BANK 1997
Financial Statements and the prior two years' audited financial
statements comply, in all material respects, with applicable accounting
requirements and have been prepared in accordance with GAAP subject, in
the case of the SUBJECT BANK Interim Financial Statements, to recurring
audit adjustments normal in nature and amount, comply with the applicable
accounting requirements and the published rules and regulations of the
SEC relating thereto and fairly present the financial position of SUBJECT
BANK (consolidated with any subsidiaries then in existence) as of the
dates thereof and the results of its (their) operations and cash flows
for the periods then ended. The Records of SUBJECT BANK have been, and
are being, maintained in all material respects in accordance with GAAP
and reflect only actual transactions.
(b) SUBJECT BANK has filed all reports, schedules, registration
statements and proxy statements required to be filed by it with the FDIC
since December 31, 1994 pursuant to the Exchange Act. As of their
respective dates, such filings complied in all material respects with the
requirements of the Exchange Act, and the rules and regulations of the
SEC or FDIC, as applicable, thereunder applicable to such filings, and
none of the such filings contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(c) SUBJECT BANK has received and reviewed a draft of the S-1
Registration Statement (draft of September 11, 1998) set forth as
Disclosure Schedule Section 3.2.5. The information pertaining to SUBJECT
BANK set forth in Disclosure Schedule Section 3.2.5 does not
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contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
3.1.9 REGULATORY FILINGS AND AGREEMENTS. SUBJECT BANK has timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
December 31, 1994 with any Bank Regulator as to which a failure to file the
same could reasonably be expected to have a Material Adverse Effect on
SUBJECT BANK, including any such report or statement required to be filed
pursuant to the Laws of the United States (including regulations of the FDIC
and the Board of Governors of the Federal Reserve) or the State of
California (including the California Department of Financial Institutions),
and has paid all fees and assessments due and payable in connection
therewith. Except as set forth on Disclosure Schedule Section 3.1.9, and
except for normal examinations conducted by a Bank Regulator in the regular
course of the business of SUBJECT BANK, no Bank Regulator has initiated any
proceeding or investigation or, to the best knowledge of SUBJECT BANK, has
threatened to initiate any proceeding or investigation, into the business or
operations of SUBJECT BANK since December 31, 1992. SUBJECT BANK is not a
party to or subject to, and since December 31, 1992 has not been a party to
or subject to, any Regulatory Agreement with or from, and has not adopted
any board resolutions at the request of, any Bank Regulator that restricts
the conduct of SUBJECT BANK's business or in any manner relates to its
business or financial condition, including without limitation its capital
adequacy, credit policies, loan origination practices or management. To the
knowledge of SUBJECT BANK, no Bank Regulator is contemplating issuing or
requesting (or considering the appropriateness of issuing or requesting) any
such Regulatory Agreement. There is no material unresolved violation,
criticism, or exception by any Bank Regulator with respect to any report or
statement relating to any examination of SUBJECT BANK.
3.1.10 UNDISCLOSED LIABILITIES. Except as and to the extent reflected
in SUBJECT BANK's Interim Balance Sheet, SUBJECT BANK does not have any
liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, and whether due or to become due,
including, without limitation, liabilities that may become known or arise
after the date hereof and which relate to transactions entered into, or any
state of facts existing, on or before the Balance Sheet Date and which would
be required under GAAP to be shown in such balance sheet or referenced in
the notes thereto, other than (a) obligations (including guarantees and
letters of credit) not required by GAAP to be reflected, reserved against or
disclosed in the SUBJECT BANK Interim Financial Statements, all of which are
set forth on Disclosure Schedule Section 3.1.10 and none of which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on SUBJECT BANK and (b) those incurred in the
ordinary course of business consistent with past practice since the Balance
Sheet Date.
3.1.11 LOANS, CLASSIFIED AND OLEM ASSETS, RESERVES AND CERTAIN OTHER
ASSETS.
(a) All currently outstanding loans of, or current extensions of
credit by, SUBJECT BANK (individually, a "Loan," and collectively, the
"Loans") were solicited, originated and currently exist in material
compliance with all applicable requirements of federal and state law and
regulations promulgated thereunder and applicable loan policies of
SUBJECT BANK, except (i) for such changes to the circumstances of the
obligor thereunder or the collateral occurring subsequent to the
origination thereof, (ii) as set forth in Disclosure Schedule Section
3.1.11(a) or (iii) where the failure to so comply would not result in a
Material Adverse Effect on SUBJECT BANK. Except as set forth in
Disclosure Schedule Section 3.1.11(a), to SUBJECT BANK's knowledge the
Loans are adequately documented and each note evidencing a Loan or loan
or credit agreement or security instrument related to the Loans
constitutes a valid, legal and binding obligation of the obligor
thereunder, enforceable in accordance with
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the terms thereof, except that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and except that
enforcement thereof may be subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding of law
or in equity) and the availability of equitable remedies. Except as set
forth in Disclosure Schedule Section 3.1.11(a), there are no oral
modifications or amendments or additional agreements related to the Loans
that are not reflected in the Records of SUBJECT BANK. Except as set
forth in Disclosure Schedule Section 3.1.11(a), no claims of defense as
to the enforcement of any Loan have been asserted against SUBJECT BANK
for which there is a reasonable possibility of an adverse determination,
and SUBJECT BANK is aware of no acts or omissions which would give rise
to any claim or right of rescission, set-off, counterclaim or defense for
which there is a reasonable possibility of an adverse determination to
SUBJECT BANK. Except as set forth in Disclosure Schedule Section
3.1.11(a), none of the Loans are presently serviced by third parties and
there is no obligation which could result in any Loan becoming subject to
any third party servicing.
(b) As of the Balance Sheet Date, the only assets of SUBJECT BANK
that were (a) Classified Assets or OLEM Assets on SUBJECT BANK's Records,
or (b) over 90 days delinquent in payment of principal or interest
whether or not the same are Classified Assets or OLEM Assets, are those
listed on Part A of Disclosure Schedule Section 3.1.11 hereto (which
Disclosure Schedule Section identifies the asset by loan number or other
designation and sets forth the original principal amount, the current
book balance, the amount of any reserve (or portion of the general
reserve) allocated thereto, and the loan classification). The loan and
other asset classification procedures utilized by SUBJECT BANK are in
accordance with RAP and prudent banking practice, and are consistently
applied. Part B of Disclosure Schedule Section 3.1.11 hereto sets forth
all loans of SUBJECT BANK outstanding as of the date hereof (whether or
not they are Classified Assets, OLEM Assets or are otherwise in default)
to any director, executive officer or Principal Shareholder of SUBJECT
BANK, or to SUBJECT BANK's knowledge, any person, corporation or
enterprise controlling, controlled by or under common control with any of
the foregoing.
(c) SUBJECT BANK currently maintains, and shall continue to maintain,
an allowance for loan losses allocable to the Loans which is adequate to
provide for all known and estimable losses, net of any recoveries
relating to such extensions of credit previously charged off, on the
Loans, such allowance for loan losses complying in all material respects
with all applicable loan loss reserve requirements established in
accordance with GAAP and by any Governmental Authority having
jurisdiction with respect to SUBJECT BANK.
3.1.12 INVESTMENT SECURITIES; DERIVATIVES. Part A of Disclosure
Schedule Section 3.1.12 describes all of the investment securities
(including mortgage backed securities, and whether actively traded,
available for sale or held to maturity) owned by SUBJECT BANK as of the date
hereof, including identification of the type of security, CUSIP numbers,
pool face values (where applicable), book values, market values and coupon
rates and, to SUBJECT BANK's knowledge, paydown speeds, book yields,
durations, weighted average life and weighted average coupons, in each case
as of August 31, 1998. Except as identified on Part B of Disclosure Schedule
Section 3.1.12, since December 31, 1996, SUBJECT BANK has not engaged in any
transaction in or involving forwards, futures, options on futures, swaps or
other derivative instruments. To the knowledge of SUBJECT BANK, none of the
counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no
such contract or agreement, were it to be a loan held by SUBJECT BANK, would
be a Classified Asset or OLEM Asset. The financial position of SUBJECT BANK
under or with respect to each such instrument has been reflected in the
Records of SUBJECT BANK in accordance with GAAP,
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and each such derivative security was entered into as a hedge against
financial risks then inherent in SUBJECT BANK's assets, liabilities and
commitments.
3.1.13 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
(a) there has been no material adverse change in the business, property,
assets (including loan and servicing portfolios), liabilities (whether
absolute, contingent or otherwise), operations, liquidity, income or
condition (financial or otherwise) of SUBJECT BANK taken as a whole (other
than as a result of changes in banking laws or regulations of general
applicability or interpretation thereof), and (b) SUBJECT BANK has carried
on its business in the ordinary and usual course consistent with its past
practices. Except as disclosed on Disclosure Schedule Section 3.1.13 or as
permitted by Section 4.9.10, between December 31, 1997 and the date hereof,
SUBJECT BANK has not increased the wages, salaries, compensation, pension,
or other fringe benefits or perquisites payable to any executive officer,
employee, or director, granted any severance or termination pay, entered
into any employment contract, salary continuation (or similar) contract or
any contract to make or grant any severance or termination pay, or paid any
bonus, in each case except for normal increases and payments for or to
persons other than directors or senior officers of SUBJECT BANK in the
ordinary course of business consistent with past practice or except as
required by applicable law.
3.1.14 COMPLIANCE WITH APPLICABLE LAWS. The business of SUBJECT BANK
is, and at all times since December 31, 1994 has been, conducted in
compliance with all Laws (including those relating to equal credit, fair
lending, fair housing and community reinvestment), except where a failure to
so comply individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect on SUBJECT BANK, and (b) SUBJECT BANK
holds all permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities that are material to the operation of the business
of SUBJECT BANK, and is in compliance with the terms of the same except
where the failure so to comply individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect on SUBJECT BANK. No
investigation by any Governmental Entity with respect to SUBJECT BANK is
pending or, to SUBJECT BANK's knowledge, contemplated, other than normal
examinations conducted by a Bank Regulator in the regular course of the
business of SUBJECT BANK.
3.1.15 LITIGATION AND OTHER DISPUTES. Except as disclosed on Disclosure
Schedule Section 3.1.15, (a) there is no suit, action, or proceeding
(including any cross- or counter-claim) pending or, to the knowledge of
SUBJECT BANK, threatened, against or affecting SUBJECT BANK or any of its
assets, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against SUBJECT BANK the
obligations under which have not heretofore been fully performed; (b)
SUBJECT BANK has not accrued nor set aside any reserves relating to any
suit, action, or proceeding (including any cross- or counter-claim) pending
or, to the knowledge of SUBJECT BANK, threatened, against or affecting
SUBJECT BANK or any of its assets; and (c) since December 31, 1994, SUBJECT
BANK has not been a defendant, either directly or as
defendant-in-counterclaim or cross-claim, in any litigation in which any
"lender liability" cause of action was asserted against SUBJECT BANK.
3.1.16 ADMINISTRATION OF FIDUCIARY ACCOUNTS. SUBJECT BANK has properly
administered in all material respects all accounts for which it acts as a
fiduciary (including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor) in accordance with the terms of the governing documents
and applicable Law, including state and federal common law. To the knowledge
of SUBJECT BANK, neither SUBJECT BANK nor any of its directors, officers or
employees has committed any breach of trust with respect to any such
fiduciary account which has had or could reasonably be expected
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to have a Material Adverse Effect on SUBJECT BANK, and the accounting for
each such fiduciary account are true and correct in all material respects
and accurately reflect the assets of such fiduciary account.
3.1.17 TAXES.
(a) Except as set forth in Disclosure Schedule Section 3.1.17,
SUBJECT BANK and any affiliated, combined or unitary group of which
SUBJECT BANK is or was a member has in all material respects (i)
correctly prepared and timely filed all returns, declarations, estimates,
reports, claims for refund, information returns and statements
("Returns") required to be filed with respect to all Taxes, (ii) timely
and properly paid all Taxes that are due and payable, (iii) established
on its Records reserves that are adequate for the payment of all Taxes
accrued but not yet due and payable and (iv) complied with all Laws
relating to the withholding and payment of all Taxes with respect to
employees' wages.
(b) There are no actual or proposed Tax deficiencies, assessments, or
adjustments for Taxes with respect to SUBJECT BANK or any assets,
property or operations of SUBJECT BANK. Except as set forth in Disclosure
Schedule Section 3.1.17, (i) there are no liens for Taxes upon the assets
of SUBJECT BANK, (ii) SUBJECT BANK has not requested any extension of
time within which to file any Return which has not since been filed,
(iii) there are no waivers or consents given by SUBJECT BANK regarding
the application of the statute of limitations with respect to any Taxes
or Returns, (iv) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are pending against
SUBJECT BANK with regard to any Taxes or Returns or (v) SUBJECT BANK has
not filed any election under Section 338(g) or 338(h)(10) of the Code or
caused or permitted any deemed election under Section 338(e) of the Code.
(c) The Company has not made any election under Section 341(f) of the
Code or any corresponding provision of state, local or foreign tax Law.
The Company is not required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in
accounting method nor does SUBJECT BANK have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change in
accounting method. The Company, as a result of any "closing agreement" as
defined in Section 7121 of the Code (or any corresponding provisions of
any state, local or foreign tax law), is not required to include any item
of income in or exclude any item of deduction from taxable income. The
Company, as a result of any deferred intercompany gain or any excess loss
account, described in Section 1.1502 of the Treasury Department
Regulations concerning consolidated returns, is not required to include
any item of income in taxable income. The Company has not been at any
time during the past ten (10) years a member of an affiliated group, as
defined in Section 1504 of the Code, other than one of which SUBJECT BANK
was the common parent, or filed or been included in a combined,
consolidated or unitary income tax return other than one filed by SUBJECT
BANK.
(d) The Company has not made any payments and is not obligated under
any contract to make any payments that will be nondeductible, in whole or
in part, under Section 280G or 162(m) of the Code.
3.1.18 CERTAIN AGREEMENTS. Except as disclosed on Disclosure Schedule
Section 3.1.18, SUBJECT BANK is not party to (nor are any of its assets
bound by) any oral or written contract, lease or other agreement of any name
or nature, in effect as of the date hereof:
(a) that would be required to be filed as an exhibit to an annual
report on Form 10-K filed with the FDIC or SEC,
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(b) the benefits of which (to either party) will accrue or be
increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of the Merger (either alone or upon the occurrence of
any additional acts or events), or the value of any of the benefits of
which will be calculated on the basis of the Merger or any portion or
aspect thereof (including any so-called retention or similar bonuses),
(c) relating to employment, salary continuation, severance,
consulting, collective bargaining or otherwise relating to the provision
of personal services or payment therefor (including data processing,
software programming and licensing contracts),
(d) which, upon the consummation of the Merger, will result in any
payment (whether of severance pay or otherwise) becoming due from SUBJECT
BANK or the Company to any officer or employee of SUBJECT BANK,
(e) relating to non-competition or secrecy,
(f) that materially restricts the conduct of any line of business by
SUBJECT BANK, or
(g) that was entered into in connection with the consummation of an
acquisition of the stock or one or more branches of a depository
institution pursuant to which SUBJECT BANK is entitled to receive
indemnification from any Person.
SUBJECT BANK is not materially in default under, conflict with, violation
of, nor has SUBJECT BANK, to its knowledge, through any act or omission
created a material right of termination under, cancellation of, acceleration
of any obligation under, loss of material benefit under, or created any
material lien, pledge, security interest or other encumbrance on its assets
under any contract, lease or other agreement described by any of the
foregoing clauses (a) through (g), and to its knowledge, no other party to
any such contract, lease or other agreement has committed (by act or
omission) any such material default or violation of the same. SUBJECT BANK
has previously delivered to the Company true and correct copies of all
employment, consulting and deferred compensation agreements in effect as of
the date hereof that are in writing to which SUBJECT BANK is a party, and
has delivered to the Company complete and accurate summaries of all
employment, consulting and deferred compensation agreements in effect as of
the date hereof that are not in writing to which SUBJECT BANK is a party.
