As filed with the Securities and Exchange Commission on November 1, 2001
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
FIRST COMMUNITY BANCORP
(Exact Name of Registrant as Specified in Its Charter)
| CALIFORNIA (State or other jurisdiction of incorporation or organization) |
33-0885320 (I.R.S. Employer Identification No.) |
6110 El Tordo
Rancho Santa Fe, California 92067
(760) 918-2469
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
Matthew P. Wagner
President, Chief Executive Officer and Acting Chief Financial Officer
2310 Camino Vida Roble, Suite B
Carlsbad, California 92009
(760) 918-2469
(Name, address, including zip code, and telephone number, including area code, of agent for service)
with a copy to:
Stanley F. Farrar, Esq.
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
(310) 712-6600
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered |
Amount to Registered |
Proposed Maximum Aggregate Offering Price (3) |
Amount of Registration Fee |
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|---|---|---|---|---|---|---|
| Common Stock, no par value (1) | (2) | $20,000,000 | $5,000 | |||
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 that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any state in which the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 2001
Shares of Common Stock
First Community Bancorp
We are distributing to our shareholders of record at the close of business on December , 2001 subscription rights to purchase additional shares of common stock for a price of $ per share in cash. For each share of common stock you held as of the close of business on the record date, you will receive rights. You may purchase one share of common stock for each whole right you hold. We will not issue any fractional rights or cash in lieu of fractional rights. Instead, the number of rights you receive will be rounded up to the nearest whole number. If you fully exercise all rights issued to you, you will also be eligible for an oversubscription privilege to subscribe at the subscription price for additional shares of common stock that are not otherwise purchased pursuant to the exercise of rights. The subscription rights are non-transferable.
We are also currently negotiating certain standby purchase agreements that we expect to enter into prior to the commencement of the rights offering. Under these standby purchase agreements, certain institutional investors and high-net-worth individuals would agree to acquire from us, at the subscription price any common stock remaining after the exercise of rights and the satisfaction of all elections to exercise the oversubscription privilege.
Our directors and executive officers have indicated that they intend to exercise their basic subscription privileges and oversubscription privileges for an aggregate purchase price of approximately $ .
The rights will expire at 5:00 p.m., Pacific time, on January , 2002, unless extended at our sole discretion. You are encouraged to consider carefully the exercise of the rights prior to their expiration. Your election to exercise rights is irrevocable. We expect to make delivery of the common stock as soon as practicable after you validly exercise the corresponding rights.
Our common stock is traded on the Nasdaq National Market System under the symbol "FCBP". On October 31, 2001, the last reported sale price of our common stock was $20.50 per share.
See "Risk Factors" beginning on page 8 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
These securities are not savings or deposit accounts and are not insured by the Federal Deposit Insurance Corporation, Bank Insurance Fund, Savings Association Insurance Fund or any other governmental agency.
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Subscription price (1) |
Underwriting discounts and commissions |
Proceeds to First Community (2) |
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|---|---|---|---|---|---|---|---|---|
| Per Share value(1) | None | |||||||
| Total | $ | 20,000,000 | None | $ | 20,000,000 | |||
The date of this prospectus is , 2001.
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Page |
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| QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING | i | |
SUMMARY |
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RISK FACTORS |
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USE OF PROCEEDS |
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CAPITALIZATION |
12 |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS |
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WHERE TO FIND MORE INFORMATION |
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THE RIGHTS OFFERING |
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STANDBY PURCHASE AGREEMENTS |
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VALIDITY OF SECURITIES |
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EXPERTS |
24 |
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UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION |
F-1 |
No dealer, salesperson or other person is authorized to give any information or to make any representation not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy the rights or any of the securities offered hereby to any person or by anyone in any jurisdiction in which it is unlawful to make such offer or solicitation. The information contained in this prospectus supplement and the accompanying prospectus is current only as of its date.
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
What is a subscription right?
We have granted to our shareholders of record as of December , 2001 of a subscription right for each share of common stock they held on that date. Each whole subscription right you hold represents the privilege to purchase one additional share of our common stock for the subscription price of $ per share. We call this right the "basic subscription privilege."
May I purchase shares in addition to the basic subscription privilege?
If you exercise your basic subscription privilege in full and other stockholders do not elect to purchase all of the shares offered under their basic subscription privileges, you may elect to purchase a number of additional shares up to a maximum amount you specify. We call this right the "oversubscription privilege." If there are not enough shares available to fill all subscriptions for additional shares, we will allocate the available shares pro rata based on the number of shares of common stock you owned as of the record date. If we receive a payment from you that exceeds the amount necessary to purchase the shares available to allocate to you, we will refund any excess payment without interest as soon as practicable after completion of the offering.
Why are we offering the rights?
We are offering the rights and the common stock in order to raise a portion of the purchase price for the acquisition of Pacific Western National Bank, or Pacific Western. Pacific Western is a national banking association with five branches in Southern California. We expect to use the proceeds of this offering, together with those from a separate offering of trust preferred securities, to finance the $36.6 million purchase price of Pacific Western.
How soon must I act?
The rights expire at 5:00 p.m., Pacific time, on January , 2002. In order to participate in the offering, you must ensure that U. S. Stock Transfer Corporation, the subscription agent, actually receives all required documents and payments before that time and date.
Has the board of directors made a recommendation regarding this offering?
Neither our board of directors nor the board's special committee for the rights offering makes any recommendation to you about whether you should exercise your rights.
To whom may I direct questions or send forms and payment?
If you have questions about the rights or would like to request additional copies of offering documents, you may call the Shareholder Relations Department at U.S. Stock Transfer Corporation at (818) 502-1404.
You should return your subscription documents and payments to U.S. Stock Transfer Corporation at the address indicated in the instructions forwarded with this prospectus.
How are stockholders affected if they do not exercise any rights?
You are not required to exercise any rights or otherwise take any action in response to this rights offering. If you do not exercise any rights, the number of shares which you own will not change, but your percentage ownership of our total outstanding common stock will decline.
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What forms and payment are required to purchase shares?
If you were a record holder of our common stock on December , 2001, you are receiving with this prospectus a subscription warrant and instructions on how to purchase shares. The subscription warrant must be properly filled out and delivered before expiration of the rights with full payment for the number of shares you wish to purchase. The instructions also describe an alternate procedure called "Guaranteed Delivery," which allows you three extra days to deliver the subscription warrant if full payment is received before the expiration date and a securities broker or qualified financial institution signs the form to guarantee that the subscription warrant will be timely delivered.
What if a broker, bank or other nominee is the record holder of my shares?
If you hold your shares through a broker, bank or other nominee and you wish to purchase shares in the rights offering, please promptly contact the broker, bank or other entity holding your shares. Your broker or other nominee holder is the record holder of the shares you own and must either exercise the subscription warrant on your behalf for shares you wish to purchase or arrange for a subscription warrant issued in your name. We have requested all known brokers and banks to contact you for instructions on exercising your rights.
May I transfer my rights?
No. The rights are not transferable.
Must I pay the subscription price in cash?
In order to participate in the offering, you must timely pay the subscription price by wire transfer, certified or cashier's check drawn on a U.S. bank, or personal check that clears before expiration of the rights.
Will my money be returned if the rights offering is canceled?
Yes, but without any payment of interest.
What fees or charges apply if I do choose to exercise my rights?
We are not charging any fee or sales commission to issue rights to you or to issue shares to you if you exercise rights. If you exercise rights through a broker or other holder of your shares, you are responsible for paying any fees that person may charge.
May I change or cancel my exercise of rights after I send in the required forms?
No. Your election to exercise your rights is irrevocable.
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The following summary highlights information contained elsewhere in this prospectus. This summary is not intended to constitute a complete description of First Community Bancorp or a statement of all features of the rights offering. It may not contain all information that is important to you. You should carefully read this prospectus and the other documents to which we refer before deciding whether to purchase our common stock. See "Where to Find More Information" on page 14.
Business of First Community
First Community Bancorp, or First Community, is a California corporation registered under the Bank Holding Company Act of 1956, as amended. First Community's principal business is to serve as a holding company for its banking subsidiaries, Rancho Santa Fe National Bank, First Community Bank of the Desert and First Professional Bank, N.A. First Community was formed to operate Rancho Santa Fe National Bank, which is a federally chartered commercial bank organized in 1982. Rancho Santa Fe is a community bank serving the commercial, industrial, professional, real estate and private banking markets of San Diego County. In May 2000, First Community acquired First Community Bank of the Desert. First Community Bank of the Desert is a state-chartered commercial bank organized under the laws of California in 1980. First Community Bank of the Desert is a community bank that was established to serve the commercial, industrial, professional, real estate and private banking markets of San Bernardino and Riverside Counties. In January 2001, First Community acquired First Professional Bank, N.A., which is a federally chartered commercial bank organized in 1982. In October 2001, First Charter Bank, N.A., merged into First Professional. First Professional delivers value-added products and services that satisfy the financial services needs of its targeted customers.
Our principal executive offices are located at 6110 El Tordo, Rancho Santa Fe, California 92067. Our telephone number is (760) 918-2469.
Rancho Santa Fe National Bank
Rancho Santa Fe National Bank, a national banking association, commenced operations on March 2, 1982. Rancho Santa Fe is a member of the Federal Reserve System and its deposits are insured by the Federal Deposit Insurance Corporation up to the maximum limits prescribed by law. In addition to the main office in Rancho Santa Fe, Rancho Santa Fe operates three full-service offices located in Golden Triangle (University Towne Centre), Escondido and Carlsbad, all in San Diego County. In addition, it is an active participant in the Small Business Administration (SBA) guaranteed lending program through its lending department in San Diego.
Rancho Santa Fe concentrates on providing community banking services to, and serving the needs of, small and medium-sized businesses, professionals, local area residents and affluent individuals throughout San Diego County, with an emphasis on cultivating long-term overall banking relationships. Rancho Santa Fe also offers mortgage brokerage services. Rancho Santa Fe receives fees for packaging and processing loan applications for financing the purchase or refinance of single-family residences to several mortgage lenders for funding.
First Community Bank of the Desert
First Community Bank of the Desert opened in 1980 as Bank of Yucca Valley. First Community Bank of the Desert is an independent, commercial bank that accepts demand, savings and time deposits and makes commercial, real estate and consumer loans. First Community Bank of the Desert emphasizes consumer and small business banking. Most of First Community Bank of the Desert's depositors are consumers and small business customers.
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First Community Bank of the Desert issues cashier's checks and money orders, sells traveler's checks and provides other customary banking services. First Community Bank of the Desert also offers a variety of conventional Federal Housing Authority and department of Veterans Affairs residential real estate loan products as well as commercial loan products.
First Professional Bank, N.A.
First Professional Bank, N.A., or First Professional, commenced operations in August 1982 as a federally chartered commercial bank. First Professional Bank is a member of the Federal Reserve System and its deposits are insured by the Federal Deposit Insurance Corporation up to the maximum limits prescribed by law. In January 2001, First Professional Bank became a banking subsidiary of First Community when Professional Bancorp, Inc., the holding company of First Professional Bank, merged into First Community.
First Professional Bank's strategy is to deliver value-added products and services that satisfy the financial services needs of its targeted customers, primarily the health care services sector, emphasizing superior service and relationships. It provides a wide range of commercial banking products and services primarily directed towards the health care community, which includes physicians, independent practice associations, practice management companies, preferred provider organizations, medical billing management companies, home health agencies and hospital based practices.
First Professional Bank is engaged in the business of general commercial banking. The services which are offered include those traditionally offered by commercial banks, such as checking and savings accounts, time certificates of deposit, and commercial, consumer/installment, home equity and short-term real estate loans. First Professional Bank also offers cashier's checks, travelers checks, safe deposit boxes, night deposit facilities, wire transfers, notary services, courier services, mortgage brokering, merchant accounts and TouchTone Banking. The bank has five 24-hour automated teller machines located at its Santa Monica, Cedars Sinai Medical Center, Tarzana, Pasadena and Redlands facilities. Client access to First Professional Bank is also available through most ATM networks.
On October 8, 2001, we completed our acquisition of First Charter Bank, N.A., a federally chartered banking association. First Charter concentrated on servicing the banking needs of professional service firms, entrepreneurs, small-to medium-sized businesses and high net worth individuals and had two branches in West Los Angeles and Beverly Hills, California. First Charter merged with and into First Professional on October 8, 2001, with First Professional surviving.
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| The Rights | If you were a record holder of our common stock at the close of business on December , 2001, you will receive of a non-transferable subscription right for each share of common stock you held of record as of that date. The total number of rights you receive will be rounded up to the nearest whole number. Each right you hold will entitle you to purchase one share of common stock for a price of $ per share. We will sell an aggregate of up to shares of common stock in this offering. These shares will be sold either upon exercise of the rights or pursuant to the standby purchase agreements (described below). See "The Rights Offering—The Rights." | |
Basic Subscription Privilege |
You are entitled to purchase, at the subscription price, one share of common stock for each whole right you hold. See "The Rights Offering—Subscription Privileges—Basic Subscription Privilege." |
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Oversubscription Privilege |
If you exercise your basic subscription privilege in full and other stockholders do not elect to purchase all of the shares offered under their basic subscription privileges, you may also subscribe at the subscription price for a number of additional shares available after satisfaction of all subscriptions pursuant to the basic subscription privilege. If enough shares are not available to satisfy fully all exercises of the oversubscription privilege, then the available shares will be prorated among those holders who exercise their oversubscription privilege based upon the number of shares of common stock owned as of the record date. See "The Rights Offering—Subscription Privileges—Oversubscription Privilege." |
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Regulatory Limitation |
We will not be required to issue shares of common stock pursuant to the basic subscription privilege or the oversubscription privilege to any rights holder who, in our opinion, would be required to obtain prior clearance or approval from any state or federal bank regulatory authority to own or control such shares if, at the expiration of the rights offering, such clearance or approval has not been obtained or any required waiting period has not expired. See also "The Rights Offering—Regulatory Limitation." |
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Subscription Price |
The subscription price is $ per share. The subscription price will be payable in cash. See "The Rights Offering—Exercise of Rights" and "The Rights Offering—Determination of Subscription Price." |
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Shares of Common Stock Outstanding After Rights Offering |
As of the record date, we had shares of common stock outstanding. An aggregate of up to shares of common stock will be issued pursuant to the basic subscription privilege, the oversubscription privilege and the standby purchase agreements. If the rights offering is fully subscribed, a total of shares of common stock will be outstanding after consummation of the offering, assuming no exercise of any outstanding stock options. See "Capitalization." |
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Transferability of Rights |
The rights are not transferable. |
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Record Date |
December , 2001. |
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Expiration Time |
5:00 P.M., Pacific time, January , 2002, or such later time to which we may extend the rights offering. See "The Rights Offering—Expiration Time." |
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Procedure for Exercising Rights |
You may exercise your basic subscription privilege and your oversubscription privilege by properly completing the subscription warrant and forwarding it to the subscription agent (or following the guaranteed delivery procedures), with payment of the subscription price for all shares of common stock subscribed for. The subscription agent must actually receive the subscription warrant or notice of guaranteed delivery and payment at or prior to the expiration time. If you send subscription warrants by mail, you are urged to use insured, registered mail. |
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If the aggregate subscription price you pay is insufficient to purchase the number of shares that you indicate you are subscribing for, or if you do not indicate the number of shares you are subscribing for, then you will be deemed to have exercised the basic subscription privilege to purchase shares to the full extent of the payment you tender. If the aggregate subscription price you pay exceeds the amount necessary to purchase the number of shares you indicated your intention to subscribe, then you will be deemed to have exercised the oversubscription privilege to the full extent of the excess payment tendered. |
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Once you have exercised your basic subscription privilege or, if eligible, your oversubscription privilege, you may not revoke your exercise. |
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Any rights you have not exercised prior to the expiration time will expire and become worthless. See "The Rights Offering—Exercise of Rights." |
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Persons Holding Common Stock, or Wishing to Exercise Rights, Through Others |
If you hold shares of common stock and are receiving the rights through a broker, dealer, commercial bank, trust company or other nominee, or if you hold certificates for common stock but would prefer to have institutions effect transactions relating to the rights on your behalf, you should contact the appropriate institution or nominee and request it to effect those transactions for you. See "The Rights Offering—Exercise of Rights." |
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Issuance of Common Stock |
Certificates representing shares of common stock you have purchased pursuant to the basic subscription privilege will be delivered to you as soon as practicable after your valid exercise of the corresponding rights. If you purchase shares pursuant to the oversubscription privilege, delivery of certificates will occur as soon as practicable after we have received your payment and made all prorations and adjustments contemplated by the terms of the rights offering. See "The Rights Offering—Subscription Privileges." |
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Certain Federal Income Tax Consequences |
You will not recognize taxable income upon the receipt of the rights for U.S. federal income tax purposes. Your basis in the rights with respect to your common stock will be zero, unless either: |
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(1) the fair market value of the rights on the date of issuance is 15% or more of the fair market value (on the date of issuance) of the common stock with respect to which they are received, or |
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(2) you elect, on your federal income tax return for the taxable year in which the rights are received, to allocate part of the basis of the stock to the rights. |
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In either case, upon exercise of the rights, your basis in that common stock will be allocated between the common stock and the rights in proportion to the fair market values of each on the date of issuance. |
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You will not recognize any gain or loss upon the exercise of rights for common stock. Your basis in the common stock acquired through exercise of the rights will be equal to the sum of the subscription price and your basis in the rights. If you allow the rights to expire unexercised, you will not recognize any gain or loss, and no adjustment will be made to the basis of your common stock. If you allow rights to expire unexercised, you will recognize a loss equal to your basis in those rights. See "The Rights Offering—Taxation." |
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Subscription Agent |
The subscription agent is U.S. Stock Transfer Corporation. The subscription agent's telephone number is (818) 502-1404. |
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Standby Purchase Agreements |
We are currently negotiating standby purchase agreements, which we expect to enter into before beginning the rights offering. In the standby purchase agreements, certain institutional investors and high-net-worth individuals will agree to acquire at the subscription price a portion of any shares remaining after the exercise of rights and the satisfaction of all elections to exercise the oversubscription privilege. The total of the standby purchasers' maximum standby commitments is expected to be up to shares of common stock. Some of the standby purchase agreements may require that we sell a minimum number of shares of common stock to related standby purchasers even if sufficient underlying shares are not available after issuance of all underlying shares subscribed for in the rights offering and the oversubscription privilege. That minimum number of shares is expected to be as many as shares in one standby purchase agreement and shares in the aggregate. In any such case, we will issue sufficient new shares to satisfy such minimum purchase commitments. The obligations of the standby purchasers will not be subject to the purchase of any minimum number of shares in the basic subscription privilege and the oversubscription privilege. |
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Intent of Directors |
Our directors and executive officers have indicated their intention to exercise basic subscription privileges with respect to shares of common stock (representing approximately % of our currently outstanding shares of common stock) and oversubscription privileges to purchase an additional shares of common stock. Such persons possess the right to exercise the basic subscription privilege with respect to shares of common stock (representing approximately % of the outstanding shares of common stock). If those indications of intent are realized, our directors and executive officers will acquire approximately shares of common stock in the rights offering (representing approximately % of the shares of common stock offered in the rights offering) for a total purchase price of approximately $ million. See "The Rights Offering—Intent of Directors and Executive Officers." |
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Nasdaq Symbol for Common Stock |
FCBP |
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A purchase of our common stock involves risk. You should carefully consider, in addition to the other information set forth herein, the following risk factors:
If you do not exercise your subscription rights in full, your percentage ownership and voting rights will decrease.
To the extent we issue shares to standby purchasers who are not currently shareholders, the percentage ownership and voting interest of all current shareholders will be diluted. In addition, if you choose not to exercise your basic subscription rights in full, your relative ownership and voting interest will be diluted to the extent others exercise their subscription rights.
You may not be able to exercise your subscription rights if you do not act promptly and follow the subscription instructions carefully.
If you wish to purchase shares in the rights offering, you must act promptly to ensure that all required forms and payments are actually received by U.S. Stock Transfer Corporation prior to the expiration date. If you fail to properly complete and sign the required subscription forms, send an insufficient payment amount, or otherwise fail to follow the subscription procedures that apply to your intended purchase, the subscription agent may, at its discretion, reject your subscription or accept it to the full extent of payment received. Neither we nor the subscription agent have any obligation to contact you concerning, or to attempt to correct, an incomplete or incorrect subscription form.