Except as disclosed on Disclosure Schedule Section 3.1.18, SUBJECT BANK is
not a party to, and since December 31, 1994 has not been a party to (nor are
any of its assets bound by), any oral or written contract, lease or other
agreement of any name or nature with a Person who was, as of or within one
year prior to the date of such agreement, a director, officer or Principal
Shareholder of SUBJECT BANK.
3.1.19 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) Section 3.1.19 of the Disclosure Schedule sets forth a true and
complete list of all Benefit Plans in effect as of the date hereof that
SUBJECT BANK maintains or to which it contributes for the benefit of its
employees. With respect to each such Benefit Plan, SUBJECT BANK has
delivered to the Company an accurate and complete copy thereof (or, to
the extent any Benefit Plan has not been reduced to writing, an accurate
description thereof) and, to the extent applicable, an accurate and
complete copy of each of (i) any related trust agreement, annuity
contract or other funding instrument, (ii) the most recent determination
letter with respect to the Benefit Plan and any summary plan description
and other written communication by SUBJECT BANK to the employees
concerning the extent of the benefits provided under such Benefit Plan,
and (iii) Forms 5500 and attached schedules, audited financial
statements, actuarial valuation reports and attorneys' responses to any
auditor's request for information filed or prepared since December 31,
1994.
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(b) Each Benefit Plan has been established and administered in all
material respects in accordance with its terms, and in material
compliance with the applicable provisions of the Code, ERISA and other
applicable Laws. Each Benefit Plan which is intended to be qualified
within the meaning of Section 401(a), 401(k), 408, 409 or 4975(e)(7) of
the Code is so qualified and has received a favorable determination
letter as to its qualification and nothing has occurred, whether by
action or failure to act, which would cause the loss of such
qualification. With respect to each Benefit Plan, no action, suit or
claim (other than ordinary and usual claims for benefits) is pending or,
to the knowledge of SUBJECT BANK, threatened, and no fact or circumstance
exists which could give rise to any such action, suit or claim. No Person
has engaged in any prohibited transaction, as such term is defined under
Section 4975 of the Code or Section 406 of ERISA, or otherwise breached
any fiduciary duty or failed to satisfy Section 412 of ERISA, which would
subject SUBJECT BANK or the Company to any taxes, penalties or
liabilities or obligations under Section 4975 of the Code or Part 4 or 5
of Title I (including Sections 409 and 502(i) and (l)) of ERISA. No event
has occurred and no condition exists that would subject SUBJECT BANK or
the Company to any tax, fine or penalty imposed by the Code, ERISA or
other applicable Laws. To the knowledge of SUBJECT BANK, each Benefit
Plan may be amended or terminated in accordance with its terms, to the
extent such terms provide for amendment or termination, without
obligation or liability (other than (i) those obligations and liabilities
for which specific and sufficient assets have been set aside in a trust
or other funding vehicle or reserved for on the SUBJECT BANK Interim
Balance Sheet, and (ii) those obligations and liabilities reflected by
the terms of the Benefit Plan documents). SUBJECT BANK has made all
payments and contributions due to each Benefit Plan.
(c) The Company has no Benefit Plan which is subject to Title IV of
ERISA or Section 302 of ERISA or Section 412 of the Code. No Benefit Plan
which is a pension plan as described in Section 3(1) of ERISA has been
terminated in a manner which has resulted or may result in any liability
to the Pension Benefit Guaranty Corporation or any other Person. There
exists no condition or set of circumstances which present a material risk
of termination or partial termination of any Benefit Plan which could
result in any liability on the part of SUBJECT BANK or the Company, and
there is no existing or anticipated material liability under ERISA with
respect to a Benefit Plan. Neither SUBJECT BANK, nor any entity which may
be or in the past may have been treated as a single employer with SUBJECT
BANK under Section 414 of the Code, contributes to, has ever contributed
to or has ever had an obligation to contribute to, a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
(d) Each Benefit Plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of
the Code meets such requirements in all material respects. SUBJECT BANK
has received a favorable determination from the Internal Revenue Service
with respect to any trust intended to be qualified within the meaning of
Section 501(c)(9) of the Code. There is no unfunded obligation under any
Benefit Plan providing benefits after termination of employment to any
employee of SUBJECT BANK, and SUBJECT BANK has made no other commitment
to employees, former employees or their beneficiaries under which it is
or would be obligated to provide any benefit or payment which is not
adequately funded through a trust or other funding arrangement or
reserved for on the SUBJECT BANK Interim Balance Sheet. SUBJECT BANK has
no "accumulated post-retirement benefit obligation," as defined in FAS
106, in respect to post-retirement health and life benefits for
employees. No Benefit Plan exists which could result in the payment to
any employee of any money or other property or right, or accelerate or
provide any other right or benefit, to any employee as a result of any
transaction explicitly contemplated by this Agreement.
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(e) With respect to the SUBJECT BANK Benefit Plans, individually and
in the aggregate, to the knowledge of SUBJECT BANK, no event has occurred
and there exists no condition or set of circumstances in connection with
which SUBJECT BANK could be subject to any liability that could
reasonably be expected to have a Material Adverse Effect on SUBJECT BANK
(except liability for benefits claims and funding obligations payable in
the ordinary course) under ERISA, the Code or any other applicable Law.
(f) Except as disclosed on Disclosure Schedule Section 3.1.19(f),
there are no material disputes, employee grievances, or disciplinary
actions pending or, to the knowledge of SUBJECT BANK, threatened by or
between any of SUBJECT BANK's employees and SUBJECT BANK. SUBJECT BANK
has complied in all material respects with all Laws relating to the
employment of labor and has no liability for any arrears of wages or
employment-related taxes, or penalties for failure to comply with any
such Law, or for any severance or termination payments of any type. No
election or proceeding relating to SUBJECT BANK's labor relations is
pending or, to SUBJECT BANK's knowledge, contemplated. To the knowledge
of SUBJECT BANK, SUBJECT BANK has had no union activity or any material
labor trouble (including any strike, work stoppage, slow-down, or similar
disturbance) of any kind, nature or description at any time.
3.1.20 PROPERTIES. Except as disclosed on Part A of Disclosure Schedule
Section 3.1.20, as of the date of this Agreement SUBJECT BANK does not hold
title to or a beneficial interest in any real property other than OREO.
Disclosed on Disclosure Schedule Section 3.1.20 are the only real properties
leased by, otherwise occupied by, or in the possession of SUBJECT BANK, as
of the date of this Agreement (excluding OREO and property occupied only as
lender in possession, in each case provided that SUBJECT BANK is conducting
no business in such property). Except for assets disposed of in the ordinary
course of business consistent with past practice since the Balance Sheet
Date, SUBJECT BANK has good and valid title to all of the tangible personal
property and assets which are used in and material to the operation of its
business and which it owns or purports to own, including all assets
reflected as owned by SUBJECT BANK on the SUBJECT BANK Interim Balance
Sheet, and has good and valid title to all of the leasehold interests in all
leases of real or personal property which it leases or purports to lease (in
each case, as lessee), including all assets reflected as leased by SUBJECT
BANK on the SUBJECT BANK Interim Balance Sheet, in each case free and clear
of any liens, encumbrances or other imperfections of title other than such
liens, encumbrances or imperfections as (a) are set forth on Part A of
Disclosure Schedule Section 3.1.20 or are fully reserved against on the
SUBJECT BANK Interim Balance Sheet, (b) arise out of Taxes not yet due or
payable, or (c) relate to immaterial properties or assets or otherwise could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on SUBJECT BANK. SUBJECT BANK enjoys peaceful and
undisturbed possession of the applicable leased asset under all leases of
real or personal property under which it is operating or to which it is a
party excepting only those properties noted on Part B of Disclosure Schedule
Section 3.1.20 as subleased to third parties, as to which SUBJECT BANK's
sublessee enjoys peaceful and undisturbed possession. All of such leases are
valid, subsisting and in full force and effect and there are no existing
defaults or events which, with the passage of time or the giving of notice,
or both, would constitute defaults by SUBJECT BANK or, to the knowledge of
SUBJECT BANK, by any other party thereto, except for such defaults, if any,
which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on SUBJECT BANK. All items of real or
personal property owned or used by SUBJECT BANK and material to its business
have been properly maintained and, to SUBJECT BANK's knowledge, are in good
operating order and repair.
3.1.21 ENVIRONMENTAL. Except as set forth on Disclosure Schedule
Section 3.1.21, SUBJECT BANK and all real property (including OREO) in the
possession of SUBJECT BANK or over
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which SUBJECT BANK exercises control are, and at all times while in the
possession or control of SUBJECT BANK each property at any time owned,
possessed or controlled by SUBJECT BANK has been, in compliance with all
applicable Laws relating to pollution or protection of human health or the
environment (including Laws relating to emissions, discharges, releases or
threatened releases of Hazardous Material or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Material), except for any violations of
Law that, either individually or in the aggregate, have not had and cannot
reasonably be expected to have a Material Adverse Effect on SUBJECT BANK.
Except as set forth on Disclosure Schedule Section 3.1.21, there has not
occurred any release of Hazardous Material on, under or affecting any real
property during the period of SUBJECT BANK's ownership, possession or
operation of such property (including its participation in the management of
any business located on such property) or during any prior period except for
releases that, individually or in the aggregate, have not had and cannot
reasonably be expected to have a Material Adverse Effect on SUBJECT BANK. To
the knowledge of SUBJECT BANK, neither SUBJECT BANK nor any property now or
heretofore in its possession is or has ever been a defendant in or the
subject of any suit, claim, action, proceeding, investigation or notice
before any Governmental Entity or other forum relating to an alleged
violation (including by any predecessor) of any environmental Law or any Law
relating to the release or threatened release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned, leased
or operated by SUBJECT BANK.
3.1.22 INTELLECTUAL PROPERTY. SUBJECT BANK owns, or possesses valid and
binding licenses and other rights to use without payment (other than
payments for software licenses incurred in the ordinary course of business),
all material trademarks, trade names, servicemarks, copyrights, trade
secrets and patents used in its businesses, and SUBJECT BANK has not
received any challenge of the same by any Person or any notice of alleged
conflict between the same and the rights of any other Person. SUBJECT BANK
has, in all material respects, performed all of its obligations under, is
not materially in default under, and has not created any right of
termination under, cancellation of, acceleration of any obligation under, or
loss of a material benefit under, any contract, agreement, arrangement or
commitment relating to any of the foregoing.
3.1.23 CAPITALIZATION. As of the date hereof, without giving effect to
the transactions contemplated hereby, SUBJECT BANK (a) is "well
capitalized", as defined in applicable Federal regulations, and (b) meets
all capital requirements, standards and ratios required by each Bank
Regulator with jurisdiction over SUBJECT BANK, including without limitation,
any such higher requirement, standard or ratio as shall apply to
institutions engaging in the acquisition of insured institution deposits,
assets or branches, and no such Bank Regulator has indicated that it will
condition any of the regulatory approvals upon an increase in SUBJECT BANK's
capital or compliance with any special capital requirement, standard or
ratio.
3.1.24 CRA. SUBJECT BANK was rated "Satisfactory" following its most
recent Community Reinvestment Act examination by the FDIC. SUBJECT BANK has
not received any notice of and SUBJECT BANK has no knowledge of any planned
or threatened objection by any community group to the transactions
contemplated hereby.
3.1.25 YEAR 2000. None of the computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on by SUBJECT BANK or BancData Solutions, Inc. in the conduct
of their respective businesses (collectively, the "Computer Systems") will
malfunction, cease to function, generate incorrect data, or produce
incorrect results when processing, providing, and/or receiving (i)
date-related data into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries (the "Year 2000 Problem") where such
Year 2000 Problem would have a
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Material Adverse Effect on SUBJECT BANK. SUBJECT BANK's Computer Systems are
in compliance in all material respects with all regulations and guidelines
concerning the Year 2000 Problem promulgated or published by Federal or
State Bank Regulators. Disclosure Schedule Section 3.1.25 sets forth a true
and correct summary of SUBJECT BANK's analysis, plans and implementation
status with respect to the Year 2000 Problem. Except as set forth on
Disclosure Schedule Section 3.1.25, SUBJECT BANK has no contracts with, or
commitments to, any third-party with respect to its Computer Systems
relating to the Year 2000 Problem and is not aware of any expense that it
will incur in connection with the resolution of any Year 2000 Problem. To
the best knowledge of SUBJECT BANK, there is no inability on the part of any
customer, reinsurance company or service provider with which SUBJECT BANK
transacts business to timely remedy their own deficiencies in respect of the
Year 2000 Problem, which inability, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on SUBJECT BANK.
3.1.26 POOLING OF INTERESTS TREATMENT; TAX FREE REORGANIZATION. As of
the date hereof, SUBJECT BANK has no reason to believe that the Merger will
not qualify as a pooling of interests for accounting purposes or as a
reorganization within the meaning of Section 368 of the Code.
3.1.27 FAIRNESS OPINION. SUBJECT BANK has received an opinion from
Carpenter & Company, addressed to SUBJECT BANK's Board of Directors, to the
effect that as of the date hereof the Merger Consideration is fair, from a
financial point of view, to the holders of the SUBJECT BANK Common Stock.
3.1.28 BROKERS. SUBJECT BANK has not employed any broker, finder or
similar Person in connection with the Merger other than Carpenter & Company,
and has not incurred and will not incur any broker's, finder's or similar
fees, commissions or expenses in connection with the Merger excepting those
of Carpenter & Company, the terms of which are set forth in Disclosure
Schedule Section 3.1.28.
3.1.29 DISCLOSURE OF ALL MATERIAL MATTERS. No statement of fact set
forth in (a) this Agreement (including all information in the Disclosure
Schedules and Annexes hereto), (b) SUBJECT BANK's Form 10-K filed with the
FDIC for the period ended December 31, 1997, (c) SUBJECT BANK's Forms 10-Q
filed with the FDIC for the periods ended March 31, 1998 and June 30, 1998,
(d) SUBJECT BANK's Interim Financial Statements, (e) each of SUBJECT BANK's
Forms 10-Q and 10-K filed with the FDIC between the date hereof and the
Closing Date (when the same are filed), (f) SUBJECT BANK's Reports of
Condition and Reports of Income filed with the FDIC between the date hereof
and the Closing Date (when the same are filed), or (g) SUBJECT BANK's
Monthly Financial Statements (when the same are delivered), including in
each case the financial statements included therein and other exhibits
thereto, is or will be false or misleading in any material respect; nor does
or will this Agreement (including all information in the Disclosure
Schedules and Annexes hereto, taken as a whole) or the above-referenced
Forms 10-K, Forms 10-Q, Most Recent Financial Statements, Reports of
Condition, Reports of Income or Monthly Financial Statements omit to state
any material fact necessary in order to make the statements made or
information disclosed, in the light of the circumstances under which they
were made or disclosed, not misleading.
3.2 BY THE COMPANY. The Company represents and warrants as follows, except
as specifically disclosed in the Disclosure Schedule:
3.2.1 ORGANIZATION, STANDING AND POWER.
(a) The Company is a business corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
The Company has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being
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conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which a failure to be so qualified could reasonably
be expected to have a Material Adverse Effect on the Company. Copies of
the Certificate of Incorporation and By-Laws of the Company, including
all amendments thereto as of the date of this Agreement, have been
delivered to SUBJECT BANK and are complete and correct. The minute books
of the Company accurately reflect in all material respects all corporate
actions held or taken by the Company's shareholders and Board of
Directors, including all committees of such Board of Directors, except
the meetings listed in Disclosure Schedule Section 3.2.1 for which
minutes have not been prepared. The Company is a bank holding company
duly registered under the Bank Holding Company Act.
(b) The Bank is a commercial banking corporation duly organized,
validly existing and in good standing under the laws of the State of
California, and is a wholly-owned direct subsidiary of the Company.