The subscription price was determined by a special committee of our board of directors and represents a discount to the market price of our common stock on the date the subscription price was determined. The subscription price bears no direct relationship to the value of our assets, financial condition or other established criteria for value. Our common stock may trade at prices above or below this price.
You may not revoke your subscription privilege and may be committed to buy shares above the prevailing market price.
Your election to exercise your subscription privilege is irrevocable. The public trading market price of our common stock may decline before the subscription rights expire. If you exercise your subscription rights and the public trading market price of our common stock decreases below $ , then you will have committed to buy shares of our common stock at a price above the prevailing market price.
We may be required to pay a $1.8 million termination fee if the rights offering does not succeed.
Under our merger agreement with Pacific Western, we are obligated to pay a termination fee of $1.8 million and certain expenses up to $200,000 if we are unable to complete the merger under certain circumstances. Those circumstances include our failure to have sufficient funds to pay the merger consideration at the termination date of the merger agreement, subject to certain exceptions. We expect that we will need to raise a total of $20 million in this offering in order to complete the Pacific Western merger. We expect to raise another $20 million through a separate offering of trust preferred securities. If we are unable to raise the necessary funds in this offering or in the trust preferred offering, we may be required to pay Pacific Western the $1.8 million termination fee plus expenses, which would harm our business and significantly reduce our profitability.
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You may have to wait to resell the shares you purchase in the rights offering.
Until certificates are delivered, you may not be able to sell the shares of common stock that you have purchased in the rights offering. That means that you may have to wait until you (or our broker or other nominee) have received a stock certificate. We will endeavor to prepare and issue the appropriate certificates as soon as practicable after the rights have been validly exercised. We cannot assure you, however, that the market price of the common stock purchased pursuant to the exercise of rights will not decline below the subscription price you paid before we are able to deliver your certificates. For shares purchased pursuant to the oversubscription privilege, delivery of certificates will occur as soon as practicable after all prorations and adjustments contemplated by the terms of the rights offering have been effected.
We face strong competition from financial service companies and other companies that offer banking services which can hurt our business.
We conduct our banking operations primarily in Southern California. Increased competition in our market may result in reduced loans and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. Many competitors offer the banking services that we offer in our service area. These competitors include national banks, regional banks and other community banks. We also face competition from many other types of financial institutions, including without limitation, savings and loans, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. These competitors of First Community may have greater financial resources and develop products that enable such competitors to compete more successfully than we can.
If we are unable to integrate our business with those of Pacific Western and First Charter, our business and earnings may be negatively affected.
The Pacific Western and First Charter mergers involve the integration of companies that have previously operated independently. Successful integration of their operations will depend primarily on our ability to consolidate operations, systems and procedures and to eliminate redundancies and costs. No assurance can be given that we will be able to integrate our operations without encountering difficulties including, without limitation, the loss of key employees and customers, the disruption of our respective ongoing businesses or possible inconsistencies in standards, controls, procedures and policies. Estimated cost savings and revenue enhancements are projected to come from various areas that management has identified through the due diligence and integration planning process. If we have difficulties with the integration, we might not achieve the economic benefits we expect to result from the merger and this would likely hurt our business and our earnings. In addition, we may experience greater than expected costs or difficulties relating to the integration of the business of Pacific Western and First Charter, and/or may not realize expected cost savings from the mergers within the expected time frame.
The economic slowdown in Southern California could hurt our business.
We focus our business in Southern California. The current economic slowdown in Southern California could result in the following consequences, any of which could hurt our business:
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A downturn in the real estate market or health care industry could hurt our business.
A downturn in the real estate market could hurt our business because many of our loans are secured by real estate. Our ability to recover on defaulted loans by selling the real estate collateral would then be diminished, and we would be more likely to suffer losses on defaulted loans. As of June 30, 2001, approximately 61.8 percent of the book value of our loan portfolio consisted of loans secured by various types of real estate. Substantially all of our real property collateral is located in Southern California. If there is a significant decline in real estate values, especially in Southern California, the collateral for our loans will provide less security.
In addition, a downturn in the healthcare industry could adversely affect our loan portfolio and business because many of our customers are in the health care industry. Such downturn might result from changes in the methods used by health care insurers and/or the government (Medicare) to reimburse health care providers for their services. If there is a downturn in the health care industry, we are more likely to suffer losses on defaulted loans and demand for our products and services may decline.
Our business is subject to interest rate risk.
Changes in the interest rate environment may reduce our profits. It is expected that we will continue to realize income from the differential or "spread" between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. In addition, loan volume and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume of loan originations. There can be no assurance that our interest rate risk will be minimized or eliminated. In addition, an increase in the general level of interest rates may adversely affect the ability of certain borrowers to pay the interest on and principal of their obligations. Accordingly, changes in levels of market interest rates could materially adversely affect our net interest spread, asset quality, loan origination volume and overall profitability.
We are subject to extensive regulation which could adversely affect our business.
Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. We believe that we are in substantial compliance in all material respects with applicable federal, state and local laws, rules and regulations. Because our business is highly regulated, the laws, rules and regulations applicable to us are subject to regular modification and change. There are currently proposed various laws, rules and regulations that, if adopted, would impact our operations. There can be no assurance that these proposed laws, rules and regulations, or other such laws, rules or regulations will not be adopted in the future, which could make compliance much more difficult or expensive, restrict our ability to originate, broker or sell loans, further limit or restrict the amount of commissions, interest or other charges earned on loans originated or sold by us or otherwise adversely affect our business or prospects.
Only a limited market exists for First Community common stock.
Our common stock was designated for quotation on Nasdaq in June 2000 and trading volumes since that time have been modest. There can be no assurance that an active trading market for our common stock will develop. The limited trading market for our common stock may cause fluctuations in the market value of our common stock to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market.
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We estimate that the net proceeds to us from the sale of shares of our common stock in this offering will be approximately $20 million, based on the subscription price of $ per share and after deducting our estimated offering expenses. We expect that the total net proceeds of approximately $20 million, together with the separate proceeds from an offering of trust preferred securities, will be used for the acquisition of Pacific Western National Bank.
On August 21, 2001, we signed a definitive Agreement and Plan of Merger, or the merger agreement, providing for the acquisition of Pacific Western National Bank, a national banking association with five branches in Southern California. Under the merger agreement and related agreements, Pacific Western will consolidate with a wholly-owned subsidiary of First Professional Bank, then the consolidated bank merge with and into First Professional Bank, with First Professional surviving. At that time First Professional's name will be charged to Pacific Western National Bank.
The Pacific Western acquisition is subject to customary conditions to consummation, including prior approval by the Office of the Comptroller of the Currency. In the event the Pacific Western merger is not completed because of a breach of certain of our covenants, representations or warranties, we may be required to pay to Pacific Western a $1.8 million termination fee, plus expenses of Pacific Western. The success of this offering is not a condition to the Pacific Western merger, and we may be required to pay the $1.8 million fee, plus expenses of Pacific Western if this offering is not successful.
Pending the completion of the Pacific Western acquisition, we expect to invest the proceeds of this offering in short-term investment grade securities. Although we currently intend to use the proceeds as set forth above, we have broad discretion to vary the expected uses as it deems fit, and we may substitute one or more other sources of funding, such as the funds from the trust preferred securities, to finance the Pacific Western acquisition.
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The following table sets forth our actual and as adjusted consolidated capitalization. Our as adjusted data gives effect to the issuance of 1,111,100 shares of common stock at $18.00 per share and $20,000,000 of trust preferred securities and the mergers with Pacific Western and First Charter.
First Community Bancorp
| |
June 30, 2001 |
|||||||
|---|---|---|---|---|---|---|---|---|
| |
Actual |
As Adjusted |
||||||
| |
(Amounts in thousands, except per share amounts) |
|||||||
| Liabilities: | ||||||||
| Deposits | $ | 558,297 | $ | 880,479 | ||||
| Trust Preferred Securities | 8,000 | 28,000 | ||||||
| Short-term borrowings | 7,009 | 7,009 | ||||||
| FHLB advances | — | 6,000 | ||||||
| Convertible debt | 673 | 673 | ||||||
| Accrued interest payable and other liabilities | 6,960 | 15,634 | ||||||
| Total liabilities | 580,939 | 937,795 | ||||||
Shareholders' Equity: |
||||||||
| Common Stock, no par value | 28,690 | 62,915 | ||||||
| Accumulated other comprehensive income | 359 | 359 | ||||||
| Retained earnings | 9,682 | 9,682 | ||||||
| Total shareholders' equity | 38,731 | 72,956 | ||||||
| Total Capitalization | $ | 619,670 | $ | 1,010,751 | ||||
| Book value per common share | $ | 8.46 | $ | 11.49 | ||||
Number of common shares: |
||||||||
| Common shares authorized | 15,000 | 15,000 | ||||||
| Common shares issued and outstanding | 4,577.1 | 6,349.8 | ||||||
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement-prospectus contains certain forward-looking statements about the financial condition, results of operations and business of First Community. These statements may include statements regarding the projected performance of First Community for the period following the completion of the offering. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," "intends," "will," "plans" or similar words or expressions. These forward-looking statements involve substantial risks and uncertainties. Some of the factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to, the following possibilities:
Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this prospectus. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and shareholder values of First Community following the offering may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. Accordingly, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
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WHERE TO FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission, or SEC. You may read and copy any document we file at the Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's website is www.sec.gov.
This prospectus, which is a part of a registration statement on Form S-3 we have filed with the SEC under the Securities Act of 1933, omits certain information set forth in the registration statement. Accordingly, for further information, you should refer to the registration statement and its exhibits on file with the SEC. Furthermore, statements contained in this prospectus concerning any document filed as an exhibit are not necessarily complete and, in each instance, we refer you to the copy of such document filed as an exhibit to the registration statement.
The SEC allows us to incorporate by reference the information we file with them, which means that we can disclose important information to you by referring you to other documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede the information in this prospectus. We incorporate by reference the documents listed below and, until this offering has been completed, any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended:
We will provide each person to whom this prospectus is delivered, including any beneficial owner of our shares, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus, upon request at no cost, by writing or telephoning us at the address set forth below.
First
Community Bancorp
2310 Camino Vida Roble, Suite B
Carlsbad, California 92009
Attention: Robert Laddaga
(760) 918-2469
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The Rights
We expect to issue rights to each record holder of our common stock as of the close of business on the record date of December , 2001. We will issue of a right for each share of common stock you held on the record date. The rights will be evidenced by non-transferable subscription warrants, which are being distributed to you with the delivery of this prospectus.
We will not issue fractional rights or pay any cash for fractional rights. Instead, the total number of rights you receive will be rounded up to the nearest whole number. A depository, bank, trust company, or securities broker, dealer or similar intermediary holding shares of common stock on the record date for more than one beneficial owner may, upon proper showing to the subscription agent, exchange its subscription warrant to obtain a subscription warrant for the number of rights to which all such beneficial owners in the aggregate would have been entitled had each been a holder on the record date; no other subscription warrant may be so divided as to increase the number of rights to which its original recipient was entitled. We reserve the right to refuse to issue any subscription warrant if the issuance would be inconsistent with the principle that each beneficial owner's holdings will be rounded up to the nearest whole number of rights.
Because the number of rights issued to each holder will be rounded up to the nearest whole number, beneficial owners of common stock who are also the record date holders of their shares will receive more rights under certain circumstances then beneficial owners of common stock who are not the record date holders of their shares and who do not obtain (or cause the record date holder of their shares to obtain) a separate subscription warrant with respect to the shares beneficially owned by those beneficial owners, including shares held in an investment advisory or similar account. To the extent that record date holders or beneficial owners of common stock who obtain a separate subscription warrant receive more rights, they will be able to subscribe for more shares pursuant to the basic subscription privilege.
Expiration Time
The rights will expire at 5:00 p.m., Pacific time, on January , 2002, unless we decide, in our sole discretion, to extend the offering. After the expiration time, unexercised rights will be null and void. We will not be obligated to honor any purported exercise of rights received by the subscription agent after the expiration time, regardless of when you sent the documents relating to that exercise, except pursuant to the guaranteed delivery procedures described below.
Subscription Privileges
Basic Subscription Privilege. Each right you hold will entitle you to purchase one share of our common stock at the subscription price. You are entitled to subscribe for all, or any portion of, the shares that may be acquired through the exercise of your rights. We will deliver certificates representing shares of common stock purchased pursuant to the basic subscription privilege as soon as practicable after you validly exercise your rights.
Oversubscription Privilege. Except as described below, if you fully exercise all of your rights you will also be eligible to subscribe, at the subscription price, for additional shares available after satisfaction of all subscriptions pursuant to the basic subscription privilege. You will only be entitled to the oversubscription privilege if you exercise your basic subscription privilege in full.
Shares will be available for purchase pursuant to the oversubscription privilege only to the extent that any shares are not subscribed for through the basic subscription privilege. If the shares not subscribed for through the basic subscription privilege are not sufficient to satisfy all subscriptions pursuant to the oversubscription privilege, those excess shares will be allocated pro rata (subject to the
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elimination of fractional shares) among those record date holders exercising the oversubscription privilege in proportion to the number of shares of common stock owned by each such holder on the record date relative to the number of shares owned on the record date by all holders exercising the oversubscription privilege. If the pro rata allocation would result in your being allocated a greater number of excess shares than you subscribed for pursuant to your oversubscription privilege, then you will be allocated only the number of excess shares for which you oversubscribed. The remaining excess shares will be allocated among all other holders exercising the oversubscription privilege on the same pro rata basis outlined above. We will repeat this proration until all excess shares have been allocated to the full extent of the oversubscription privileges exercised.
Payments for oversubscriptions will be deposited upon receipt by the subscription agent and held in escrow pending a final determination of the number of underlying shares to be issued pursuant to such oversubscription privilege. If a proration of the excess shares results your receiving fewer excess shares than you subscribed for pursuant to the oversubscription privilege, then the excess funds you paid as the subscription price for shares not issued will be returned to you without interest or deduction. Certificates representing underlying shares purchased pursuant to the oversubscription privilege will be delivered to subscribers as soon as practicable after the expiration time and after we have completed all prorations and adjustments contemplated by the terms of the rights offering.
Banks, brokers and other nominee record date holders who exercise the oversubscription privilege on behalf of beneficial owners of rights will be required to certify to the subscription agent and to us the aggregate number of rights as to which the oversubscription privilege has been exercised and the number of underlying shares thereby subscribed for by each beneficial owner of rights on whose behalf the nominee holder is acting.
Subscription Price
The subscription price is $ per share of common stock subscribed for pursuant to the basic subscription privilege or the oversubscription privilege.
Exercise of Rights
You may exercise your rights by delivering to the subscription agent, U.S. Stock Transfer Corporation, the properly completed and executed subscription warrant(s) at or prior to the expiration time, with any signatures guaranteed as required, together with payment in full of the subscription price for each share subscribed for. You may make payment only by check or bank draft drawn upon a U.S. bank, or postal, telegraphic or express money order. Make your check, draft or money order, payable to U.S. Stock Transfer Corporation, as Subscription Agent.
The subscription price will be deemed to have been received by the subscription agent only upon (i) clearance of any uncertified check or (ii) receipt by the subscription agent of any certified check or bank draft drawn upon a U.S. bank or of any postal, telegraphic or express money order. Funds paid by uncertified personal check may take at least five business days to clear. Accordingly, if you wish to pay the subscription price by means of uncertified personal check, you are urged to make payment sufficiently in advance of the expiration time to ensure that such payment is received and clears by such time and are urged to consider in the alternative payment by means of certified or cashier's check or money order.
All funds received in payment of the subscription price will be held by the subscription agent and invested at our direction in short-term certificates of deposit, short-term obligations of the United States, any state or any agency thereof, or money market mutual funds investing in the foregoing instruments. The account in which such funds will be held is not insured by the FDIC. We will retain any interest earned on such funds.
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The subscription agent's addresses, which are the addresses to which the subscription warrants and payment of the subscription price should be delivered, as well as the address to which a notice of guaranteed delivery or DTC participant oversubscription exercise form must be delivered, are:
If by mail:
U.S.
Stock Transfer Corporation
1745 Gardena Avenue
Glendale, CA 91204
Attention: Stock Transfer Department
If by hand:
U.S.
Stock Transfer Corporation
1745 Gardena Avenue
Glendale, CA 91204
Attention: Stock Transfer Department
If by overnight courier:
U.S.
Stock Transfer Corporation
1745 Gardena Avenue
Glendale, CA 91204
Attention: Stock Transfer Department
The subscription agent's telephone number is (818) 502-1404.
We will pay the fees and expenses of the subscription agent. We have also agreed to indemnify the subscription agent from any liability which it may incur in connection with the rights offering.
If you wish to exercise your rights, but time will not permit you to return the subscription warrant(s) evidencing those rights to the subscription agent prior to the expiration time, you may still exercise those rights if all of the following conditions are met:
You may deliver the notice of guaranteed delivery to the subscription agent in the same manner as subscription warrants at the addresses set forth above, or the notice may be transmitted to the subscription agent by telegram or facsimile transmission (telecopier no. (818) 502-1737). Additional copies of the form of notice of guaranteed delivery are available upon request from the information agent, whose addresses and telephone numbers are set forth under "Information Agent" below.
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If you do not indicate the number of rights you are exercising, or do not forward full payment of the aggregate subscription price for the number of rights that you are exercising, then you will be deemed to have exercised the basic subscription privilege with respect to the maximum number of rights that may be exercised for the subscription price payment you delivered. If you are a record date holder, to the extent that the aggregate subscription price payment you delivered exceeds the product of the subscription price multiplied by the number of rights evidenced by the subscription warrants you delivered, you will be deemed to have exercised the oversubscription privilege to purchase, to the extent available, that number of whole excess shares equal to the quotient obtained by dividing the excess price paid by the subscription price. Any amount remaining after application of these procedures (or, in the case of a rights holder who was not a record date holder of such rights, any subscription excess) shall be returned to you as soon as practicable by mail without interest or deduction.
Until we issue certificates representing shares of common stock, we will hold any funds received in a segregated escrow account. If shares are not issued pursuant to the basic subscription privilege, or if you are allocated less than all of the shares for which you subscribed pursuant to the oversubscription privilege, then the funds held in escrow you paid as the subscription price for shares not issued or for excess shares not allocated to you shall be returned by mail without interest or deduction as soon as practicable after the expiration time and after all prorations and adjustments contemplated by the terms of the rights offering have been effected.
We will mail the certificates representing shares of common stock subscribed for and issued pursuant to the basic subscription privilege as soon as practicable after the expiration time. We will mail the certificates representing shares of common stock subscribed for and issued pursuant to the oversubscription privilege as soon as practicable after all prorations and adjustments contemplated by the terms of the rights offering have been effected. Certificates for shares of common stock issued pursuant to the exercise of rights will be registered in the name of the rights holder exercising such rights.
Unless your subscription warrant provides that the shares to be issued pursuant to the exercise of the rights represented thereby are to be issued to or is submitted for the account of an eligible institution, signatures on each subscription warrant must be guaranteed by an eligible institution.
If you hold shares of common stock for the account of others, such as in your capacity as a broker, trustee or depository for securities, you should contact the respective beneficial owners of such shares as soon as possible to ascertain those beneficial owners' intentions and to obtain instructions with respect to their rights. If a beneficial owner so instructs, you should complete appropriate subscription warrants and submit them to the subscription agent with the proper payment. In addition, beneficial owners of common stock or rights held through such a nominee holder should contact the nominee holder and request the nominee holder to effect transactions in accordance with the beneficial owner's instructions.
The instructions accompanying the subscription warrants should be read carefully and followed in detail. Subscription warrants should be sent with payment to the subscription agent. Please do not send subscription warrants to us.
The method of delivery of subscription warrants and payment of the subscription price to the subscription agent will be at your own election and risk. If you send subscription warrants and payments by mail, you are urged to send the materials by registered mail, properly insured, with return receipt requested, and are urged to allow a sufficient number of days to ensure delivery to the subscription agent and clearance of payment prior to the expiration time. Because uncertified personal checks may take at least five business days to clear, you are strongly urged to pay, or arrange for payment, by means of certified or cashier's check, money order or wire transfer of funds.