3.2.2 AUTHORITY AND RELATED MATTERS. The Company has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby (including the Merger), and has duly
authorized the execution and delivery of this Agreement and the consummation
of such transactions (including the Merger) by all necessary corporate
action on the part of the Company's Board of Directors. The only vote of the
holders of any class or series of SUBJECT BANK's securities necessary to
approve this Agreement or the consummation of the Merger is the affirmative
vote of the holders of a majority of the outstanding shares of Company
Common Stock entitled to vote thereon approving the Merger, and the Board of
Directors has directed the officers of the Company to submit the Merger and
this Agreement to the holders of Company Common Stock for approval at a
meeting of such shareholders or for approval of such shareholders by written
consent. The Company has entered into agreements with shareholders of the
Company holding greater than 50% of the Company Common Stock whereby such
shareholders agree to vote in favor of the Merger. No other corporate
proceedings on the part of the Company not heretofore taken are necessary to
approve this Agreement or to consummate the Merger. This Agreement has been
duly executed and delivered by the Company and (assuming due authorization,
execution and delivery by SUBJECT BANK) constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms subject
only to laws regarding bankruptcy, insolvency, reorganization, moratorium or
otherwise affecting creditors' rights generally, and to the application of
general principles of equity (whether considered in a proceeding in law or
at equity).
3.2.3 CONFLICTS. The execution and delivery of this Agreement does not,
and the consummation of the Merger will not, result in any conflict with or
violation of any provision of the Certificate of Incorporation or By-laws of
the Company. Subject only to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings included
among the Company Governmental Approvals, the execution and delivery of this
Agreement does not, and the consummation of the Merger will not, result in
any violation, conflict, default, creation of a right of termination,
cancellation, acceleration, or loss of a material benefit under any Law or
under any loan or credit agreement, note, mortgage, indenture, lease,
employee benefit plan or other agreement, obligation, instrument, permit,
concession, franchise or license, or any judgment, order or decree,
applicable to the Company or any of their properties or assets, which
violation, conflict, default, creation of a right of termination,
cancellation, acceleration, or loss of a material benefit could reasonably
be expected to have a Material Adverse Effect on the Company.
3.2.4 CONSENTS. Except as disclosed on Disclosure Schedule Section
3.2.4 (collectively, the "Company Governmental Approvals"), no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required in connection with the Company's
execution and delivery of this Agreement or its consummation of the Merger,
as to which
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the failure to obtain the same could reasonably be expected to have a
Material Adverse Effect on the Company or materially interfere with the
Company's ability to consummate the Merger.
3.2.5 REGISTRATION STATEMENT. The Company has provided to SUBJECT BANK
a copy of the registration statement on Form S-1 that the Company filed with
SEC on August 17, 1998 (the "S-1 Registration Statement") and a revised
draft of the S-1 Registration Statement (draft of September 11, 1998) is set
forth as Disclosure Schedule Section 3.2.5. As of the date of this
Agreement, Disclosure Schedule Section 3.2.5 does not contain any statement
of fact which is false or misleading in any material respect nor does it
omit to state a material fact necessary in order to make the statements made
or information disclosed therein, in the light of the circumstances under
which they were made or disclosed, not misleading. No statement of fact with
respect to the Company set forth in any document filed by the Company with
the SEC between the date hereof and the Closing Date (when the same are
filed) will be false or misleading in any material respect; nor will any
such document omit to state any material fact necessary in order to make the
statements made or information disclosed, in the light of the circumstances
under which they were made or disclosed, not misleading.
3.2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on
Disclosure Schedule Section 3.2.6, since August 17, 1998, (a) there has been
no material adverse change in the business, property, assets (including loan
and servicing portfolios), liabilities (whether absolute, contingent or
otherwise), operations, liquidity, income or condition (financial or
otherwise) of the Company (other than as a result of changes in banking laws
or regulations of general applicability or interpretation thereof), and (b)
each of the Company and the Bank has carried on its business in the ordinary
and usual course consistent with its past practices.
3.2.7 POOLING OF INTERESTS TREATMENT; TAX FREE REORGANIZATION. As of
the date hereof, the Company has no reason to believe that the Merger will
not qualify as a pooling of interests for accounting purposes or as a
reorganization within the meaning of Section 368 of the Code.
3.2.8 NASDAQ. To the Company's knowledge, immediately after the
Closing, the Company will meet all of the criteria necessary in order for
the Company Common Stock to be eligible for listing on the Nasdaq National
Market System ("Nasdaq NMS") under Initial Listing Option No. 1 (as in
effect as of the date of this Agreement), except that the Company makes no
representation or warranty as to the number of broker-dealers, if any, that
will be market makers in Company Common Stock.
ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 DISCUSSIONS WITH THIRD PARTIES.
4.1.1 SUBJECT BANK (a) shall not, and shall instruct and cause each of
its Representatives not to, solicit or encourage, directly or indirectly,
inquiries or proposals with respect to any Strategic Transaction Proposal,
and, (b) except as expressly permitted by Section 4.1.2, shall not, and
shall instruct and cause each of its Representatives not to, furnish any
non-public information relating to or participate in any negotiations,
discussions or other activities concerning, any Strategic Transaction with
any Person other than the Company. SUBJECT BANK shall notify the Company
promptly after any Strategic Transaction Proposal is received by, or any
negotiations or discussions regarding a Strategic Transaction Proposal are
sought to be initiated with, directly or indirectly, SUBJECT BANK or any of
its Representatives, and shall disclose to the Company the identity of the
third party making or seeking to make such Strategic Transaction Proposal,
the terms and conditions thereof and such other information as the Company
reasonably may request; PROVIDED, HOWEVER, that if SUBJECT BANK receives a
Strategic Transaction Proposal and the
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foregoing disclosure of such Strategic Transaction Proposal to the Company
would violate a confidentiality agreement by which SUBJECT BANK is bound,
SUBJECT BANK shall make the foregoing disclosure only to the maximum extent
permissible under such confidentiality agreement. SUBJECT BANK represents
and warrants to the Company that SUBJECT BANK is not subject to any such
confidentiality agreement.
4.1.2 Notwithstanding Section 4.1.1, following receipt of a Qualifying
Strategic Transaction Proposal, neither SUBJECT BANK nor any of its
Representatives shall be prohibited from (a) engaging in discussions or
negotiations with a third party which has made a proposal that satisfies the
requirements of a Qualifying Strategic Transaction Proposal and thereafter
providing to such third party information previously provided or made
available to the Company, provided the third party shall have entered into a
confidentiality agreement substantially similar to the confidentiality
provisions of Section 4.3 hereof, (b) taking and disclosing to the SUBJECT
BANK Shareholders a position contemplated by Rule 14e-2(a) under the
Exchange Act or otherwise making disclosure of the Qualifying Strategic
Transaction Proposal to its shareholders, or (c) subject to the terms of
Article VI of this Agreement, terminating this Agreement. A "Qualifying
Strategic Transaction Proposal" shall mean a bona fide written Strategic
Transaction Proposal with respect to which the Board of Directors shall have
determined, after consultation with SUBJECT BANK's counsel, that the action
by SUBJECT BANK contemplated under either clause (a), (b) or (c), as
applicable, of the immediately preceding sentence is required under the
fiduciary duties owed by the Board of Directors to the SUBJECT BANK
Shareholders, which determination has been made acting in good faith and on
the basis of a written opinion from a financial advisor retained by SUBJECT
BANK to the effect that the financial terms of such Strategic Transaction
Proposal are, from such shareholders' perspective, financially superior to
the Merger Consideration.
4.1.3 In the event that SUBJECT BANK receives a Qualifying Strategic
Transaction Proposal, it shall, within ten (10) Business Days of its receipt
thereof, give notice to the Company either (i) reaffirming SUBJECT BANK's
intent to proceed under this Agreement and to consummate the Merger, or (ii)
terminating this Agreement pursuant to Section 6. If SUBJECT BANK does not,
within such ten (10) Business Day-period, either expressly reaffirm its
intent to proceed under this Agreement or terminate this Agreement pursuant
to Section 6, the Company may at any time within thirty (30) days thereafter
terminate this Agreement pursuant to Section 6.
4.2 JOINT PROXY STATEMENT -- PROSPECTUS AND S-4 REGISTRATION STATEMENT;
SHAREHOLDER APPROVAL.
4.2.1 The Company and SUBJECT BANK shall promptly prepare and file with
the SEC the Joint Proxy Statement -- Prospectus (including the preliminary
form thereof) and the Company shall promptly prepare and file with the SEC a
registration statement on form S-4 (the "S-4 Registration Statement"), in
which the Joint Proxy Statement -- Prospectus will be included as a
prospectus. The Parties shall use all commercially reasonable efforts to
file the preliminary proxy statement with the SEC within thirty (30)
Business Days after the date of this Agreement. The Company's employees and
advisors shall have principal responsibility for the preparing the Joint
Proxy Statement -- Prospectus. Each of the Company and SUBJECT BANK shall
use all commercially reasonable efforts to have the S-4 Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing, and the Company and SUBJECT BANK shall
thereafter as promptly as practicable mail the Joint Proxy
Statement -- Prospectus to their respective shareholders and convene
meetings (or, with respect to the Company, take action by written consent)
of their respective shareholders for the purpose of approving this
Agreement, the proposed Merger and the other transactions contemplated
hereby. The Company shall use all commercially reasonable efforts to obtain
all necessary state securities law or "Blue Sky" permits and approvals
required for the Company and SUBJECT BANK to carry out the transactions
contemplated by this Agreement and SUBJECT BANK shall furnish all
information concerning
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SUBJECT BANK and the holders of SUBJECT BANK Common Stock as may be
reasonably requested in connection with any such action. Each Party shall
promptly notify the other of the receipt by it of any comments of the SEC or
state securities laws regulators and will promptly supply the other with
copies of all correspondence between it and its representatives, on the one
hand, and the SEC or Joint Proxy Statement -- Prospectus, the S-4
Registration Statement or such "Blue Sky" permits and approvals.
4.2.2 The Company and SUBJECT BANK shall, upon request, furnish each
other with all information concerning themselves, their subsidiaries,
directors, officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with the Joint Proxy
Statement -- Prospectus, the S-4 Registration Statement or any other
statement, filing, notice or application made by or on behalf of the
Company, SUBJECT BANK or any of their respective subsidiaries to any
Governmental Entity in connection with the Joint Proxy
Statement -- Prospectus, the S-4 Registration Statement or the "Blue Sky"
permits and approvals.
4.2.3 Except as expressly provided in the immediately following
sentence, the Joint Proxy Statement -- Prospectus shall include the
Recommendation of Approval by the SUBJECT BANK Board of Directors.
Notwithstanding the immediately preceding sentence, in the event that
SUBJECT BANK has received a Strategic Transaction Proposal and its Board of
Directors has determined, in accordance with Section 4.1.2, that such
Strategic Transaction Proposal constitutes a Qualifying Strategic
Transaction Proposal, then its Board of Directors shall not be prohibited
from failing to include a Recommendation of Approval in the Joint Proxy
Statement -- Prospectus, from retracting or qualifying its Recommendation of
Approval if previously given, or from postponing or adjourning the meeting
of the SUBJECT BANK Shareholders called for the purpose of approving the
Merger.
4.2.4 SUBJECT BANK represents and warrants to the Company that as of
the date the Joint Proxy Statement -- Prospectus is issued and as of the
date its shareholders act to approve this Agreement and the transactions
contemplated hereby, the Joint Proxy Statement -- Prospectus will comply as
to form in all material respects with the Exchange Act and the rules and
regulations of the FDIC thereunder, and the Joint Proxy
Statement -- Prospectus will not at the time of its issuance and as of the
date of the SUBJECT BANK Shareholder meeting to approve this Agreement and
the transactions contemplated hereby, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made, in the light of the circumstances under which they were
made, not misleading, except that no representation or warranty is made with
respect to information set forth in the Joint Proxy Statement -- Prospectus
concerning the Company or the meeting of the shareholders of the Company to
act upon approval of this Agreement and the transactions contemplated
hereby. SUBJECT BANK will promptly advise the Company in writing if, at any
time prior to the date of the SUBJECT BANK Shareholder meeting to approve
this Agreement and the transactions contemplated hereby, it shall obtain
knowledge of any facts that might make it necessary or appropriate to amend
or supplement the Joint Proxy Statement -- Prospectus in order to make the
statements contained or incorporated by reference therein not misleading or
to comply with applicable law and agrees to correct any statements that are
or have become misleading.
4.2.5 The Company represents and warrants to SUBJECT BANK that the S-4
Registration Statement, at the time it becomes effective and at the date of
the SUBJECT BANK Shareholder meeting to act upon approval of this Agreement
and the transactions contemplated hereby, and the Joint Proxy
Statement--Prospectus, at the date of its issuance and at the date of the
SUBJECT BANK Shareholder meeting to act upon approval of this Agreement and
the transactions contemplated hereby, will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations of the SEC thereunder, and will not at any such time contain any
untrue statement of a material fact or omit to state any material fact
necessary in
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order to make the statements made, in the light of the circumstances under
which they were made, not misleading, except that no representation or
warranty is made with respect to information set forth in the Joint Proxy
Statement -- Prospectus concerning SUBJECT BANK or the meeting of the
SUBJECT BANK Shareholders to act upon approval of this Agreement and the
transactions contemplated hereby. The Company will promptly advise SUBJECT
BANK in writing if, at any time prior to the meeting of the SUBJECT BANK
Shareholders to act upon approval of this Agreement and the transactions
contemplated hereby, the Company shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the S-4
Registration Statement or the Joint Proxy Statement -- Prospectus in order
to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law and agrees to correct any
statements that are or have become misleading.
4.2.6 SUBJECT BANK shall use all commercially reasonable efforts to
cause to be delivered to the Company letters from its independent
accountants dated the date on which the S-4 Registration Statement or last
amendment thereto shall become effective, and dated the Closing Date, and
addressed to the Company and SUBJECT BANK, with respect to SUBJECT BANK's
consolidated financial position and the results of operations, which letters
shall be based on SAS 72 and certain agreed-upon procedures, which
procedures shall be consistent with applicable professional standards for
letters delivered by independent accountants in connection with comparable
transactions, and each in form and substance which is reasonably
satisfactory to the Company.
4.2.7 SUBJECT BANK shall identify in a letter to the Company, after
consultation with counsel, all persons who, at the time of the meeting of
its stockholders referred to in Section 4.2.1, it believes may be deemed to
be "affiliates" of SUBJECT BANK, as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 under the Securities Act and/or as used
in and for purposes of Accounting Series Releases 130 and 135, as amended,
of the SEC (the "Seller Affiliates"). SUBJECT BANK shall use all
commercially reasonable efforts to cause each person who is identified as a
Seller Affiliate in the letter referred to above to deliver to the Company
at least forty (40) days prior to the Effective Time an executed copy of
SUBJECT BANK Affiliates Agreement in the form of Exhibit 4.2.7. Prior to the
Effective Time, SUBJECT BANK shall amend and supplement such letter and use
all commercially reasonable efforts to cause each additional person who is
identified as a Seller Affiliate to execute a copy of SUBJECT BANK
Affiliates Agreement. Within thirty (30) days after the end of the first
fiscal quarter of the Company ending at least thirty (30) days after the
Effective Time, the Company will publish results including at least thirty
(30) days of combined operations of the Company and SUBJECT BANK as referred
to in SUBJECT BANK Affiliates Agreement as contemplated by and in accordance
with SEC Accounting Series Release No. 135.
4.2.8 The Company shall identify in a letter to SUBJECT BANK, after
consultation with counsel, all persons who, at the time of the meeting of
its stockholders (or the time of the written consent of its stockholders)
referred to in Section 4.2.1, it believes may be deemed to be "affiliates"
of the Company, as that term is defined for purposes of paragraphs (c) and
(d) of Rule 145 under the Securities Act and/or as used in and for purposes
of Accounting Series Releases 130 and 135, as amended, of the SEC (the
"Company Affiliates"). The Company shall use all commercially reasonable
efforts to cause each person who is identified as a Company Affiliate in the
letter referred to above to deliver to the Company at least forty (40) days
prior to the Effective Time an executed copy of an affiliates agreement
satisfactory to the Company.