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We will determine all questions concerning the timeliness, validity, form and eligibility of any exercise of rights and our determinations will be final and binding. In our sole discretion, we may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as we may determine, or reject the purported exercise of any right. Subscription warrants will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as we determine, in our sole discretion. Neither we nor the subscription agent will be under any duty to give notification of any defect or irregularity in connection with the submission of subscription warrants or incur any liability for failure to give such notification. We reserve the right to reject any exercise if such exercise is not in accordance with the terms of the rights offering or not in proper form or if the acceptance thereof or the issuance of shares of common stock pursuant thereto could be deemed unlawful. See "Regulatory Limitation" below.
If you have any questions or requests for assistance concerning exercising your rights or requests for additional copies of this prospectus, the instructions or the notice of guaranteed delivery, you should contact the Shareholder Relations Department of the information agent at one of its addresses set forth under "Information Agent" (telephone (818) 502-1404).
No Revocation
Once you have properly exercised the basic subscription privilege or the oversubscription privilege, you cannot revoke your exercise.
You may obtain a new subscription warrant upon a partial exercise of your rights only if you ensure that the subscription agent receives a properly endorsed subscription warrant no later than , Pacific time, on , 2001. After such time and date, we will not issue new subscription warrants. Accordingly, if after that time you have exercised less than all of your rights, you will lose the power to exercise your remaining rights. A new subscription warrant will be sent by first class mail to you if the subscription agent receives your properly completed subscription warrant by on the business day before the expiration time. Unless you make other arrangements with the subscription agent, a new subscription warrant issued after on the business day before the expiration time will be held for pick-up by the submitting rights holder at the subscription agent's address provided above. All deliveries of newly issued subscription warrants are at your own risk.
Except for the fees charged by the subscription agent (which we will pay as described above), all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the exercise of rights will be for the account of the holder of the rights, and none of such commissions, fees or expenses will be paid by us or by the subscription agent.
Determination of Subscription Price
The subscription price will be determined by our board of directors and a special rights committee of our board. We expect that negotiations with standby purchasers will have a direct impact on the determination of the subscription price. Our objective in establishing the subscription price will be the achievement of maximum net proceeds obtainable from the rights offering, while providing the holders with an opportunity to make an additional investment in the First Community.
In approving the subscription price, our board of directors will consider the written statement and oral advice provided by the financial advisor and such additional factors as
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We cannot assure you, however, that the market price of the common stock will not decline during the subscription period to a level equal to or below the subscription price, or that, following the issuance of the rights and of the common stock upon exercise of rights, you will be able to sell shares purchased in the rights offering at a price equal to or greater than the subscription price.
Information Agent
We have appointed U.S. Stock Transfer Corporation as information agent for the rights offering. Any questions or requests for assistance concerning the method of subscribing for shares of common stock or for additional copies of this prospectus, the instructions, the notice of guaranteed delivery or the DTC participant oversubscription exercise form may be directed to the information agent at the address and telephone number below:
U.S.
Stock Transfer Corporation
Shareholder Relations Department
1745 Gardena Avenue
Glendale, CA 91204
(818) 502-1404
We will pay the fees and expenses of the information agent and will indemnify the information agent from certain liabilities which it may incur in connection with the rights offering.
Foreign and Certain Other Stockholders
We will not mail subscription warrants to holders whose addresses are outside the United States and Canada or who have an APO or FPO address. Instead, those warrants will be held by the subscription agent for such holders' accounts. To exercise your rights, you must notify the subscription agent at or prior to 11:00 a.m., Pacific time, on , 2001, at which time (if no contrary instructions have been received) the rights represented thereby will be cancelled.
Intent of Directors and Executive Officers
Our directors and executive officers have indicated their intention to exercise basic subscription privileges to purchase shares of common stock and oversubscription privileges to purchase an additional shares of common stock. These directors and executive officers possess the right to exercise the basic subscription privilege with respect to shares of common stock (representing approximately % of the outstanding shares of common stock). If all of such indications of intent were realized, our directors and executive officers would acquire approximately shares of common stock in the rights offering (representing approximately % of the shares of common stock offered in the rights offering) for a total purchase price of approximately $ million. Any such purchases will be made for investment purposes and not with a view to resale.
Regulatory Limitation
We will not be required to issue shares of common stock in the rights offering to any rights holder who in our opinion would be required to obtain prior clearance or approval from any state or federal bank regulatory authority to own or control such shares if, at the expiration time, that clearance or approval has not been obtained. If we elect not to issue shares, the shares will become available to satisfy subscriptions pursuant to the oversubscription privilege.
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The Federal Change in Bank Control Act of 1978 prohibits a person or group of persons "acting in concert" from acquiring "control" of a bank holding company unless the Federal Reserve Board has been given 60 days' prior written notice of such proposed acquisition and within that time period the Federal Reserve Board has not issued a notice disapproving the proposed acquisition or extending for up to another 30 days the period during which such a disapproval may be issued. An acquisition may be made prior to the expiration of the disapproval period if the Federal Reserve Board issues written notice of its intent not to disapprove the action. Under a rebuttable presumption established by the Federal Reserve Board, the acquisition of more than 10% of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act (such as First Community) would, under the circumstances set forth in the presumption, constitute the acquisition of control.
In addition, any "company" would be required to obtain the approval of the Federal Reserve Board under the Bank Holding Company Act of 1956 before acquiring 25% (5% in the case of a company that is a bank holding company) or more of our outstanding common stock of, or any lesser number of shares as would constitute control over First Community.
No Board or Financial Advisor Recommendation
An investment in our common stock must be made according to your own evaluation of your best interests. Accordingly, neither our board of directors nor the special rights committee of our board makes any recommendation to you about whether you should exercise your rights. Neither have we retained a financial advisor to make any recommendation to you about whether you should exercise your rights.
Taxation
This section describes the material United States federal income tax consequences relating to the distribution, receipt and exercise of rights. This section applies to you only if:
This section does not apply to you if you are a member of a special class of holders subject to special rules, including:
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.
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You are a U.S. holder if you are a beneficial owner of rights and you are:
You should consult your own tax advisor regarding the United States federal, state and local and other tax consequences of owning rights in your particular circumstances.
This discussion addresses only United States federal income taxation.
Distribution of Rights. Under the United States federal income tax laws, the distribution of rights to you will be treated as a tax-free stock dividend under Section 305(a) of the Internal Revenue Code and therefore you will not be required to include any amount in income with respect to such distribution.
If the fair market value of a right on the date of distribution is less than 15% of the fair market value of a share of our common stock on that date (with the fair market value for shares based upon the average of the high and low trading prices for shares), your tax basis in a right will be zero unless you elect to allocate your tax basis in our common stock between the common stock and the rights in proportion to their relative fair market values. This election would need to be made for all the rights distributed to you, in the form of a statement attached to the U.S. federal income tax return filed by you for the year in which you receive the rights. If made, this election would be irrevocable. If, on the date of distribution of the rights, the fair market value of a right is 15% or more of the fair market value of a share of First Community common stock, you will be required to allocate your tax basis in First Community common stock between the rights and the common stock in proportion to their relative fair market values.
Expiration of the Rights. If the rights expire without exercise, no basis will be allocated to the rights and no loss will be recognized upon their expiration. In this case, your basis in First Community common stock would not be reduced as a result of the distribution of the rights.
Exercise of the Rights. If you are a U.S. holder, you will not recognize gain or loss upon exercise of a right.
Tax Basis of Common Stock Acquired Upon Exercise of a Right. The tax basis of each share of First Community common stock acquired by a right exercise will equal the sum of the subscription price for the right and the tax basis, if any, for the right. The holding period of any share of First Community common stock acquired in this way will begin with and include the date of the right exercise.
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We are currently negotiating the terms of standby purchase agreements with certain institutional investors and high net worth individuals as standby purchasers and expect to enter into agreements with these investors prior to the commencement of the rights offering. We expect that the standby purchasers will agree, subject to certain conditions, to acquire a portion of the shares, if any, remaining after the exercise of rights and the satisfaction of all elections to exercise the oversubscription privilege at the subscription price. Although definitive terms have not been agreed, we expect that the standby purchase agreements will contain substantially the following terms. The following summary does not purport to be complete and is qualified in its entirety by reference to the draft form of standby purchase agreement that has been filed as an exhibit to the registration statement of which this prospectus forms a part.
We expect that each standby purchase agreement would be subject to a maximum standby commitment. In addition, certain standby purchase agreements may provide that we must sell a minimum number of shares of common stock to the standby purchasers irrespective of whether any shares remain unsold after the exercise of rights and the satisfaction of all elections to exercise the oversubscription privilege. The obligation of the standby purchasers will not be subject to the purchase of any minimum number of shares in the rights offering.
If the number of shares remaining after the exercise of rights and the satisfaction of all elections to exercise the oversubscription privilege is less than the standby purchasers' aggregate maximum standby purchase commitments, the shares will first be allocated among the standby purchasers in satisfaction of any minimum standby obligations and any remaining shares will be allocated pro rata among the standby purchasers according to their respective maximum standby purchase commitments (also subject in each case to the reductions described above). If the number of shares is less than the minimum standby commitment, we will issue and sell, at the subscription price, to the relevant standby purchasers sufficient additional shares to satisfy the aggregate minimum standby commitment.
We expect that each standby purchaser will agree with us that until the closing date, it will not offer, sell, contract to sell or otherwise dispose of, or bid for, purchase, contract to purchase or otherwise acquire, any shares of common stock without our prior written consent.
The validity of the shares of common stock will be passed upon for First Community by Sullivan & Cromwell, Los Angeles, California.
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The consolidated financial statements of First Community Bancorp and subsidiaries as of December 31, 2000 and 1999 and for each of the years in the three-year period ended December 31, 2000, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of First Charter Bank, N.A., included in the registration statement of First Community on Form S-4/A and incorporated by reference herein have been audited by Grant Thornton LLP, independent certified public accountants, as stated in their reports with respect thereto, and are incorporated by reference herein and in the registration statement in reliance upon the authority of said firm as experts in accounting and auditing.