4.3 ACCESS.
4.3.1 WITH RESPECT TO SUBJECT BANK. SUBJECT BANK shall make available
to the Company all information regarding itself that the Company reasonably
may request, and shall authorize all commercially reasonable visits to its
premises with such staff, consultants and experts as the
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Company reasonably may request. The Company agrees to coordinate closely all
such activities with SUBJECT BANK's President or Chief Financial Officer and
to conduct any such inquiries with appropriate discretion and sensitivity to
SUBJECT BANK's relationships with its employees, customers and suppliers.
4.3.2 WITH RESPECT TO THE COMPANY. Upon reasonable notice, the Company
shall afford SUBJECT BANK, and its officers, employees, counsel, accountants
and other authorized representatives, access, during normal business hours
throughout the period prior to the date of the meeting of shareholders of
the Company held to vote (or written consent voting) upon the transactions
contemplated by this Agreement, to such information regarding the Company
and its subsidiaries as shall be reasonably necessary for SUBJECT BANK to
fulfill its obligations pursuant to this Agreement to prepare the Joint
Proxy Statement-Prospectus. In addition to the foregoing, the Company shall,
within a reasonable period of time prior to the Closing, afford SUBJECT BANK
and its officers, employees, counsel, accountants and other authorized
representatives, such access as is reasonably necessary to confirm that the
representations and warranties of the Company made herein are true and
correct in all material respects. Notwithstanding the foregoing, in its
discretion, the Company may limit or exclude the provision of and access to
information relating to any actual or proposed acquisition or business
combination by the Company that is unrelated to the Merger. The Company
shall furnish promptly to SUBJECT BANK a copy of each application, report,
schedule, correspondence and other document filed by the Company with or
received by the Company from any Governmental Entity in connection with the
transactions contemplated hereunder, and the Company agrees to notify
SUBJECT BANK by telephone within 24 hours of receipt of any adverse oral
communication from any Governmental Entity regarding the outcome of any
regulatory applications required in connection with the Merger. Neither the
Company nor any of its subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would jeopardize
the attorney-client privilege of the institution in possession or control of
such information or would contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to
the date of this Agreement. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. No investigation pursuant to
this Section 4.3.2 by SUBJECT BANK shall affect of be deemed to modify or
waive any representation or warranty made herein by the Company or the
conditions to the obligation of SUBJECT BANK to consummate the transactions
contemplated by this Agreement. SUBJECT BANK agrees to coordinate closely
all such activities with the Company's President or Chief Financial Officer
and to conduct any such inquiries with appropriate discretion and
sensitivity to the Company's relationships with its employees, customers and
suppliers.
4.3.3 CONFIDENTIALITY. Each Party acknowledges that certain of the
information made available to it pursuant to this Section 4.3 and otherwise
in connection with the Merger may be confidential, proprietary or otherwise
nonpublic, and each Party agrees, for itself and for each of its
Representatives, that it (i) shall hold in confidence all confidential
information received by it from or with regard to the other Party
("Confidential Information") subject to the terms of this Section 4.3, (ii)
shall disclose such Confidential Information only to those of its
Representatives and, in the case of the Company, its current or prospective
investors, and other sources of capital, in each case having a need to know
the same for purposes of evaluating, negotiating or implementing the
financing of the Merger, and (iii) shall inform each Representative or
investor to whom Confidential Information is disclosed that such information
is confidential and direct such Representative or current or prospective
investor not to disclose the same. Each Party shall remain responsible for
any disclosure of Confidential Information by any of its Representatives or
investors. Each Party further agrees that, upon the request of the other
Party given following any termination of this Agreement, the receiving Party
and each of its Representatives either shall return to the requesting
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Party all Confidential Information received by the receiving Party and its
Representatives (including all compilations, analyses or other documents
prepared by it that contain Confidential Information) or shall certify that
the same has been destroyed. As used herein, Confidential Information shall
not include (i) information that is or becomes generally available to the
public other than as a result of a breach of this Agreement, (ii)
information that the receiving Party demonstrates was known to it on a
non-confidential basis prior to receiving such information from the other
Party, (iii) information that the receiving Party develops independently
without relying on Confidential Information, and (iv) information that
becomes available to the receiving Party on a non-confidential basis from
another source if the source was not known to or not reasonably believed by
the receiving Party to be subject to any prohibition against disclosing such
information.
4.4 PROSECUTION OF REGULATORY FILINGS; COOPERATION. The Parties shall
cooperate with each other and use all commercially reasonable efforts to prepare
and file promptly all necessary documentation, to effect all applications,
notices, petitions and filings, and to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the Merger.
The Parties agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
Merger and each Party will keep the other apprised of the status of matters
relating to completion of the Merger. Each Party shall, upon request, furnish
the other Party with all information concerning itself as may be reasonably
necessary or advisable in connection with any filing or application made by or
on behalf of such Party to any Governmental Entity in connection with the
Merger. Each Party shall promptly advise the other Party upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the Merger which causes such Party to believe that there is
a reasonable likelihood that any required Governmental Approval will not be
obtained or that the receipt of any such Governmental Approval will be
materially delayed. Subject to the terms and conditions herein provided, each of
the Parties hereto agrees to use all reasonable efforts to, as promptly as
practicable, take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement or to vest the Company, indirectly through the Surviving
Corporation, with full title to all properties, assets, rights, approvals,
immunities and franchises of SUBJECT BANK. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Company with full title to all
properties, assets, rights, approvals, immunities and franchises of SUBJECT
BANK, the proper officers and directors of each party to this Agreement shall
take all such necessary action.
4.5 ADVICE OF CHANGES. Each Party shall promptly advise the other Party of
any change or event having a Material Adverse Effect on it or which it believes
would or may be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained herein or to
preclude the satisfaction of one or more of the conditions set forth in Article
V. From time to time prior to the Closing Date, each Party will promptly
supplement or amend the Disclosure Schedules delivered by it in connection with
the execution of this Agreement to reflect any matter which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Disclosure Schedules, or which is necessary to
correct any information in such Disclosure Schedules which has been rendered
inaccurate thereby; PROVIDED, HOWEVER, that no such supplement or amendment to
the Disclosure Schedules shall have any effect for the purpose of determining
the accuracy of any representation or warranty when made, for determining
satisfaction of the conditions set forth in Article V, or for determining the
compliance by any Party with any other provision of this Agreement.
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4.6 CURRENT INFORMATION. During the period from the date of this Agreement
to the Closing Date, SUBJECT BANK will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than
bi-weekly) with representatives of the Company and to report the general status
of its ongoing operations. SUBJECT BANK will promptly notify the Company of any
material change in the normal course of its business or in the operation of its
properties and of any governmental complaint, investigation or hearing (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving it, and will keep the Company
fully informed of such events. SUBJECT BANK will keep the Company fully informed
of the status of, and the action proposed to be taken with respect to,
Classified Assets that, individually or in combination with one or more other
loans to the same borrower thereunder, have an aggregate carry value of $100,000
or more. SUBJECT BANK will provide to the Company copies of the minutes (or
consents in lieu of meeting) of its loan committee, its Board of Directors and
all committees thereof promptly following each such meeting; PROVIDED, HOWEVER,
that SUBJECT BANK may omit therefrom any portion of such minutes that it
determines, with the concurrence of its counsel, relates to (a) the SUBJECT BANK
compliance or non-compliance with the terms of this Agreement, or (b) any
Strategic Transaction or Strategic Transaction Proposal other than the Merger.
4.7 INTERIM AND ANNUAL FINANCIAL STATEMENTS. As soon as reasonably
available, but in no event more than 45 days after the end of each fiscal
quarter ending after the date of this Agreement and prior to the Closing Date
(excepting the quarter ending December 31, 1998), each Party will deliver to the
other Party its Quarterly Reports on Form 10-Q as filed with the FDIC or SEC, as
applicable, and as soon as reasonably available, but in no event later than
March 31, 1999 (provided that the Closing has not yet occurred and the Agreement
has not theretofore been terminated), will deliver to the other Party its Annual
Report on Form 10-K for the period ending December 31, 1998, as filed with the
FDIC or SEC, as applicable. SUBJECT BANK will deliver to the Company monthly
financial statements (the "Monthly Financial Statements"), prepared in
accordance with GAAP (excepting only by the absence of footnotes and other
presentation items and subject to normal year-end adjustments) and otherwise in
the form delivered to the members of SUBJECT BANK's Board of Directors, no later
than the time at which such financial statements are delivered to such Directors
but in no event later than the twenty-first calendar day of the month
immediately following the month to which such financial statements relate. The
Company will deliver to SUBJECT BANK financial statements, prepared in
accordance with GAAP (excepting only by the absence of footnotes and other
presentation items and subject to normal year-end adjustments) and otherwise in
the form delivered to the members of the Company's Board of Directors, no later
than the time at which such financial statements are delivered to such
Directors. The Company will deliver to SUBJECT BANK promptly after the filing
thereof copies of all documents filed by the Company with the SEC.
4.8 CONDUCT OF BUSINESS. SUBJECT BANK shall (a) conduct its business in the
usual, regular and ordinary course of business consistent with the past practice
(except as required by applicable Law or as required by this Agreement), (b) use
all commercially reasonable efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees (including by causing its current
insurance policies not to be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such event replacement policies
providing substantially similar coverage for substantially similar (or lesser)
premiums are in full force and effect), (c) conduct relations with its
employees, including hiring and terminating practices, only in the ordinary
course of business and consistent with past practice, (d) take no action which
would adversely affect or delay the ability of SUBJECT BANK to obtain any
necessary approvals of any Governmental Entity required for the Merger or for
the transactions contemplated in connection therewith, or to perform its
covenants and agreements under this Agreement, and (e) take no action which
would prevent or impede the Merger from qualifying for pooling of interests
accounting treatment and as a reorganization within the meaning of Section 368
of the Code. Through the Effective Time, SUBJECT BANK will maintain the Records
in the same manner and with the same
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care that the Records have been maintained prior to the execution of this
Agreement. The Company may, at its own expense, make such copies of and excerpts
from the Records as it may deem desirable. All Records, whether held by the
Company or SUBJECT BANK, shall be maintained for such periods as are required by
law, unless the parties shall, applicable law permitting, agree in writing to a
different period.
4.9 CERTAIN OPERATING COVENANTS. Without the Company's prior written
consent (which consent, in the case of Sections 4.9.9 through 4.9.14, shall not
be unreasonably withheld or delayed), SUBJECT BANK shall not:
4.9.1 declare or make any payment or distribution with respect to its
capital stock or other securities, whether by way of payment of interest or
principal, redemption, dividend or otherwise;
4.9.2 (a) create, authorize, issue, sell or deliver any of its capital
stock, bonds or other of its securities (whether authorized and unissued or
held in treasury) or any instrument convertible into any of them; (b) grant
or otherwise issue any options, warrants or other rights with respect
thereto; (c) amend the terms of any rights with regard to the SUBJECT BANK
securities; or (d) split up, combine or reclassify any of its outstanding
stock;
4.9.3 acquire, by merging or consolidating with, by purchasing a
substantial equity interest in or a substantial portion of the assets of, or
by any other manner, any business, including any corporation, partnership,
association or other business organization or division thereof;
4.9.4 excepting those matters identified on Exhibit 4.9.4, (a) create,
renew, amend or terminate, or give notice of a proposed renewal, amendment
or termination of, any material contract, agreement or lease for goods,
services or office space to which the applicable Party is a party or by
which the applicable Party or any of its properties is bound, excepting only
contracts, agreements and leases under which the aggregate annual payments
by either party do not exceed $50,000, (b) make any single capital
expenditure exceeding $50,000 or any capital expenditures exceeding $100,000
in the aggregate, or (c) relocate or terminate, or file any application to
relocate or terminate, the operations of any of its banking offices;
4.9.5 enter into any new line of business;
4.9.6 change its methods of accounting in effect at December 31, 1997,
except as required by changes in GAAP or RAP as concurred with by the
applicable Party's independent auditors;
4.9.7 commit any act or omission which constitutes a Violation of any
Law, Regulatory Agreement or any material contract or license to which the
applicable Party is a party or by which it or any of its properties is bound
which Violation, individually or in the aggregate, has or reasonably could
be expected to have a Material Adverse Effect on such Party;
4.9.8 make any equity investment in any real estate or real estate
development project, other than in connection with foreclosures, settlements
in lieu of foreclosure or troubled loan or debt restructurings in the
ordinary course of business consistent with prudent banking practices;
4.9.9 sell, lease, assign, transfer or otherwise dispose of any property
or asset, except for (a) investment portfolio transactions in the ordinary
course of business and substantially consistent with past practice; and (b)
sales of assets having a gross book value not in excess of $50,000
individually or $100,000 in the aggregate;
4.9.10 (a) enter into any agreement with any labor union or association
representing any employee, (b) institute, amend or terminate any Benefit
Plan, (c) pay any pension or retirement allowance to any Person not required
by an existing plan or agreement, (d) except as set forth on Schedule
3.1.13, increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any officer or employee other than customary annual (or
less frequent) increases in the wages
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or salaries of non-officer employees consistent with past practice, which
increases on an annualized basis do not increase the salary or wage of any
individual employee by more than 5% and in the aggregate do not increase
personnel costs for all non-officer employees by more than 2% over the
levels in effect as of December 31, 1997, (e) increase any other direct or
indirect compensation or employee benefit for or to any of its officers,
directors or employees, or (f) purchase, enter into a new lease for, or
extend or renew any lease for, any automobile for any employee of SUBJECT
BANK;
4.9.11 make, amend or compromise any loan or advance (whether in cash or
other property) to any officer, to any director, or to any holder of record
or beneficial owner of 3% or more of the SUBJECT COMPANY Common Stock,
except advances made to employees in the usual, regular and ordinary course
of business consistent with the past practice;
4.9.12 (a) make, amend or renew, or enter into any commitment to make,
amend or renew, any loan if, as a result of the disbursement of the proceeds
of such loan, the total Borrower Group Obligations (including accrued and
unpaid interest) of the borrower to the applicable Party would exceed
$300,000 with respect to unsecured loans or $500,000 with respect to secured
loans, except that if the Company does not grant or refuse its consent or
reasonably request additional information regarding such proposed loan
within five Business Days of the Company's receipt of SUBJECT BANK's request
for consent, then such the Company shall be deemed to have granted its
consent; or (b) amend or renew, or enter into any commitment to amend or
renew, any Criticized Asset with an unpaid balance (including accrued and
unpaid interest) in excess of $250,000;
4.9.13 incur any indebtedness for borrowed money, or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, in each
case except in the usual, regular and ordinary course of business consistent
with the past practice, it being understood and agreed that the creation of
deposit liabilities, purchases of federal funds, sales of certificates of
deposit and entering into repurchase agreements shall be deemed to be in the
ordinary course of business so long as the maturity of such indebtedness
does not exceed (a) 24 months in the case of retail certificates of deposit
in amounts of $100,000 or less, and (b) 12 months in the case of all other
such indebtedness;
4.9.14 restructure or materially change its investment securities
portfolio through purchases, sales or otherwise, or the manner in which the
portfolio is classified or reported, it being understood and agreed that
investment portfolio transactions in the ordinary course of business and
substantially consistent with past practice shall be deemed to constitute a
material change in a Party's investment portfolio only if the number and/or
nature of such transactions causes a material change in the makeup of the
portfolio taken as a whole; or
4.9.15 enter into any agreement or commitment to do any of the
foregoing.
4.10 CERTAIN COVENANTS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Company shall not take any
action which would prevent or impede the Merger from qualifying for pooling of
interests accounting treatment and as a reorganization within the meaning of
Section 368 of the Code; PROVIDED, HOWEVER, that nothing herein shall limit the
ability of the Company to exercise its rights under the SUBJECT BANK Stock
Option Agreement. The Company shall use all commercially reasonable efforts to
cause the Company Common Stock, including without limitation, the Company Common
Stock to be received by SUBJECT BANK Shareholders in the Merger, to be listed on
the Nasdaq NMS as soon as practical after the Closing.
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4.11 COVENANTS REGARDING EMPLOYEES, DIRECTORS AND OFFICERS.