The financial statements of Pacific Western National Bank as of December 31, 2000 and 1999 and for each of the years in the three-year period ended December 31, 2000 have been incorporated by reference herein and in the registration statement in reliance upon the report of Vavrinek, Trine, Day & Co., LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Professional Bancorp, Inc. and subsidiary as of December 31, 2000 and for the year ended December 31, 2000 have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated balance sheets of Professional Bancorp, Inc. and subsidiary as of December 31, 1999 and for the year ended December 31, 1999 have been incorporated by reference herein and in the registration statement in reliance upon the report of Moss Adams LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Professional Bancorp, Inc. and subsidiary for the year ended December 31, 1998 have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
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Unaudited Pro Forma Condensed Combined Financial Data
of First Community, First Charter and Pacific Western
The following tables present financial data for First Community and Pacific Western after giving effect to the mergers and the proceeds received from this offering and the separate offering of trust preferred securities described in Note 12, which we refer to as "pro forma" information. The pro forma financial data give effect to the mergers under the purchase accounting method in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In presenting the pro forma information for certain time periods, First Community assumed that First Community and Pacific Western had been merged throughout those periods. The following unaudited pro forma combined financial data combines the historical consolidated condensed financial statements of First Community and the historical consolidated condensed financial statements of First Charter and the historical condensed financial statements of Pacific Western, giving effect of the mergers as if they had been effective on June 30, 2001 and December 31, 2000, with respect to the Pro Forma Combined Condensed Balance Sheet, and as of the beginning of the periods indicated, with respect to the Pro Forma Combined Condensed Statements of Income. This information should be read in conjunction with the historical financial statements of the companies, including their respective notes thereto, which are incorporated by reference in this registration statement on Form S-3.
First Community expects that it will incur reorganization and restructuring expenses as a result of combining First Charter and Pacific Western with First Community. The effect of the estimated merger and reorganization costs expected to be incurred in connection with the mergers have been reflected in the pro forma combined balance sheets. First Community also anticipates that the mergers will provide the combined company with certain financial benefits that include reduced operating expenses and opportunities to earn more revenue. However, First Community does not reflect any of these anticipated cost savings or benefits in the pro forma information. Finally, the pro forma financial information does not reflect any divestitures of branches or deposits that may be required in connection with the mergers. Therefore, the pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not attempt to predict or suggest future results. The pro forma information also does not attempt to show how the combined company would actually have performed had the companies been combined throughout these periods. All adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of results of the unaudited historical interim periods have been included.
As described in Note 6, on January 16, 2001, Professional Bancorp merged with and into First Community. The Professional Merger was accounted for using purchase accounting. Due to the materiality of this acquisition, the Unaudited Pro Forma Combined Condensed Statements of Income for the six-month period ended June 30, 2001, and for the year ended December 31, 2000, and the Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 2000 are additionally presented as if the Professional Merger occurred at the beginning of the periods presented for the unaudited Pro Forma Combined Condensed Statements of Income or as of December 31, 2000 for the Unaudited Pro Forma Combined Condensed Balance Sheet. Such information presented is not intended to reflect the actual results that would have been achieved had the Professional Merger actually occurred on those dates, and it should be read in conjunction with the historical financial information incorporated by reference in this Form S-3.
As described in Note 11, on August 21, 2001, First Community entered into an agreement to acquire Pacific Western National Bank (the "Pacific Western Acquisition"). The Pacific Western Acquisition will be accounted for using purchase accounting. Due to the materiality of this acquisition, the Unaudited Pro Forma Combined Condensed Statements of Income for the six-month period ended June 30, 2001, and for the year ended December 31, 2000 and the Unaudited Pro Forma Combined Condensed Balance Sheets as of June 30, 2001 and December 31, 2000 are additionally presented as if the Pacific Western Acquisition occurred at the beginning of the periods for the Unaudited Pro Forma Combined Condensed Statements of Income and as of the indicated dates for the Pro Forma Combined Condensed Balance Sheets. Such information presented is not intended to reflect the actual results that would have been achieved had the Pacific Western Acquisition actually occurred on those dates, and it should be read in conjunction with the historical financial information presented elsewhere herein.
F–1
Unaudited Pro Forma Combined Condensed Balance Sheets
At June 30, 2001
| |
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
Pacific Western |
Pacific Western Pro Forma Adjustments |
Pro Forma with Pacific Western |
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
(In thousands, except per share data) |
|||||||||||||||||||||
| Assets: | ||||||||||||||||||||||
| Cash and due from banks | $ | 56,624 | $ | 10,611 | $ | — | $ | 67,235 | $ | 11,992 | $ | — | $ | 79,227 | ||||||||
| Federal funds sold | 73,327 | 18,302 | — | 91,629 | 32,300 | 3,367 | (aaa) | 127,296 | ||||||||||||||
| Total cash and cash equivalents | 129,951 | 28,913 | — | 158,864 | 44,292 | 3,367 | 206,523 | |||||||||||||||
Interest-bearing deposits in financial institutions |
285 |
3,038 |
— |
3,323 |
— |
— |
3,323 |
|||||||||||||||
Federal Reserve Bank and Federal Home Loan Bank stock, at cost |
1,536 |
659 |
— |
2,195 |
346 |
— |
2,541 |
|||||||||||||||
| Securities held to maturity | 13,020 | — | — | 13,020 | — | — | 13,020 | |||||||||||||||
| Securities available-for-sale | 85,717 | 20,136 | — | 105,853 | 6,338 | — | 112,191 | |||||||||||||||
| Total securities | 100,273 | 20,795 | — | 121,068 | 6,684 | — | 127,752 | |||||||||||||||
Net loans |
366,078 |
66,951 |
— |
433,029 |
176,310 |
— |
609,339 |
|||||||||||||||
| Premises and equipment | 5,573 | 628 | — | 6,201 | 3,003 | — | 9,204 | |||||||||||||||
| Other real estate owned | 654 | 1,292 | — | 1,946 | — | — | 1,946 | |||||||||||||||
| Goodwill | 4,227 | — | 7,867 | (aa) | 12,094 | — | 21,299 | (bbb) | 33,393 | |||||||||||||
| Other assets | 12,629 | 2,652 | 427 | (bb) | 15,708 | 2,708 | 855 | (ccc) | 19,271 | |||||||||||||
| Total Assets | $ | 619,670 | $ | 124,269 | $ | 8,294 | $ | 752,233 | $ | 232,997 | $ | 25,521 | $ | 1,010,751 | ||||||||
| Liabilities and Shareholders' Equity: | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||
| Non-interest bearing deposits | $ | 214,148 | $ | 32,803 | $ | — | $ | 246,951 | $ | 36,216 | $ | — | $ | 283,167 | ||||||||
| Interest bearing deposits | 344,149 | 75,807 | — | 419,956 | 177,356 | — | 597,312 | |||||||||||||||
| Total deposits | 558,297 | 108,610 | — | 666,907 | 213,572 | — | 880,479 | |||||||||||||||
| Borrowed funds | 15,682 | 6,000 | — | 21,682 | — | 20,000 | (kkk) | 41,682 | ||||||||||||||
| Accrued interest payable & other liabilities | 6,960 | 1,007 | 2,721 | (cc) | 10,688 | 872 | 4,074 | (ddd) | 15,634 | |||||||||||||
| Total Liabilities | 580,939 | 115,617 | 2,721 | 699,277 | 214,444 | 24,074 | 937,795 | |||||||||||||||
Shareholders' Equity: |
||||||||||||||||||||||
| Convertible preferred stock | — | 5,045 | (5,045 | )(dd) | — | — | — | — | ||||||||||||||
| Common stock | 28,690 | 174 | 14,051 | (ee) | 42,915 | 1,463 | 18,537 | (eee) | 62,915 | |||||||||||||
| Additional paid-in-capital | — | 12,439 | (12,439 | )(ff) | — | 4,986 | (4,986 | )(fff) | — | |||||||||||||
| Retained earnings (accumulated deficit) | 9,682 | (9,087 | ) | 9,087 | (gg) | 9,682 | 12,076 | (12,076 | )(ggg) | 9,682 | ||||||||||||
| Accumulated other comprehensive income: unrealized net gains on securities available-for-sale, net | 359 | 81 | (81 | )(hh) | 359 | 28 | (28 | )(hhh) | 359 | |||||||||||||