4.11.1 EMPLOYEE BENEFIT PLANS. (a) The Company agrees to provide the
employees of SUBJECT BANK (the "SUBJECT BANK Employees") who remain employed
after the Closing Date (collectively, the "Transferred SUBJECT BANK
Employees") with the types and levels of employee benefits maintained by the
Company for similarly situated employees of the Company or the Bank. As soon
as administratively practicable after the Effective Time, the Company shall
permit the Transferred SUBJECT BANK Employees to participate in the
Company's group hospitalization, medical, life and disability insurance
plans, defined benefit pension plan, thrift plan, severance plan and similar
plans, on the same terms and conditions as applicable to comparable
employees of the Company and the Bank (including the waiver of pre-existing
conditions, restrictions, exclusions or limitations), giving the Transferred
SUBJECT BANK Employees full credit for all "years of service," as that term
is defined in Section 411(a)(5) of the Code, with SUBJECT BANK and its
subsidiaries (to the extent SUBJECT BANK gave effect) as if such service
were with the Company, for purposes of eligibility, vesting and calculation
of benefits under vacation, severance and other plans, but not for benefit
accrual for any other purpose.
(b) Compensation Arrangements. Following the Effective Time, the
Company shall honor and shall cause each of its subsidiaries to honor in
accordance with their terms all individual employment and other
compensation agreements existing prior to the execution of this
Agreement, which are between SUBJECT BANK and any current or former
director, officer or employee thereof, and which have been disclosed in
the Disclosure Schedule, except as the same are modified by the Executive
Compensation Amendments, and the Company will not, and will not cause any
of its subsidiaries to, challenge the validity of any obligation of
SUBJECT BANK under any employment, consulting, supplemental retirement or
other compensation, contract or arrangement with any current or former
director, officer or employee of SUBJECT BANK, provided such contract or
arrangement was set forth in the Disclosure Schedule.
(c) Continuation of Plans. Notwithstanding anything to the contrary
contained herein, the Company shall have sole discretion with respect to
the determination as to whether to terminate, merge or continue any
employee benefit plans and programs of SUBJECT BANK to the extent
permitted by and in accordance with the terms of such plans and programs;
PROVIDED, HOWEVER, that the Company shall continue to maintain SUBJECT
BANK plans (other than stock based or incentive plans) until SUBJECT BANK
Employees are permitted to participate in the Company's plans in
accordance with this Section 4.11.1. Nothing in this Agreement shall
alter or limit the Company's obligations, if any, under ERISA, as amended
by the Consolidated Omnibus Budget Reconciliation Act of 1985 and/or the
Health Insurance Portability and Accountability Act of 1996 with respect
to the rights of SUBJECT BANK Employees and their qualified beneficiaries
in connection with the group health plan maintained by SUBJECT BANK as of
the Effective Time.
4.11.2 INDEMNIFICATION. (a) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer or employee of SUBJECT BANK (collectively, the
"Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to
(i) the fact that he or she is or was a director, officer or employee of
SUBJECT BANK or any of its predecessors or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate
and use all commercially reasonable efforts to defend against and respond
thereto. It is understood and agreed that after the Effective Time, the
Company shall indemnify and hold harmless, as
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and to the fullest extend permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final disposition
of any claim, suit, proceeding or investigation to each Indemnified Party to
the fullest extent permitted by law upon receipt of any undertaking required
by applicable law), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with the
Company; provided, however, that (a) the Company shall have the right to
assume the defense thereof and upon such assumption the Company shall not be
liable to any Indemnified Party for any legal expenses of other counsel or
any other expenses subsequently incurred by any Indemnified Party of any
legal expenses of other counsel or any other expenses subsequently incurred
by any Indemnified Party in connection with the defense thereof, except that
if the Company elects not to assume such defense, or counsel for the
Indemnified Parties reasonably advised the Indemnified Parties that there
are issues which raise conflicts of interest between the Company and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with the Company, and the Company
shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (b) the Company shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties,
(c) the Company shall not be liable for any settlement without its prior
written consent (which consent shall not be unreasonably withheld) and (d)
the Company shall have no 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
indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 4.11.2, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company thereof,
provided that the failure to so notify shall not affect the obligations of
the Company under this Section 4.11.2 except to the extent such failure to
notify materially prejudices the Company. The Company's obligations under
this Section 4.11.2 continue in full force and effect for a period of six
(6) years from the Effective Time; PROVIDED, HOWEVER, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
(b) In the event the Company or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors
and assigns of the Company assume the obligation set forth in this
section.
4.11.3 TAIL INSURANCE. The Company shall obtain so-called "tail
insurance" with respect to SUBJECT BANK's directors and officers liability
insurance policy for a three-year period following the Effective Time so
long as the premium therefor does not exceed one hundred fifty (150) percent
of the 1998 premium for SUBJECT BANK's directors and officers liability
insurance.
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ARTICLE V.
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The obligations of the
Company and SUBJECT BANK to consummate the Merger are subject to the
satisfaction of each of the following conditions:
5.1.1 APPROVAL BY SHAREHOLDERS. The Merger shall have been approved by
the affirmative vote of the holders of a majority of all shares of SUBJECT
BANK Common Stock entitled to vote thereon and the affirmative vote of the
holders of a majority of all shares of the Company Common Stock entitled to
vote thereon.
5.1.2 REGULATORY APPROVALS. All necessary approvals of any Governmental
Entity required for the consummation of the Merger (including the SUBJECT
BANK Governmental Approvals and the Company Governmental Approvals) shall
have been obtained and shall remain in full force and effect; all statutory
or other required waiting periods in respect thereof shall have expired; and
no approval of any Governmental Entity shall have imposed any condition or
requirement which, in the reasonable opinion of the Company, would so
materially adversely affect the economic or business benefits to the Company
of the Merger so as to render inadvisable the consummation thereof.
5.1.3 EFFECTIVENESS OF S-4 REGISTRATION STATEMENT; LISTING OF
STOCK. The S-4 Registration Statement shall have become effective under the
Securities Act, no stop order suspending its effectiveness shall have been
issued, and no proceedings for that purpose shall have been initiated or
shall be threatened by the SEC.
5.1.4 NO PENDING OR THREATENED CLAIMS. There shall be no claim, action,
suit, investigation or other proceeding pending or overtly threatened before
any court or other Governmental Entity that presents a substantial risk of
restraint or prohibition of the Merger, or the obtaining of material damages
from SUBJECT BANK or the Company or their respective officers or directors
in connection therewith; and no such restraint or prohibition shall be
effective as of the Closing, whether or not the action in which the same was
entered shall remain pending.
5.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Merger are further subject to the satisfaction of, or
the Company's written waiver of, each of the following conditions:
5.2.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
COVENANTS. SUBJECT BANK's representations and warranties contained in this
Agreement shall have been true and correct as of the dates when made, and
SUBJECT BANK shall have performed, satisfied and complied with, in all
material respects, each of its agreements and covenants contained in
Articles II and IV and elsewhere in this Agreement.
5.2.2 BRINGDOWN OF REPRESENTATIONS AND WARRANTIES. SUBJECT BANK's
representations and warranties contained in this Agreement remain true and
correct as of the Closing as though made at and as of the Closing, excepting
only representations and warranties which speak expressly as of an earlier
specified date.
5.2.3 SUBJECT BANK COMMON STOCK OUTSTANDING. There shall be no shares
of SUBJECT BANK Common Stock or other SUBJECT BANK securities issued and
outstanding as of the Effective Time other than the 767,342 shares issued
and outstanding as of the date hereof.
5.2.4 DISSENTING SUBJECT BANK SHARES. The aggregate number of shares of
SUBJECT BANK Common Stock owned by Persons who have made a demand for
purchase under Section 1301 of the California Corporation Code shall
constitute less than 5% of all shares of
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SUBJECT BANK Common Stock outstanding as of the date of the meeting of the
SUBJECT BANK Shareholders called for the purpose of voting on the Merger.
5.2.5 UNSATISFACTORY REGULATORY REVIEW. SUBJECT BANK shall not have
received between the date of this Agreement and the Closing an
"unsatisfactory" rating in any supervisory, CRA or compliance exam conducted
by any Regulatory Authority.
5.2.6 TAX AND ACCOUNTING OPINIONS. The Company shall have received (a)
an opinion of Nutter, McClennen & Fish, LLP, the Company's tax counsel,
addressed to the Company's Boards of Directors and dated as of the Closing
Date, substantially to the effect that, based upon representations,
assumptions and conditions customary for transactions such as the Merger,
the Merger should be treated for federal income tax purposes as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Code and that Merger Sub and SUBJECT BANK will each be a party to
such reorganization within the meaning of Section 368(b) of the Code; and
(b) an opinion of PricewaterhouseCoopers LLP addressed to the Company's
Board of Directors and dated as of the Closing Date, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment;
PROVIDED, HOWEVER, that this condition shall not constitute a basis for
termination by the Company if it has taken any action that prevents either
such opinion from being rendered.
5.2.7 THIRD PARTY CONSENTS. The consent, approval or waiver of each
Person (other than the Governmental Entities referred to in Section 5.1.2)
whose consent, approval or waiver shall be required in order to permit the
consummation of the Merger or the preservation of the contractual rights of
SUBJECT BANK with respect to its business shall have been obtained except
where the failure to obtain such consent, approval or waiver would not
materially adversely affect the economic or business benefits to the Company
of the Merger contemplated by this Agreement, so as to render inadvisable
the consummation of the Merger in the reasonable judgment of the Company.
5.2.8 RECEIPT OF OFFICERS' CERTIFICATES. SUBJECT BANK shall have
delivered to the Company (a) a certificate, executed by the President and
Chief Financial Officer of SUBJECT BANK and dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 5.1
(with regard to SUBJECT BANK only) and Section 5.2, including a
certification that each representation or warranty of SUBJECT BANK contained
in Article III is true and correct as of the Closing Date (or, if such
certification cannot be made, specifying the exceptions thereto), excepting
only representations and warranties which speak expressly as of an earlier
specified date, and (b) a certificate, executed by the Chief Financial
Officer of SUBJECT BANK and dated as of not more than three (3) Business
Days prior to the Closing Date, containing, and certifying to the accuracy
of, the same information required to be included on Part A of Schedule
3.1.11 had such Schedule been delivered as of the date of such certificate.
5.2.9 NONCOMPETITION AGREEMENT. Each director of SUBJECT BANK that is
not an employee of SUBJECT BANK shall have executed and delivered to the
Company a Nondisclosure and Noncompetition Agreement substantially in the
form attached hereto as Exhibit 5.2.9.
5.2.10 DOCUMENTS AND INSTRUMENTS IN SATISFACTORY FORM. All corporate
and other proceedings in connection with this Agreement and with the Merger
and all documents and instruments incidental to the Merger shall be
reasonably satisfactory in substance and form to the Company and its
counsel, and the Company and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as they
may reasonably request.
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5.3 CONDITIONS TO THE OBLIGATIONS OF SUBJECT BANK. The obligations of
SUBJECT BANK to consummate the Merger are further subject to the satisfaction
of, or SUBJECT BANK's written waiver of, each of the following conditions:
5.3.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
COVENANTS. The Company's representations and warranties contained in this
Agreement shall have been true and correct as of the dates when made, and
the Company shall have performed, satisfied and complied with, in all
material respects, each of its agreements and covenants contained in
Articles II and IV and elsewhere in this Agreement.
5.3.2 BRINGDOWN OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties contained in this Agreement remain true and
correct as of the Closing as though made at and as of the Closing, excepting
only representations and warranties which speak expressly as of an earlier
specified date.
5.3.3 DELIVERY OF SHARES TO EXCHANGE AGENT. The Company shall have
issued and delivered to the Exchange Agent one or more certificates
representing the full number of shares of Company Common Stock issuable to
the holders of SUBJECT BANK Common Stock as Merger Consideration.
5.3.4 TAX AND ACCOUNTING OPINIONS. SUBJECT BANK shall have received (a)
an opinion of SUBJECT BANK's tax counsel or tax accountants, addressed to
SUBJECT BANK's Boards of Directors and dated as of the Closing Date,
substantially to the effect that, based upon representations, assumptions
and conditions customary for transactions such as the Merger, the Merger
should be treated for federal income tax purposes as a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code and that
Merger Sub and SUBJECT BANK will each be a party to such reorganization
within the meaning of Section 368(b) of the Code; and (b) an opinion of
Grant Thornton LLP addressed to the SUBJECT BANK's Board of Directors and
dated as of the Closing Date, to the effect that the Merger will qualify for
"pooling of interests" accounting treatment; PROVIDED, HOWEVER, that this
condition shall not constitute a basis for termination by SUBJECT BANK if it
has taken any action that prevents either such opinion from being rendered.
5.3.5 RECEIPT OF OFFICERS' CERTIFICATE. SUBJECT BANK shall have
received from the Company a certificate, executed by the President and Chief
Financial Officer of the Company and dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 5.1
(with regard to the Company only) and Section 5.3, including a certification
that each representation or warranty of the Company contained in Article III
is true and correct as of the Closing Date (or, if such certification cannot
be made, specifying the exceptions thereto), excepting only representations
and warranties which speak expressly as of an earlier specified date.
5.3.6 DOCUMENTS AND INSTRUMENTS IN SATISFACTORY FORM. All corporate and
other proceedings in connection with this Agreement and with the Merger and
all documents and instruments incidental to the Merger shall be reasonably
satisfactory in substance and form to SUBJECT BANK and its counsel, and
SUBJECT BANK and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
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ARTICLE VI.
TERMINATION; TERMINATION FEE
This Agreement may be terminated, and the Merger abandoned, prior to the
Closing by the following means and with the following effects:
6.1 BY MUTUAL AGREEMENT. SUBJECT BANK and the Company may terminate this
Agreement by mutual written consent at any time.
6.2 REGULATORY IMPEDIMENT. Either the Company (on behalf of itself and
Merger Sub) or SUBJECT BANK may unilaterally terminate this Agreement at any
time prior to the Closing if (a) a Bank Regulator shall have made a final
determination denying an application of either Party the granting of which is
essential to the consummation of the Merger, or (b) the occurrence of the
Closing would violate any final order, decree or judgment of any court having
competent jurisdiction.
6.3 BY THE COMPANY. The Company may unilaterally terminate this Agreement:
6.3.1 if SUBJECT BANK has breached any representation or warranty
contained in this Agreement, or has failed to perform, satisfy or comply
with in any material respect any of its agreements and covenants contained
in this Agreement (other than as described in Section 6.2.2), such
termination to take effect fifteen (15) Business Days following notice to
SUBJECT BANK identifying such breach if such breach has not been cured prior
to the expiration of such period;
6.3.2 upon notice to SUBJECT BANK if (a) SUBJECT BANK has not reaffirmed
its intent to proceed with the Merger pursuant to Section 4.1.3 following
its receipt of a Qualifying Strategic Transaction Proposal, or (b) its Board
of Directors fails to give its Recommendation of Approval to the holders of
the SUBJECT BANK Common Stock, or withdraws its Recommendation of Approval
prior to the affirmative vote of such shareholders, whether or not such
failure or withdrawal is permitted under Section 4.2.3, PROVIDED that in the
case of a termination under this Section 6.3.2, the Company shall be
entitled to receive from SUBJECT BANK the Termination Fee, which shall be
the Company's sole and exclusive remedy against SUBJECT BANK at law or in
equity;
6.3.3 upon notice to SUBJECT BANK if any of the conditions to the
obligations of the Company contained in Section 5.2 has not been satisfied
as of the Closing Date;
6.3.4 upon notice to SUBJECT BANK at any time after 12:00 noon (Pacific
time) on April 30, 1999, if the Closing shall not have occurred prior to
such date and time, unless such failure results primarily from the Company
breaching any of its representations, warranties, covenants or agreements
contained in this Agreement, PROVIDED, that if the basis for such
termination is the failure of the SUBJECT BANK Shareholders to approve the
Merger, the Company shall be entitled to receive from SUBJECT BANK the
Termination Fee, which shall be the Company's sole and exclusive remedy
against SUBJECT BANK at law or in equity;
6.4 BY SUBJECT BANK. SUBJECT BANK may unilaterally terminate this
Agreement:
6.4.1 if the Company has breached any representation or warranty
contained in this Agreement, or has failed to perform, satisfy or comply
with in any material respect any of its agreements and covenants contained
in this Agreement, such termination to take effect fifteen (15) Business
Days following notice to the Company identifying such breach if such breach
has not been cured prior to the expiration of such period;
6.4.2 upon notice to the Company if SUBJECT BANK receives a Qualifying
Strategic Transaction Proposal; PROVIDED, HOWEVER, that a condition to the
effectiveness of any termination pursuant to this Section 6.4.2 is the
payment of the Termination Fee to the Company by SUBJECT BANK;
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6.4.3 upon notice to the Company if the SUBJECT BANK Shareholders fail
to approve the Merger at the meeting of the SUBJECT BANK Shareholders called
for the purpose of voting on the Merger; PROVIDED, HOWEVER, that a condition
to the effectiveness of any termination pursuant to this Section 6.4.3 is
SUBJECT BANK's payment of the Termination Fee;
6.4.4 upon notice to the Company if any of the conditions to the
obligations of SUBJECT BANK contained in Section 5.3 has not been satisfied
as of the Closing Date; or
6.4.5 upon notice to the Company after 12:00 noon (Pacific time) on
April 30, 1999, if the Closing shall not have occurred prior to such date
and time, unless the failure results primarily from SUBJECT BANK breaching
any of its representations, warranties, covenants or agreements contained in
this Agreement; PROVIDED, HOWEVER, that if the basis for such termination is
the failure of the SUBJECT BANK Shareholders to approve the Merger, a
condition to the effectiveness of such termination is SUBJECT BANK's payment
of the Termination Fee.
6.5 TERMINATION FEE. The "Termination Fee" means Five Hundred Thousand
Dollars ($500,000) and the Company's expenses, in same day funds.
6.6 EFFECT OF TERMINATION; REMEDIES.
6.6.1 GENERAL. In the event this Agreement is terminated pursuant to
this Article VI, this Agreement shall become void and of no effect and
neither Party shall have any liabilities or other obligations whatsoever
hereunder, except that (a) the provisions of Section 4.3 relating to
Confidential Information, Article VI and Section 7.2 shall survive such
termination, and (b) notwithstanding anything else to the contrary contained
herein, neither Party shall be relieved of or released from any liability or
damages arising out of its breach of any provision of this Agreement prior
to such termination.
6.6.2 REMEDIES CUMULATIVE GENERALLY. No remedy made available by any of
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity.
ARTICLE VII.
MISCELLANEOUS
7.1 CLOSING. Unless the Parties shall mutually fix another date, the
Closing Date shall be on such Business Day as the Company shall select that is
not more than five Business Days after the Final Approval Date or such later
date on which the latest to occur of the conditions set forth in Section 5.1 is
satisfied. Subject to the fulfillment or waiver of those conditions and the
other conditions set forth in Article V, the Closing of the Merger shall take
place at the offices of SUBJECT BANK's counsel in Los Angeles, California, at
10:00 a.m. (local time) on the Closing Date. Except as otherwise provided
herein, all proceedings to be taken and all documents to be executed at the
Closing shall be deemed to have been taken, delivered and executed
simultaneously as of the Effective Time, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed.
7.2 EXPENSES. Except as expressly provided in Sections 6.3 and 6.4 with
respect to reimbursement of the Company's Expenses under certain circumstances,
each Party shall be responsible for its own Expenses.
7.3 PUBLICITY. Promptly following the execution and delivery of this
Agreement, SUBJECT BANK and the Company shall issue a joint press release in a
form mutually to be agreed upon. SUBJECT BANK and the Company shall not, and
shall instruct their Representatives not to, issue or cause the
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publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, this Agreement or the Merger
without the consent of the other Party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, in the event that either the Company or
SUBJECT BANK determines, based upon the advice of counsel, that a press release,
disclosure in a public filing, or other public disclosure of, or reference to,
this Agreement, the Merger or the Company is required by law, such Party shall
first notify the other of the potential disclosure, afford the other Party a
reasonable opportunity to review and comment on the proposed disclosure, and
obtain the other Party's approval of such disclosure, which approval shall not
be withheld or delayed in any manner that is unreasonable under the
circumstances.
7.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission
(with confirmation) or on the next business day after dispatch by an overnight
courier of national reputation to the respective Parties as follows:
If to the Company, to it at:
Eldorado Bancshares, Inc.
24012 Calle de la Plata, Suite 150
Laguna Hills, California 92653
Attention: Robert P. Keller, President & CEO
fax: (714) 891-8884
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Michael K. Krebs, Esquire
fax: (617) 973-9748
If to SUBJECT BANK, to it at:
Antelope Valley Bank
831 W. Lancaster Boulevard
Lancaster, California 93534
Attention: Clyde G. Golding, Chairman
fax: (805) 942-6093
with copies to:
King, Purtich, Holmes, Paterno & Berliner, LLP
1900 Avenue of the Stars, Suite 2500
Los Angeles, California 90067
Attention: Keith T. Holmes, Esq.
fax: (310) 282-8903
Fried, Bird & Crumpacker
10100 Santa Monica Boulevard
Los Angeles, California 90067
Attention: Jack Fried, Esq.
fax: (310) 556-4487
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<PAGE>
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
7.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the Parties and, supersedes all prior agreements, understandings, negotiations
and discussions, both written and oral, among the Parties with respect to the
subject matter hereof.
7.6 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements contained herein or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
except those covenants and agreements that by their express terms apply in whole
or in part to periods after the Effective Time.
7.7 BENEFITS; BINDING EFFECT; ASSIGNMENT AND DESIGNATION. This Agreement
shall be for the benefit of and binding upon the Parties, their respective
successors and, where applicable, assigns. No Party may assign this Agreement or
any of its rights, interests or obligations hereunder without the prior written
consent of the other Party. Notwithstanding any assignment or delegation of any
Party's rights, interests or obligations, each Party shall nonetheless remain
responsible for the performance of all of its obligations provided hereunder.
7.8 WAIVER. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly so provided.
7.9 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the Parties and their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
7.10 SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses, Sections or Articles contained in this Agreement shall not
affect the enforceability of the remaining portions of the Agreement or any part
hereof, all of which are inserted conditionally on their being valid in law. In
the event any one or more of the words, phrases, sentences, clauses, sections or
subsections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, section or sections, or
subsection or subsections, had not been inserted; PROVIDED, HOWEVER, that if any
provision is declared to be unenforceable because it is determined to be
overbroad, then, to the extent possible, in lieu of deletion such provision
shall be modified to the minimum extent necessary to render such provision
enforceable.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the several Parties in separate counterparts, each of which
shall be deemed to be one and the same instrument.
7.12 APPLICABLE LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE UNITED STATES AND THE INTERNAL LAW OF THE STATE OF
CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF) AND ALL
QUESTIONS CONCERNING THE VALIDITY AND CONSTRUCTION THEREOF SHALL BE DETERMINED
IN ACCORDANCE WITH THE LAWS OF SAID STATE. EACH PARTY HEREBY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN THE
STATE OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND HEREBY IRREVOCABLY AGREES, ON BEHALF OF ITSELF AND ON BEHALF
OF SUCH PARTY'S SUCCESSORS AND PERMITTED ASSIGNS, THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT
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AND IRREVOCABLY WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM.
7.13 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
IN WITNESS WHEREOF, the Parties have each executed and delivered this
Agreement as of the day and year first above written.
<TABLE>
<S> <C> <C>
ELDORADO BANCSHARES, INC.
ATTEST:
/s/MICHAEL K. KREBS By: /s/ROBERT P. KELLER
Secretary President & Chief Executive Officer
ANTELOPE VALLEY BANK
ATTEST:
/s/ROY J. SIMI By: /s/JACK D. SEEFUS
Secretary President & Chief Executive Officer
</TABLE>
THE FOREGOING SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER DATED AS OF
SEPTEMBER 16, 1998 BY AND BETWEEN ELDORADO BANCSHARES, INC. AND ANTELOPE VALLEY
BANK HAS BEEN RE-EXECUTED BY THE PARTIES AFTER THE ISSUANCE OF THE ORDER OF
EXEMPTION ISSUED BY THE CALIFORNIA DEPARTMENT OF FINANCIAL INSTITUTIONS ON
SEPTEMBER 22, 1998, WHICH ORDER OF EXEMPTION EXEMPTS THE EXECUTION OF THE
AGREEMENT AND PLAN OF MERGER FROM THE PROVISIONS OF SECTION 690 ET. SEQ. OF THE
CALIFORNIA FINANCIAL CODE.
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APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 16, 1998, between Antelope
Valley Bank, a California banking corporation (the "Issuer") and Eldorado
Bancshares, Inc., a Delaware corporation (the "Grantee").
WHEREAS, the Grantee and the Issuer have entered into an Agreement and Plan
of Merger of even date herewith (as amended and in effect from time to time, the
"Acquisition Agreement"), which agreement is being executed by the parties
thereto prior to the execution of this Agreement; and
WHEREAS, as a condition to the Grantee's entry into the Acquisition
Agreement and in consideration for such entry, the Issuer has agreed to grant to
the Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Acquisition Agreement, the parties
hereto agree as follows:
1. The Issuer hereby grants to the Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 152,700
fully paid and nonassessable shares (the "Option Shares") of common stock, no
par value per share, of the Issuer ("Common Stock") at a price of $43.25 per
share (the "Option Price"). The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment, as herein set forth, PROVIDED that, except as provided by Section 8
hereof, in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common
Stock (without giving effect to any shares of Common Stock issued pursuant to
the Option) less the number of shares previously issued pursuant to exercise of
the Option.
2. (a) The Holder (as such term is defined in paragraph (c) below) may
exercise the Option, in whole or in part, if, but only if, both an Initial
Triggering Event (as defined in paragraph (e) below) and a Subsequent
Triggering Event (as defined in paragraph (f) below) shall have occurred
prior to the occurrence of an Exercise Termination Event (as defined in
paragraph (b) below), PROVIDED that the Holder shall have sent the written
notice of such exercise (as provided in paragraph (h) of this Section 2)
within thirty (30) days following such Subsequent Triggering Event and prior
to the Exercise Termination Event.
(b) The term "Exercise Termination Event" shall mean the earliest of (i)
the Effective Time, (ii) any termination of the Acquisition Agreement in
accordance with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event, and (iii) in the event of any
termination of the Acquisition Agreement in accordance with the provisions
thereof after the occurrence of an Initial Triggering Event, the passage of
twelve (12) months after such termination. Upon the occurrence of an
Exercise Termination Event, this Option (or such portion hereof as to which
the holder has not theretofore given a notice of exercise in accordance with
paragraph (h) below) shall terminate and become void, without notice or
other action by any Person (the term "Person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder). Notwithstanding the termination of the
Option, the Grantee shall be entitled to purchase those Option Shares with
respect to which it has exercised the Option in whole or in part prior to
the termination of the Option.
(c) The term "Holder" shall mean the holder or holders of the Option.
(d) The term "Schedule 13G Investor" shall mean any person holding
voting securities of the Issuer eligible to report the beneficial ownership
of such securities on Schedule 13G pursuant to the provisions of Rule 13d-1
under the Exchange Act.
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(e) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof.
(i) The Issuer or any subsidiary of the Issuer, without having
received the Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction with any Person, other
than the Grantee or any subsidiary of the Grantee, or, without the
consent of the Grantee, the Board of Directors of the Issuer shall have
approved an Acquisition Transaction or recommended that the shareholders
of the Issuer approve or accept any Acquisition Transaction other than as
contemplated by the Acquisition Agreement. For purposes of this
Agreement, the term "Acquisition Transaction" shall mean (A) a merger or
consolidation, or any similar transaction, with the Issuer or any
Significant Subsidiary of the Issuer (as such term is defined in
Regulation S-X of the Securities and Exchange Commission), or any
subsidiary of the Issuer which, after such transaction, would be a
Significant Subsidiary of the Issuer, (B) a purchase, lease or other
acquisition of all or substantially all of the assets of the Issuer or
any Significant Subsidiary of the Issuer or (C) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing ten percent (10%) or more of the
voting power of the Issuer or any Significant Subsidiary of the Issuer;
(ii) Any Person, other than the Grantee or any subsidiary of the
Grantee or the Issuer in a fiduciary capacity, and other than a Schedule
13G Investor, shall have acquired beneficial ownership (as hereinafter
defined) or the right to acquire beneficial ownership of ten percent
(10%) or more of the outstanding shares of Common Stock if such Person
owned beneficially less than ten percent (10%) of the outstanding shares
of Common Stock on the date of this Agreement, or any Person shall have
acquired beneficial ownership of an additional three percent (3%) of the
outstanding shares of Common Stock if such Person owned beneficially ten
percent (10%) or more of the outstanding shares of Common Stock on the
date of this Agreement (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the Exchange Act, and in the rules and regulations thereunder);
(iii) (A) The holders of Common Stock shall not have approved the
Acquisition Agreement at the meeting of such shareholders held for the
purpose of voting on the Acquisition Agreement, (B) such meeting shall
not have been held or shall have been canceled prior to the termination
of the Acquisition Agreement unless the Grantee shall be in default of
any of its obligations under the Acquisition Agreement or the Issuer
shall be entitled to terminate the Acquisition Agreement pursuant to its
terms, or (C) the Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Director's with respect to the Acquisition Agreement, in each
case after it shall have been publicly announced or become publicly known
that (x) any Person, other than the Grantee or any subsidiary of the
Grantee, shall have made a bona-fide proposal to the Issuer or its
shareholders to engage in an Acquisition Transaction by public
announcement or written communication that shall be or become the subject
of public disclosure; or (y) any Person other than the Grantee or any
subsidiary of the Grantee, other than in connection with a transaction to
which the Grantee has given its prior written consent, shall have filed
an application or notice with the Federal Reserve Board or other federal
or state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction;
(iv) After any Person other than the Grantee or any subsidiary of
the Grantee has made a proposal to the Issuer or its shareholders to
engage in an Acquisition Transaction, the Issuer shall have breached any
covenant or obligation contained in the Acquisition Agreement and such
breach (A) shall remain uncured at the expiration of any applicable cure
period provided
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for under the Acquisition Agreement, (B) would entitle the Grantee to
terminate the Acquisition Agreement and (C) shall not have been remedied
prior to the Notice Date (as defined in paragraph (h) below); or
(v) Any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect
to, a tender offer or exchange offer to purchase any shares of Common
Stock such that, upon consummation of such offer, such person would own
or control 50% or more of the then outstanding shares of Common Stock
(such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively).
(f) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than a Schedule 13G
Investor) of beneficial ownership of fifteen percent (15%) or more of the
then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of paragraph (e) of this Section 2, except that the
percentage referenced in clause (C) thereof shall be fifteen percent
(15%) in lieu of ten percent (10%).
(g) The Issuer shall notify the Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of
such notice by the Issuer shall not be a condition to the right of the
Holder to exercise the Option.
(h) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to the Issuer a written notice prior to an Exercise
Termination Event (the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise, and (ii) a place and date not earlier
than three (3) business days nor later than sixty (60) business days from
the Notice Date for the closing of such purchase (the "Closing"); PROVIDED
that if prior notification to or approval of the Federal Reserve Board or
any other regulatory agency is required in connection with such purchase,
the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run instead from
the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. The term "business day" for purposes of
this Agreement means any day, excluding Saturdays, Sundays and any other day
that is a legal holiday in The Commonwealth of Massachusetts or a day on
which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive order to close.
(i) At the Closing, the Holder shall pay to the Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by a wire transfer to
a bank account designated by the Issuer, PROVIDED that failure or refusal of
the Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option.
(j) At such Closing, simultaneously with the delivery of immediately
available funds as provided in paragraph (i) above, the Issuer shall deliver
to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to the
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Issuer a copy of this Agreement and a letter agreeing that the Holder will
not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(k) Certificates for the Common Stock delivered at a Closing hereunder
may (in the sole discretion of the Issuer) be endorsed with a restrictive
legend that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTION PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF SEPTEMBER , 1998, A COPY OF WHICH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if the shares have
been sold or transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such legend. In
addition, such certificates shall bear any other legend as may be required
by law.