| Total Shareholders' Equity | 38,731 | 8,652 | 5,573 | 52,956 | 18,553 | 1,447 | 72,956 | |||||||||||||||
| Total Liabilities & Shareholders' Equity | $ | 619,670 | $ | 124,269 | $ | 8,294 | $ | 752,233 | $ | 232,997 | $ | 25,521 | $ | 1,010,751 | ||||||||
| Number of common shares outstanding(1) | 4,577.1 | 2,289.8 | 5,238.7 | 921.2 | 6,349.8 | |||||||||||||||||
| Common shareholders' equity per share | $ | 8.46 | $ | 1.58 | $ | 10.11 | $ | 20.14 | $ | 11.49 | ||||||||||||
F–2
Unaudited Pro Forma Combined Condensed Balance Sheets
At December 31, 2000
| |
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
Professional Bancorp |
Professional Bancorp Pro Forma Adjustments |
Pro Forma with Professional Bancorp |
Pacific Western |
Pacific Western Pro Forma Adjustments |
Pro Forma with Pacific Western |
||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
(In thousands, except per share data) |
|||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 35,752 | $ | 12,369 | $ | — | $ | 48,121 | $ | 17,727 | — | $ | 65,848 | $ | 12,187 | $ | — | $ | 78,035 | |||||||||||||
| Federal funds sold | 16,903 | — | — | 16,903 | 77,275 | (8,431 | )(a) | 85,747 | 2,800 | 3,367 | (aaa) | 91,914 | ||||||||||||||||||||
| Total cash and cash equivalents | 52,655 | 12,369 | — | 65,024 | 95,002 | (8,431 | ) | 151,595 | 14,987 | 3,367 | 169,949 | |||||||||||||||||||||
Interest-bearing deposits in financial institutions |
495 |
16 |
— |
511 |
447 |
— |
958 |
— |
— |
958 |
||||||||||||||||||||||
Federal Reserve Bank and Federal Home Loan Bank stock, at cost |
913 |
779 |
— |
1,692 |
415 |
— |
2,107 |
261 |
— |
2,368 |
||||||||||||||||||||||
| Securities held to maturity | 40,428 | — | — | 40,428 | 14,263 | — | 54,691 | — | — | 54,691 | ||||||||||||||||||||||
| Securities available-for-sale | 4,972 | 41,520 | — | 46,492 | 46,692 | (425 | )(a) | 92,759 | 5,504 | — | 98,263 | |||||||||||||||||||||
| Total securities | 46,313 | 42,299 | — | 88,612 | 61,370 | (425 | ) | 149,557 | 5,765 | — | 155,322 | |||||||||||||||||||||
Net loans |
246,622 |
72,698 |
— |
319,320 |
102,376 |
— |
421,696 |
164,044 |
— |
585,740 |
||||||||||||||||||||||
| Premises and equipment | 5,027 | 734 | — | 5,761 | 817 | — | 6,578 | 2,720 | — | 9,298 | ||||||||||||||||||||||
| Other real estate owned | 1,031 | 1,296 | — | 2,327 | — | — | 2,327 | — | — | 2,327 | ||||||||||||||||||||||
| Goodwill | — | 882 | 6,555 | (aa) | 7,437 | — | 4,634 | (b) | 12,071 | — | 22,190 | (bbb) | 34,261 | |||||||||||||||||||
| Other assets | 6,144 | 3,038 | 427 | (bb) | 9,609 | 4,796 | 2,923 | (c) | 17,328 | 2,694 | 855 | (ccc) | 20,877 | |||||||||||||||||||
| Total Assets | $ | 358,287 | $ | 133,332 | $ | 6,982 | $ | 498,601 | $ | 264,808 | $ | (1,299 | ) | $ | 762,110 | $ | 190,210 | $ | 26,412 | $ | 978,732 | |||||||||||
| Liabilities and Shareholders' Equity | ||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 114,042 | $ | 34,909 | $ | — | $ | 148,951 | $ | 135,797 | — | $ | 284,748 | $ | 33,455 | $ | — | $ | 318,203 | |||||||||||||
| Interest bearing deposits | 202,896 | 76,322 | — | 279,218 | 113,338 | — | 392,556 | 138,155 | — | 530,711 | ||||||||||||||||||||||
| Total deposits | 316,938 | 111,231 | — | 428,169 | 249,135 | — | 677,304 | 171,610 | — | 848,914 | ||||||||||||||||||||||
| Borrowed funds | 9,689 | 11,000 | — | 20,689 | 679 | 21,368 | — | 20,000 | (kkk) | 41,368 | ||||||||||||||||||||||
| Accrued interest payable & other liabilities | 3,888 | 1,137 | 2,721 | (cc) | 7,746 | 3,074 | 3,144 | (d) | 13,964 | 938 | 4,074 | (ddd) | 18,976 | |||||||||||||||||||
| Total Liabilities | 330,515 | 123,368 | 2,721 | 456,604 | 252,888 | 3,144 | 712,636 | 172,548 | 24,074 | 909,258 | ||||||||||||||||||||||
Shareholders' Equity: |
||||||||||||||||||||||||||||||||
| Convertible preferred stock | — | 5,045 | (5,045 | )(dd) | — | — | — | — | — | — | — | |||||||||||||||||||||
| Common stock | 20,402 | 174 | 14,051 | (ee) | 34,627 | 17 | 7,460 | (e) | 42,104 | 1,463 | 18,537 | (eee) | 62,104 | |||||||||||||||||||
| Additional paid-in-capital | — | 12,439 | (12,439 | )(ff) | — | 21,271 | (21,271 | )(f) | — | 4,987 | (4,987 | )(fff) | — | |||||||||||||||||||
| Treasury stock | — | — | — | — | (537 | ) | 537 | (g) | — | — | — | — | ||||||||||||||||||||
| Retained earnings (accumulated deficit) | 7,432 | (7,486 | ) | 7,486 | (gg) | 7,432 | (8,264 | ) | 8,264 | (h) | 7,432 | 11,208 | (11,208 | )(ggg) | 7,432 | |||||||||||||||||
| Accumulated other comprehensive loss: unrealized net losses on securities available-for-sale, net | (62 | ) | (208 | ) | 208 | (hh) | (62 | ) | (567 | ) | 567 | (i) | (62 | ) | 4 | (4 | )(hhh) | (62 | ) | |||||||||||||
| Total Shareholders' Equity | 27,772 | 9,964 | 4,261 | 41,997 | 11,920 | (4,443 | ) | 49,474 | 17,662 | 2,338 | 69,474 | |||||||||||||||||||||
| Total Liabilities & Shareholders' Equity | $ | 358,287 | $ | 133,332 | $ | 6,982 | $ | 498,601 | $ | 264,808 | $ | (1,299 | ) | $ | 762,110 | $ | 190,210 | $ | 26,412 | $ | 978,732 | |||||||||||
| Number of common shares outstanding(1) | 3,971.4 | 2,289.8 | 4,633.0 | 2,030.8 | 5,137.7 | 921.2 | 6,248.8 | |||||||||||||||||||||||||
| Common shareholders' equity per share | $ | 6.99 | $ | 2.15 | $ | 9.06 | $ | 5.87 | $ | 9.63 | $ | 19.17 | $ | 11.12 | ||||||||||||||||||
F–3
Unaudited Pro Forma Combined Condensed Income Statements
for the Six Months Ended June 30, 2001
| |
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
Pacific Western |
Pacific Western Pro Forma Adjustments |
Pro Forma with Pacific Western |
|||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
(In thousands, except per share data) |
|||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||
| Interest and fees on loans | $ | 16,648 | $ | 3,109 | $ | — | $ | 19,757 | $ | 9,303 | $ | — | $ | 29,060 | ||||||||||
| Interest on interest-bearing deposits in financial institutions | 17 | 22 | — | 39 | — | — | 39 | |||||||||||||||||
| Interest on investment securities | 2,974 | 821 | — | 3,795 | 218 | — | 4,013 | |||||||||||||||||
| Interest on federal funds sold | 2,393 | 278 | — | 2,671 | 260 | 2,931 | ||||||||||||||||||
| Total interest income | 22,032 | 4,230 | — | 26,262 | 9,781 | 36,043 | ||||||||||||||||||
Interest expense: |
||||||||||||||||||||||||
| Interest expense on deposits | 5,212 | 2,000 | — | 7,212 | 3,772 | — | 10,984 | |||||||||||||||||
| Interest expense on borrowed funds | 658 | 203 | — | 861 | 16 | 750 | (iii) | 1,627 | ||||||||||||||||
| Total interest expense | 5,870 | 2,203 | — | 8,073 | 3,788 | 750 | 12,611 | |||||||||||||||||
| Net interest income | 16,162 | 2,027 | — | 18,189 | 5,993 | (750 | ) | 23,432 | ||||||||||||||||
| Less: provision for loan losses | 639 | — | — | 639 | 600 | — | 1,239 | |||||||||||||||||
| Net interest income after provision for loan losses | 15,523 | 2,027 | — | 17,550 | 5,393 | (750 | ) | 22,193 | ||||||||||||||||
Non-interest income: |
||||||||||||||||||||||||
| Service charges, commissions and fees | 1,850 | 86 | — | 1,936 | 592 | — | 2,528 | |||||||||||||||||
| Other income | 368 | 254 | — | 622 | 112 | — | 734 | |||||||||||||||||
| Total non-interest income | 2,218 | 340 | — | 2,558 | 704 | — | 3,262 | |||||||||||||||||
Non-interest expense: |
||||||||||||||||||||||||
| Salaries and employee benefits | 6,509 | 1,011 | — | 7,520 | 2,273 | — | 9,793 | |||||||||||||||||
| Occupancy, furniture and equipment | 2,139 | 501 | — | 2,640 | 864 | — | 3,504 | |||||||||||||||||
| Professional services | 1,555 | 709 | — | 2,264 | 340 | — | 2,604 | |||||||||||||||||
| Stationery, supplies and printing | 297 | 106 | — | 403 | 369 | — | 772 | |||||||||||||||||
| FDIC assessment | 284 | 11 | — | 295 | 16 | — | 311 | |||||||||||||||||
| Cost of other real estate owned | 32 | 10 | — | 42 | — | — | 42 | |||||||||||||||||
| Advertising | 237 | 2 | — | 239 | 524 | — | 763 | |||||||||||||||||
| Insurance | 142 | 57 | — | 199 | 39 | — | 238 | |||||||||||||||||
| Goodwill amortization | 134 | — | — | 134 | — | — | 134 | |||||||||||||||||
| Other | 1,194 | 459 | — | 1,653 | 198 | — | 1,851 | |||||||||||||||||
| Total non-interest expense | 12,523 | 2,866 | — | 15,389 | 4,623 | — | 20,012 | |||||||||||||||||
| Income before income taxes | 5,218 | (499 | ) | — | 4,719 | 1,474 | (750 | ) | 5,443 | |||||||||||||||
| Income taxes | 2,154 | 1 | — | 2,155 | 606 | (315) | (jjj) | 2,446 | ||||||||||||||||
| Income (loss) from continuing operations | 3,064 | (500 | ) | — | 2,564 | 868 | (435 | ) | 2,997 | |||||||||||||||
| Discontinued operations | ||||||||||||||||||||||||
| Loss from operations of discontinued merchant card processing (net of income taxes) | — | (481 | ) | — | (481 | ) | (315 | ) | — | (481 | ) | |||||||||||||
| Loss on disposal of merchant card processing, including provision of $478 for operating losses during phase-out period (net of income taxes) | — | (620 | ) | — | (620 | ) | — | — | (620 | ) | ||||||||||||||