(l) Upon the giving by the Holder to the Issuer of the written notice of
exercise of the Option provided for under paragraph (h) above, the tender of
the applicable purchase price in immediately available funds and the tender
of a copy of this Agreement to the Issuer, such Holder shall be deemed to be
the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Issuer shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. The Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. The Issuer agrees (a) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without requiring the Issuer's
shareholders to approve an increase in the number of authorized shares of Common
Stock after giving effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock, (b) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by the Issuer, (c) promptly to take all action
as may from time to time be required (including without limitation cooperating
fully with any Holders in preparing any applications or notices required under
the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control
Act of 1978, as amended, or any state banking law), in order to permit such
Holders to exercise the Option and the Issuer duly and effectively to issue
shares of Common Stock pursuant hereto, and (d) promptly to take all action
provided herein to protect the rights of any Holders against dilution.
4. This Agreement (and the Option granted hereby) is exchangeable, without
expense, at the option of each Holder, upon presentation and surrender of this
Agreement at the principal office of the Issuer, for other Agreements providing
for Options of different denominations entitling the Holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by the Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification,
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and upon surrender and cancellation of this Agreement, if mutilated, the Issuer
will execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute for all purposes and under all
circumstances an additional contractual obligation on the part of the Issuer,
whether or not this Agreement so lost, stolen, destroyed or mutilated shall at
any time be enforceable by anyone.
5. The number of Option Shares shall be subject to adjustment from time to
time as provided in this Section 5.
(a) (i) In the event of any change in the shares of Common Stock by
reason of stock dividend, split up, merger, recapitalization,
subdivision, conversion, combination, exchange of shares or similar
transaction, the type and number of Option Shares, and the Option Price
therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that the Grantee
shall receive upon exercise of the Option the number and class of shares
or other securities or property that the Grantee would have held
immediately after such event if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable.
(ii) The Issuer may, at its election, make such increases in the
number of Option Shares, in addition to those required under subparagraph
(a)(i) above, as shall be determined by its Board of Directors to be
advisable in order to avoid taxation, so far as practicable, of any
dividend of stock or stock rights or any event treated as such for
federal income tax purposes to the recipients.
(b) Whenever the number of Option Shares (or other securities)
purchasable upon exercise hereof is adjusted as provided in this Section 5,
the Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which is equal to the number of Option Shares
prior to the adjustment and the denominator of which is equal to the number
of Option Shares (or other securities) purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within thirty (30) days of such Subsequent Triggering Event (whether
on the Grantor's own behalf or on the behalf of any subsequent Holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current, with respect to the Option and
the Option Shares, a "shelf" registration statement under Rule 415 of the
Securities Act or any successor provision, and Issuer shall use its best efforts
to qualify such shares under any applicable state securities laws; PROVIDED,
HOWEVER, that the Issuer shall have no obligation to file a registration
statement under the Securities Act with respect to the Option Shares if the
offer and sale of such common stock is exempt from the registration requirements
of the Securities Act pursuant to Section 3 thereof, including without
limitation Section 3(a)(2). Issuer will use all commercially reasonable efforts
to cause such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect sales or other dispositions of Option Shares.
Grantee shall have the right to demand one such registration. Any registration
statement prepared and filed under this Section 6, and any sales covered
thereby, shall be at Issuer's expense, except for underwriting discounts or
commissions, broker's fees and expenses and the fees and disbursements of
Grantee's counsel related thereto. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or Option Shares
as provided above, (i) Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and (ii) in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering, the inclusion of the Option or
Option Shares would interfere with the successful marketing of the shares
represented by the
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Option, the number of Option Shares otherwise to be covered in the registration
statement contem-
plated hereby may be reduced; PROVIDED, HOWEVER, that if such reduction occurs,
the Issuer shall file a registration statement for the balance as promptly as
practical and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for the Issuer.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, and subject in all events to
paragraph (c) hereof, (i) at the request of the Holder, delivered within
thirty (30) days following such occurrence (or such later period as provided
in Section 10), the Issuer shall repurchase the Option from the Holder at a
price (the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be
exercised, and (ii) at the request of any owner of Option Shares from time
to time (the "Owner"), delivered within thirty (30) days following such
occurrence (or such later period as provided in Section 10), the Issuer
shall repurchase such number of the Option Shares from such Owner as the
Owner shall designate at a price per share ("Option Share Repurchase Price")
equal to the greater of (A) the market/offer price and (B) the average
exercise price per share paid by the Owner for the Option Shares so
designated. The term "market/offer price" shall mean the highest of (w) the
price per share of the Common Stock at which a tender offer or exchange
offer therefor has been made, (x) the price per share of the Common Stock to
be paid by any Person, other than the Grantee or a subsidiary of the
Grantee, pursuant to an agreement with the Issuer, (y) the highest sale
price for shares of Common Stock within the six (6) month period immediately
preceding the required repurchase of Options or Option Shares, as the case
may be, or (z) in the event of a sale of all or substantially all of the
Issuer's assets, the sum of the price paid, after deducting therefrom all
related expenses, including taxes, in such sale for such assets and the
current market value of the remaining assets of the Issuer as determined by
a nationally recognized investment banking firm selected by a majority in
the interest of the Holders or the Owners, as the case may be, and
reasonably acceptable to the Issuer, divided by the number of shares of
Common Stock of the Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by a majority in interest of the Holders or the Owners, as the case
may be, and reasonably acceptable to the Issuer.
(b) Each Holder and Owner, as the case may be, may exercise its right to
require the Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to the Issuer, at its
principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating
that such Holder or Owner elects to require the Issuer to repurchase this
Option and/or Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within ten (10)
business days (the "Payment Date") after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto (the "Surrender Date"), the Issuer shall deliver or
cause to be delivered to each Holder the Option Repurchase Price and/or to
each Owner the Option Share Repurchase Price therefor or the portion thereof
that the Issuer is not then prohibited under applicable law and regulation
from so delivering in accordance with paragraph (c) hereof.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy or order, or as a
result of a written agreement or other binding obligation with a
governmental or regulatory body or agency (including without limitation
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any resolution of the Issuer's Board of Directors adopted at the direction
or request of any government or regulatory body or agency) (collectively,
"Regulatory Impediment"), from repurchasing the Option and/or the Option
Shares in full or to the extent that the Issuer would not have been
designated "Adequately Capitalized" (as such term is defined by the Issuer's
primary federal bank regulator) as of the last day of the Issuer's most
recent fiscal quarter had the Issuer repurchased the Option and/or the
Option Shares in full as of such date, the Issuer shall immediately so
notify each Holder and/or each Owner and thereafter deliver or cause to be
delivered, from time to time, to such Holder and/or Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
ten (10) business days after the date on which the Issuer is no longer so
prohibited or that the Issuer can deliver and remain designated "Adequately
Capitalized" within the meaning of this sentence; PROVIDED, HOWEVER, that if
the Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited from delivering as a
consequence of a Regulatory Impediment, or the delivery of which would cause
the Issuer not be designated "Adequately Capitalized" to any Holder and/or
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in part or in full (and the Issuer hereby
undertakes to use its best efforts to receive all required regulatory and
legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), such Holder or Owner may revoke its
notice of repurchase of the Option or the Option Shares either in whole or
to the extent of the prohibition, whereupon the Issuer shall promptly (i)
deliver to such Holder and/or Owner, as appropriate, that portion of the
Option Purchase Price or the Option Share Repurchase Price that the Issuer
is not prohibited from delivering or that the Issuer can deliver and remain
designated "Adequately Capitalized;" and (ii) deliver, as appropriate,
either (A) to such Holder, a new Stock Option Agreement evidencing the right
of such Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered
Stock Option Agreement was exercisable at the time of delivery of the notice
of repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to the Holder and the
denominator of which is the Option Repurchase Price, or (B) to such Owner, a
certificate for the Option Shares it is then so prohibited or restricted
from repurchasing.
8. (a) In the event that prior to an Exercise Termination Event, the Issuer
shall enter into an agreement (i) to consolidate with or merge into any
Person, other than the Grantee or one of the Grantee's subsidiaries, and the
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than the Grantee
or one of its subsidiaries, to merge into the Issuer and the Issuer shall be
the continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any
other property, or the then outstanding shares of Common Stock shall, after
such merger, represent less than fifty percent (50%) of the outstanding
shares and share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any Person,
other than the Grantee or one of the Grantee's subsidiaries, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Option shall upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election
of the Holder, of either (A) the Acquiring Corporation (as defined in
paragraph (b) below) or (B) any Person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) The term "Acquiring Corporation" shall mean (A) the continuing
or surviving corporation of a consolidation or merger with the Issuer (if
other than the Issuer), (B) the Issuer in
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a merger in which the Issuer is the continuing or surviving Person, and
(C) the transferee of all or substantially all of the Issuer's assets.
(ii) The term "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) The term "Assigned Value" shall mean the "market/offer price",
as defined in paragraph (a) of Section 7 hereof.
(iv) The term "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for the one (1) year period
immediately preceding the consolidation, merger or sale in question, but
in no event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale,
PROVIDED that if the Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by the Person merging into the Issuer or by any company which
controls such Person, as the Holder may elect.
(c) Except as set forth in (d) below, the Substitute Option shall have
the same terms as the Option, PROVIDED that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option, such terms
shall, to the extent legally permissible, be as similar as possible to, and
in no event less advantageous to the Holder than, the terms of the Option.
The issuer of the Substitute Option shall also enter into an agreement with
the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of shares
of the Substitute Common Stock as is equal to (i) the product of (A) the
Assigned Value and (B) the number of shares of Common Stock for which the
Option is then exercisable, divided by (ii) the Average Price. The exercise
price of the Substitute Option per share of the Substitute Common Stock
shall then be equal to the Option Price multiplied by a fraction in which
the numerator is the number of Option Shares, as adjusted pursuant to this
Section 8(d), and the denominator is the number of shares of the Substitute
Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option (without giving effect to any shares of Substitute Common
Stock issued pursuant to the Substitute Option) less the number of shares
previously issued pursuant to the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but for this paragraph
(e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to the Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in this
paragraph (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this paragraph (e). The difference in value
shall be determined by a nationally recognized investment banking firm
selected by a majority in interest of the Holders or the Owners, as the case
may be.
(f) The Issuer shall not enter into any transaction described in
paragraph (a) of this Section 8 unless the Acquiring Corporation and any
Person that controls the Acquiring Corporation shall have assumed in writing
all the obligations of the Issuer hereunder.
9. (a) At the written request of the holder of the Substitute Option (the
"Substitute Option Holder"), and subject to paragraph (c) below, the issuer
of the Substitute Option (the "Substitute Option Issuer") shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option,
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multiplied by the number of shares of the Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of each
owner (the "Substitute Share Owner") of shares of the Substitute Common
Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price per share (the "Substitute Share
Repurchase Price") equal to the greater of (A) the Highest Closing Price and
(B) the average exercise price per share paid by the Substitute Share Owner
for the Substitute Shares so designated. The term "Highest Closing Price"
shall mean the highest closing price for shares of the Substitute Common
Stock within the six (6) month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) Each Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that such Substitute Option Holder or Substitute
Share Owner elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any event
within five (5) business days after the surrender of the Substitute Option
and/or the certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor, or the portion(s) thereof which
the Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
or as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in full, the Substitute Option Issuer
shall immediately so notify each Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered, from
time to time, to the Substitute Option Holder and/or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price and
the Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five (5) business days after the date on
which the Substitute Option Issuer is no longer so prohibited, PROVIDED,
HOWEVER, that if the Substitute Option Issuer is, at any time after delivery
of a notice of repurchase pursuant to paragraph (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, or as a result of a written agreement or other
binding obligation with a governmental or regulatory body or agency, from
delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in part or in full (and the
Substitute Option Issuer shall use its best efforts to receive all required
regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or
the Substitute Shares either in whole or to the extent of the prohibition,
whereupon the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of
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shares of the Substitute Common Stock for which the surrendered Substitute
Option was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option Repurchase
Price LESS the portion thereof theretofore delivered to the Substitute
Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing.
10. The thirty (30) day period for exercise of certain rights under Sections
2, 6, 7 and 12 hereof shall be extended in each such case: (i) to the extent
necessary to obtain all Regulatory approvals for the exercise of such rights and
for the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the Exchange Act by reason
of such exercise, PROVIDED that notice of intent to exercise such rights shall
be given to the Issuer within the requisite thirty (30) day period and the
Grantee and the Holders shall use their best efforts to promptly obtain all
requisite approvals and cause the expiration of all requisite waiting periods.
11. The Issuer hereby represents and warrants to the Grantee as follows:
(a) The Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Issuer and no other corporate proceedings
on the part of the Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by the Issuer. This Agreement is the
valid and legally binding obligation of the Issuer, enforceable against the
Issuer in accordance with its respective terms, except that enforcement
thereof may be limited by the receivership, conservatorship and supervisory
powers of bank regulatory agencies generally as well as bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors rights generally and except that enforcement
thereof may be subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law) and
the availability of equitable remedies.
(b) The Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrances and security interests and not subject to any
preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other Person, whether by operation of law or otherwise, without the express
written consent of the other party, except that (a) the Grantee shall, at any
time, be permitted to assign its rights under this Option Agreement or the
Option created hereunder to any Affiliate (as defined in the Acquisition
Agreement) of the Grantee and (b) in the event a Subsequent Triggering Event
shall have occurred prior to an Exercise Termination Event, the Grantee may,
subject to the right of first refusal set forth in Section 13, assign, transfer
or sell in whole or in part its rights and obligations hereunder within thirty
(30) days following such Subsequent Triggering Event (or such later period as
provided in Section 9); PROVIDED, HOWEVER, that in the event the Grantee sells,
assigns or transfers all or a portion of the Option to other Holders as
permitted by this Agreement, the Grantee may exercise its rights hereunder on
behalf of itself and such Holders.
13. If at any time after the occurrence of a Subsequent Triggering Event
and, with respect to shares of Common Stock or other securities acquired by the
Grantee pursuant to an exercise of the
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Option, prior to the expiration of twenty-four (24) months after the date on
which the Option would have terminated but for its exercise pursuant to Section
2(b), the Grantee shall desire to sell, assign, transfer or otherwise dispose of
the Option, in whole or in part, or all or any of the shares of Common Stock or
other securities acquired by the Grantee pursuant to the Option, the Grantee
shall give the Issuer written notice of the proposed transaction (an "Offeror's
Notice"), identifying the proposed transferee, accompanied by a copy of a
binding offer to purchase the Option or such shares or other securities signed
by such transferee and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by the Grantee to the Issuer, which
may be accepted within ten (10) business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which the
Grantee is proposing to transfer the Option or such shares or other securities
to such transferee. The purchase of the Option or such shares or other
securities by the Issuer shall be settled within five (5) business days of the
date of the acceptance of the offer and the purchase price shall be paid to the
Grantee in immediately available funds, PROVIDED that, if prior notification to
or approval, consent or waiver of the Federal Reserve Board or any other
regulatory authority is required in connection with such purchase, the Issuer
shall promptly file the required notice or application for approval, consent or
waiver and shall expeditiously process the same (and the Grantee shall cooperate
with the Issuer in the filing of any such notice or application and the
obtaining of any such approval) and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which, as the case
may be, (a) the required notification period has expired or been terminated or
(b) such approval has been obtained and, in either event, any requisite waiting
period shall have passed. In the event of the failure or refusal of the Issuer
to purchase the Option or the shares or other securities, as the case may be,
covered by an Offeror's Notice or if the Federal Reserve Board or any other
regulatory authority disapproves the Issuer's proposed purchase of the Option or
such shares or other securities, the Grantee may, within sixty (60) days
following the date of the Offeror's Notice (subject to any necessary extension
for regulatory notification, approval, or waiting periods), sell all, but not
less than all, of the portion of the Option (which may be one hundred percent
(100%)) or such shares or other securities, as the case may be, proposed to be
transferred to the proposed transferee identified in the Offeror's Notice at no
less than the price specified and on terms no more favorable to the proposed
transferee than those set forth in the Offeror's Notice. The requirements of
this Section 13 shall not apply to (i) any disposition of the Option or any
shares of Common Stock or other securities by a Person to whom the Grantee has
assigned its rights under the Option with the prior written consent of the
Issuer, (ii) any sale by means of a public offering in which steps are taken to
reasonably ensure that no purchaser will acquire securities representing more
than five percent (5%) of the outstanding shares of Common Stock of the Issuer
or (iii) any transfer to a direct or indirect wholly-owned subsidiary of the
Grantee which agrees in writing to be bound by the terms hereof.
14. Each of the Grantee and the Issuer will use all reasonable efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended,
for approval to acquire the shares issuable hereunder.
15. Notwithstanding anything to the contrary herein, in the event that the
Holder or the Owner or any Related Person thereof (as hereinafter defined) is a
Person making an offer or proposal to engage in an Acquisition Transaction
(other than the transaction contemplated by the Acquisition Agreement), then (a)
in the case of a Holder or any Related Person thereof, the Option held by it
shall immediately terminate and be of no further force or effect, and (b) in the
case of an Owner or any Related Person thereof, the Option Shares held by it
shall be immediately repurchasable by the Issuer at the Option Price. For
purposes of this Agreement, a "Related Person" of a Holder or Owner means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
Exchange Act) of the Holder or the
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Owner and any Person that is required to file a Schedule 13D with the Holder or
the Owner with respect to shares of Common Stock or options to acquire the
Common Stock.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or the Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Sections 1(b) or 6(a)
hereof), it is the express intention of the Issuer to allow the Holder to
acquire or to require the Issuer to repurchase such lesser number of shares as
may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in Person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Acquisition Agreement.
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein, this Agreement contains
the entire agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Acquisition Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed as a sealed instrument on its behalf by its officers
thereunder duly authorized, all as of the day and year first above written.
ANTELOPE VALLEY BANK
By: /s/_JACK D. SEEFUS
Title: President and Chief Executive
Officer
ELDORADO BANCSHARES, INC.
By: /s/_ROBERT P. KELLER
Title: President and Chief Executive
Officer
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<PAGE>
APPENDIX C
CARPENTER & COMPANY
FIVE PARK PLAZA, SUITE 950 IRVINE, CA 92614-8527
TELEPHONE (949) 261-3888
September 14, 1998
Board of Directors
Antelope Valley Bank
831 West Lancaster Blvd.
Lancaster, CA 93534
Members of the Board:
In connection with that certain Acquisition and Merger Agreement effective
as of September 16, 1998 ("the Agreement") between Antelope Valley Bank (the
"Company") and Eldorado Bancshares ("Eldorado") pursuant to which the Company
will merge with Eldorado (the "Merger"), with Eldorado to be the surviving party
and the current shareholders of the Company to receive Eldorado common stock, in
a transaction in which the exchange ratio is fixed at 3.625 Eldorado shares for
each Company share of common stock, you have asked our opinion as to the
fairness from a financial point of view to the shareholders of the Company of
the consideration to be paid in the Merger ("the Merger Consideration").
In connection with our opinion, we have among other activities: (a) reviewed
certain publicly available financial and other data with respect to the Company
and Eldorado, including the consolidated financial statements for recent years
and for interim periods to June 30, 1998, and certain other relevant financial
and operating data relating to the Company made available to us from published
sources and from the internal records of the Company; (b) reviewed the terms of
the Agreement; (c) reviewed certain historical market prices and trading volume
of common stock of California banking companies; (d) compared the Company and
Eldorado from a financial point of view with certain other companies in the
industry which we deemed to be relevant; (e) considered the financial terms, to
the extent publicly available, of selected recent transactions which we deem to
be comparable, in whole or in part, to the Merger; (f) reviewed and discussed
with representatives of the management of the Company certain information of a
business and financial nature regarding the Company and Eldorado, including
financial forecasts and related assumptions of the Company and of Eldorado; (g)
made inquiries and held discussions on the Merger and the Agreement and other
matters relating thereto with the Company's counsel; and (h) performed such
other analyses and examinations and considered such other information, financial
analyses, and financial, economic and market criteria as we have deemed
appropriate and relevant.
In connection with our review, we have not independently verified any of the
foregoing information with respect to the Company or Eldorado. We have relied on
all such information provided by the Company and have assumed that all such
information is complete and accurate in all material respects. We have assumed
that there have been no material changes in the Company's or Eldorado'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 to the Company as to all legal matters with
respect to the Company, the Merger, and the Agreement. In addition, we have not
made an independent evaluation, appraisal or physical inspection of the assets
or individual properties of the Company or Eldorado, nor have we been furnished
with any such appraisals. We are not expressing any opinion as to the actual
value of Eldorado's common stock when issued to the Company
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shareholders pursuant to the Merger, or the prices at which Eldorado common
stock will trade subsequent to the Merger. Further, our opinion is necessarily
based upon economic, monetary, and market conditions existing as of the date
hereof. We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the ordinary course of our business, we represent aquirors and sellers of
financial institutions, and we have represented Eldorado as an acquiror in the
past. As partial compensation for those past services, we and/or our affiliates
were issued and continued to hold 33,302 shares of Eldorado Common Stock.
This opinion is furnished pursuant to our engagement letter dated April 13,
1998, and is solely for the benefit of the Board of Directors and stockholders
of the Company. In furnishing this opinion, we do not admit that we are an
expert with respect to any registration statement or other securities filing
within the meaning of the term "experts" as used in the Securities Act and the
rules and regulations promulgated thereunder. Nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act. Our opinion is directed to the Board of the Company, covers only
the fairness of the Merger Consideration from a financial point of view as of
the date hereof and does not constitute a recommendation to any holder of
Company Common Stock as to how such shareholder should vote concerning the
Merger. Except as provided in the engagement letter, this opinion may not be
used or referred to by the Company or quoted or disclosed to any person in any
manner without our prior written consent.
Based upon and subject to the foregoing, and in reliance thereon, it is our
opinion that, as of today's date, the Merger Consideration is fair to the
shareholders of the Company from a financial point of view.
Very truly yours,
SEAPOWER CARPENTER CAPITAL, INC.,
DBA CARPENTER & COMPANY
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APPENDIX D
CHAPTER 13. DISSENTER'S RIGHTS
1300 SHORT FORM MERGER; PURCHASE OF SHARES AT FAIR MARKET VALUE;
"DISSENTING SHARES" AND DISSENTING SHAREHOLDER
(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.
1301 DISSENTER'S RIGHTS; DEMAND ON CORPORATION FOR PURCHASE OF SHARES
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this
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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 shortform merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
1302 DISSENTING SHARES, STAMPING OR ENDORSING
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.
1303 DISSENTING SHAREHOLDER ENTITLED TO AGREED PRICE WITH INTEREST; 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 contractural 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.
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1304 DISSENTERS ACTIONS; JOINDER; CONSOLIDATION; 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 values 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.
1305 APPRAISERS DUTY AND REPORT; COURT JUDGEMENT; PAYMENT; APPEAL; COSTS OF
ACTION
(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).
1306 DISSENTING SHAREHOLDERS; EFFECT OF PREVENTION OF PAYMENT OF FAIR
MARKET VALUE
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
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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.
1307 DISSENTING SHARES, DISPOSITION OF DIVIDENDS
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.
1308 DISSENTING SHARES, RIGHTS AND PRIVILEGES
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.
1309 DISSENTING SHARES, LOSS OF 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.
1310 SUSPENSION OF CERTAIN PROCEEDINGS WHILE LITIGATION IS PENDING
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.
1311 CHAPTER INAPPLICABLE TO CERTAIN CLASSES OF 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.
1312 VALIDITY OF REORGANIZATION OR SHORT FORM MERGER, ATTACK ON;
SHAREHOLDERS' RIGHTS; BURDEN OF PROOF
(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
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of the reorganization or short-form merger, or to have the reorganization or
short-form merger set aside or rescinded, except in an action to test whether
the number of shares required to authorize or approve the reorganization have
been legally voted in favor thereof; but any holder of shares of a class whose
terms and provisions specifically set forth the amount to be paid in respect to
them in the event of a reorganization or short-form merger is entitled to
payment in accordance with those terms and provisions or, if the principal terms
of the reorganization are approved pursuant to subdivision (b) of Section 1202,
is entitled to payment in accordance with the terms and provisions of the
approved reorganization.
(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.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Eldorado is a Delaware corporation. Reference is made to Section 145 of the
Delaware General Corporation Law, as amended, which provides that a corporation
may indemnify any person who was or is a party to or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite an adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Eldorado's Certificate of Incorporation provides that Eldorado's directors
shall not be liable to Eldorado or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except to the extent that exculpation
from liability is not permitted under the Delaware General Corporation Law. The
provision does not eliminate liability of a director for any act or omission
occurring prior to the date on which the provision became effective.
Eldorado maintains an indemnification insurance policy covering all
directors and officers of Eldorado and its subsidiaries.
ITEM 21. EXHIBITS.
See the Exhibit Index immediately preceding the exhibits attached hereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
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(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 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.
(d) 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.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of the Delaware General Corporation Law
and the registrant's certificate of incorporation and by-laws, or otherwise, the
registrant 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. 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 a controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Laguna Hills, State of California, on the 13th day of
October, 1998.
ELDORADO BANCSHARES, INC.
By: /s/ ROBERT P. KELLER
-----------------------------------------
Robert P. Keller
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below on this Registration Statement hereby constitutes and appoints Robert P.
Keller, John L. Gordon, Curt A. Christianssen and Michael K. Krebs, and each of
them, with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-4 of the registrant, 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 fully to all intents and purposes as he or she might or
could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ ROBERT P. KELLER President, Chief Executive October 13, 1998
- ------------------------------ Officer and Director
Robert P. Keller
/s/ JOHN L. GORDON Executive Vice President, October 13, 1998
- ------------------------------ Treasurer and Chief
John L. Gordon Financial Officer
Director
- ------------------------------
Ernest J. Boch
Director
- ------------------------------
James A. Conroy
/s/ EDWARD A. FOX Director October 13, 1998
- ------------------------------
Edward A. Fox
Director
- ------------------------------
Charles E. Hugel
/s/ MITCHELL A. JOHNSON Director October 13, 1998
- ------------------------------
Mitchell A. Johnson
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ K. THOMAS KEMP Director October 13, 1998
- ------------------------------
K. Thomas Kemp
/s/ JEFFERSON W. KIRBY Director October 13, 1998
- ------------------------------
Jefferson W. Kirby
/s/ JOHN B. PETTWAY Director October 13, 1998
- ------------------------------
John B. Pettway
/s/ HENRY T. WILSON Director October 13, 1998
- ------------------------------
Henry T. Wilson
/s/ PAUL R. WOOD Director October 13, 1998
- ------------------------------
Paul R. Wood
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated September 16, 1998 by and between Eldorado and Antelope
(incorporated by reference to Eldorado's Current Report on Form 8-K filed with the Commission
on September 22, 1998)
3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Eldorado's
Current Report on Form 8-K/A filed with the Commission on July 11, 1997)
*3.2 Certificate of Amendment to Certificate of Incorporation
3.3 By-laws of Eldorado (incorporated by reference to Eldorado's September 30, 1996 Quarterly
Report on Form 10-Q)
*5 Opinion of Nutter, McClennen & Fish, LLP
*8.1 Opinion of Nutter, McClennen & Fish, LLP with respect to certain tax matters
10.1 1997 Stock Option Plan (incorporated by reference to Eldorado's Registration Statement on Form
S-8 (File no. 333-50835))
10.2 Amended and Restated Declaration of Trust of CSBI Capital Trust I (incorporated by reference to
Eldorado's Current Report on Form 8-K/A filed with the Commission on July 11, 1997)
10.3 Indenture between Eldorado and Wilmington Trust Company, dated as of July 15, 1997
(incorporated by reference to Eldorado's Current Report on Form 8-K filed with the Commission
on August 7, 1997)
10.4 Form of Junior Subordinated Debenture (incorporated by reference to Eldorado's Registration
Statement on Form S-4 (File no. 333-51179))
10.5 Form of Series A Capital Securities Guarantee (incorporated by reference to Eldorado's
Registration Statement on Form S-4 (File no. 333-51179))
10.6 Form of Subordinated Capital Income Security, Series A (incorporated by reference to Eldorado's
Registration Statement on Form S-4 (File no. 333-51179))
10.7 Employment Agreement by and between Eldorado and Robert P. Keller (incorporated by reference to
Eldorado's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1996)
*10.8 Employment Agreement by and between Eldorado Bank and Catherine C. Clampitt
*10.9 Employment Agreement by and between Eldorado Bank and Richard Korsgaard
*10.10 Employment Agreement by and between Eldorado Bank and William Rast
*10.11 Form of Severance Agreement between Eldorado and certain executive officers
*10.12 Warrant Agreement by and between Eldorado and Madison Dearborn
*10.13 Warrant Agreement by and between Eldorado and Olympus
10.14 Stock Option Agreement dated as of September 16, 1998 by and between Antelope and Eldorado
(incorporated by reference to Eldorado's Current Report on Form 8-K filed with the Commission
on September 22, 1998)
*21 Subsidiaries of Eldorado
+23.1 Consent of PricewaterhouseCoopers LLP
+23.2 Consent of Grant Thornton LLP
+23.3 Consent of KPMG Peat Marwick LLP
*23.4 Consent of Nutter, McClennen & Fish, LLP (contained in Exhibits 5 and 8.1)
+23.5 Consent of Carpenter & Company
+24 Power of Attorney (contained in the signature page to this Registration Statement)
*27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
+ Filed herewith.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Eldorado
Bancshares, Inc. and its subsidiaries of our report dated March 27, 1998
appearing on page F-1 of the issuer's Annual Report on Form 10-K, as amended,
for the year ended December 31, 1997. We also consent to the the references to
us under the headings "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
October 12, 1998
<PAGE>
EXHIBIT 23.2
We have issued our report dated January 23, 1998, accompanying the financial
statements appearing in the 1997 Annual Report of Antelope Valley Bank on Form
10-KSB/A, as amended, for the year ended December 31, 1997 which are
incorporated by reference in the Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the aforementioned
report and to the use of our name as it appears under the caption "Experts."
/s/ Grant Thornton LLP
Los Angeles, California
October 13, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
Eldorado Bancorp, Inc.
We consent to the incorporation by reference of our report dated February 5,
1997, relating to the consolidated balance sheets of Eldorado Bancorp and
subsidiary (the "Company") as of December 31, 1996 and 1995, and the
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1996, and to the
reference to our firm under the heading "Experts," which report appears in the
Form S-4 of Eldorado Bancshares, Inc.
Our report on the consolidated financial statements of the Company, dated
February 5, 1997, contains an explanatory paragraph that states that the Company
changed its method of accounting for investments in debt and equity securities
to adopt the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, "ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES," in 1994 and No. 114, "ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN", as amended by No. 118, "ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN -- INCOME RECOGNITION AND DISCLOSURES," in 1995.
/s/ KPMG PEAT MARWICK LLP
Orange County, California
October 14, 1998
<PAGE>
EXHIBIT 23.5
October 7, 1998
Board of Directors
Antelope Valley Bank
831 West Lancaster Blvd.
Lancaster, CA 93534
Re: Consent of Seapower Carpenter Capital, Inc.
d/b/a Carpenter & Company
Gentlemen:
We hereby consent to the inclusion in the Proxy Statement/Prospectus forming
part of this Registration Statement on Form S-4 of Eldorado Bancshares Inc. of
our opinion attached as Appendix B thereto and to the reference to such opinion
and to our firm therein. We also confirm the accuracy in all material respects
of the description and summary of such fairness opinion, the description and
summary of our analyses, observations, beliefs and conclusions relating thereto
set forth under the heading "Opinion of Bank's Financial Advisor" therein. In
giving such 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 1933
and the rules and regulations of the Securities and Exchange Commission issued
thereunder or (ii) that we are experts with respect to any part of the 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 herein.
Seapower Carpenter Capital, Inc.
d/b/a Carpenter & Company
By: /s/ John Flemming
Name: John Flemming
Title: President
Dated: 10/7/98