| Loss from discontinued operations | — | (1,101 | ) | — | (1,101 | ) | — | — | (1,101 | ) | ||||||||||||||
| Net income (loss) | 3,064 | (1,601 | ) | — | 1,463 | 868 | (435 | ) | 1,896 | |||||||||||||||
| Preferred dividends | — | — | — | — | — | — | — | |||||||||||||||||
| Net income (loss) available to common shareholders | $ | 3,064 | $ | (1,601 | ) | $ | — | $ | 1,463 | $ | 868 | $ | (435 | ) | $ | 1,896 | ||||||||
| Per share information: | ||||||||||||||||||||||||
| Number of shares (weighted average) | ||||||||||||||||||||||||
| Basic | 4,474.1 | 2,289.8 | 5,118.8 | 921.2 | 6,229.9 | |||||||||||||||||||
| Diluted(1) | 4,705.6 | 2,289.8 | 5,350.3 | 941.1 | 6,461.4 | |||||||||||||||||||
| Income (loss) per share: | ||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||
| From continuing operations | $ | 0.68 | $ | (0.22 | ) | $ | 0.50 | $ | 0.94 | $ | 0.48 | |||||||||||||
| From discontinued operations | — | (0.48 | ) | (0.22 | ) | — | (0.18 | ) | ||||||||||||||||
| Basic income (loss) per common share | $ | 0.68 | $ | (0.70 | ) | $ | 0.29 | $ | 0.94 | $ | 0.30 | |||||||||||||
| Diluted(2) | ||||||||||||||||||||||||
| From continuing operations | $ | 0.65 | $ | (0.22 | ) | $ | 0.48 | $ | 0.92 | $ | 0.46 | |||||||||||||
| From discontinued operations | — | (0.48 | ) | (0.21 | ) | — | (0.17 | ) | ||||||||||||||||
| Diluted income (loss) per common share | $ | 0.65 | $ | (0.70 | ) | $ | 0.27 | $ | 0.92 | $ | 0.29 | |||||||||||||
F–4
Unaudited Pro Forma Combined Condensed Income Statements
for the Year Ended December 31, 2000
| |
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
Professional Bancorp |
Professional Bancorp Pro Forma Adjustments |
Pro Forma with Professional Bancorp |
Pacific Western |
Pacific Western Pro Forma Adjustments |
Pro Forma with Pacific Western |
|||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
(In thousands, except per share data) |
||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 23,980 | $ | 5,750 | $ | — | $ | 29,730 | $ | 11,901 | — | $ | 41,631 | $ | 16,512 | $ | — | $ | 58,143 | ||||||||||||||
| Interest on interest-bearing deposits in financial institutions | 257 | 15 | — | 272 | 35 | — | 307 | — | — | 307 | |||||||||||||||||||||||
| Interest on investment securities | 2,957 | 1,723 | — | 4,680 | 4,030 | — | 8,710 | 439 | — | 9,149 | |||||||||||||||||||||||
| Interest on federal funds sold | 1,637 | 458 | — | 2,095 | 3,356 | — | 5,451 | 498 | 5,949 | ||||||||||||||||||||||||
| Total interest income | 28,831 | 7,946 | — | 36,777 | 19,322 | — | 56,099 | 17,449 | — | 73,548 | |||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||||
| Interest expense on deposits | 7,551 | 3,522 | — | 11,073 | 3,431 | — | 14,504 | 5,641 | — | 20,145 | |||||||||||||||||||||||
| Interest expense on borrowed funds | 373 | 55 | — | 428 | 51 | 582 | (j) | 1,061 | 9 | 1,500 | (iii) | 2,570 | |||||||||||||||||||||
| Total interest expense | 7,924 | 3,577 | — | 11,501 | 3,482 | 582 | 15,565 | 5,650 | 1,500 | 22,715 | |||||||||||||||||||||||
| Net interest income | 20,907 | 4,369 | — | 25,276 | 15,840 | (582 | ) | 40,534 | 11,799 | (1,500 | ) | 50,833 | |||||||||||||||||||||
| Less: provision for loan losses | 520 | (205 | ) | — | 315 | 11,732 | — | 12,047 | 840 | — | 12,887 | ||||||||||||||||||||||
| Net interest income after provision for loan losses | 20,387 | 4,574 | — | 24,961 | 4,108 | (582 | ) | 28,487 | 10,959 | (1,500 | ) | 37,946 | |||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||||||
| Service charges, commissions and fees | 1,637 | 165 | — | 1,802 | 1,314 | — | 3,116 | 1,125 | — | 4,241 | |||||||||||||||||||||||
| Gain on sale of securities | — | 10 | — | 10 | — | — | 10 | — | — | 10 | |||||||||||||||||||||||
| Other income | 828 | 1,194 | — | 2,022 | 4,646 | — | 6,668 | 113 | — | 6,781 | |||||||||||||||||||||||
| Total non-interest income | 2,465 | 1,369 | — | 3,834 | 5,960 | — | 9,794 | 1,238 | — | 11,032 | |||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 6,673 | 2,203 | — | 8,876 | 7,868 | — | 16,744 | 4,104 | — | 20,848 | |||||||||||||||||||||||
| Occupancy, furniture and equipment | 2,455 | 1,063 | — | 3,518 | 2,040 | — | 5,558 | 1,604 | — | 7,162 | |||||||||||||||||||||||
| Professional services | 1,914 | 1,189 | — | 3,103 | 2,790 | — | 5,893 | 651 | — | 6,544 | |||||||||||||||||||||||
| Stationery, supplies and printing | 418 | 65 | — | 483 | 669 | — | 1,152 | 700 | — | 1,852 | |||||||||||||||||||||||
| Cost of other real estate owned | 356 | 93 | — | 449 | — | — | 449 | — | — | 449 | |||||||||||||||||||||||
| Advertising | 435 | 24 | — | 459 | 311 | 770 | 385 | — | 1,155 | ||||||||||||||||||||||||
| Insurance | 128 | 109 | — | 237 | 125 | 362 | 56 | — | 418 | ||||||||||||||||||||||||
| Goodwill amortization | — | — | — | — | — | 309 | (k) | 309 | — | — | 309 | ||||||||||||||||||||||
| Merger costs | 3,561 | — | — | 3,561 | — | 3,561 | — | — | 3,561 | ||||||||||||||||||||||||
| Loss on sale of securities | 11 | 5 | — | 16 | — | 16 | — | — | 16 | ||||||||||||||||||||||||
| Other | 2,194 | 296 | — | 2,490 | 1,306 | — | 3,796 | 1,115 | — | 4,911 | |||||||||||||||||||||||
| Total non-interest expense | 18,145 | 5,047 | — | 23,192 | 15,109 | 309 | 38,610 | 8,615 | — | 47,225 | |||||||||||||||||||||||
| Income before income taxes | 4,707 | 896 | — | 5,603 | (5,041 | ) | (891 | ) | (329 | ) | 3,582 | (1,500 | ) | 1,753 | |||||||||||||||||||
| Income taxes | 2,803 | 1 | — | 2,804 | 2 | (244 | )(1) | 2,562 | 1,462 | (630) | (jjj) | 3,394 | |||||||||||||||||||||
| Income (loss) from continuing operations | 1,904 | 895 | — | 2,799 | (5,043 | ) | (647 | ) | (2,891 | ) | 2,120 | (870 | ) | (1,641 | ) | ||||||||||||||||||
| Discontinued operations | |||||||||||||||||||||||||||||||||
| Loss from operations of discontinued merchant card processing operations (net of income taxes) | — | (44 | ) | — | (44 | ) | — | — | (44 | ) | — | — | (44 | ) | |||||||||||||||||||
| Net income (loss) | 1,904 | 851 | — | 2,755 | (5,043 | ) | (647 | ) | (2,935 | ) | 2,120 | (870 | ) | (1,685 | ) | ||||||||||||||||||
| Preferred dividends | — | 660 | (660 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||
| Net income (loss) available to common shareholders | $ | 1,904 | $ | 191 | $ | 660 | $ | 2,755 | $ | (5,043 | ) | $ | (647 | ) | $ | (2,935 | ) | $ | 2,120 | $ | (870 | ) | $ | (1,685 | ) | ||||||||
| Per share information: | |||||||||||||||||||||||||||||||||
| Number of shares (weighted average) | |||||||||||||||||||||||||||||||||
| Basic | 3,908.3 | 2,289.8 | 4,553.0 | 2,030.8 | 5,057.7 | 921.2 | 6,168.8 | ||||||||||||||||||||||||||
| Diluted(1) | 4,090.4 | 74,658.2 | 4,735.1 | 2,030.8 | 5,239.8 | 942.6 | 6,350.9 | ||||||||||||||||||||||||||
| Income (loss) per share: | |||||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||||
| From continuing operations | $ | 0.49 | $ | 0.10 | $ | 0.62 | $ | (2.48 | ) | $ | (0.57 | ) | $ | 2.30 | $ | (0.26 | ) | ||||||||||||||||
| From discontinued operations | — | (0.02 | ) | (0.01 | ) | — | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
| Basic income (loss) per common share | $ | 0.49 | $ | 0.08 | $ | 0.61 | $ | (2.48 | ) | $ | (0.58 | ) | $ | 2.30 | $ | (0.27 | ) | ||||||||||||||||
| Diluted(1) | |||||||||||||||||||||||||||||||||
| From continuing operations | $ | 0.47 | $ | 0.01 | $ | 0.59 | $ | (2.48) | * | $ | (0.57) | * | $ | 2.25 | $ | (0.26) | * | ||||||||||||||||
| From discontinued operations | — | (0.00 | ) | (0.01 | ) | — | (0.01) | * | — | (0.01) | * | ||||||||||||||||||||||
| Diluted income (loss) per common share | $ | 0.47 | $ | 0.01 | $ | 0.58 | $ | (2.48) | * | $ | (0.58) | * | $ | 2.25 | $ | (0.27) | * | ||||||||||||||||
F–5
Notes to Unaudited Pro Forma Condensed Combined Financial Data
of First Community and First Charter
NOTE 1: BASIS OF PRESENTATION OF FIRST CHARTER
Certain historical data of First Charter have been reclassified on a pro forma basis to conform to First Community's classifications. Transactions between First Community and First Charter are not material in relation to the unaudited pro forma combined financial statements, and have not been eliminated from the pro forma combined amounts. The unaudited pro forma numbers of common shares outstanding, common shareholders' equity per share, weighted average number of shares (basic and diluted) and income (loss) per share (basic and diluted) are based on the share amounts for First Community plus the share amounts for First Charter multiplied by the First Charter exchange ratio of 0.008635 and includes the conversion of First Charter convertible preferred stock into First Community common stock as provided by the merger agreement. Prior to the merger and the conversion of 7,000 shares of preferred stock into common stock immediately prior to the record date, First Charter has 2,289,779 common shares and 110,000 convertible preferred shares outstanding. The convertible preferred shares are equivalent to 72,368,421 First Charter common shares. As a result of the conversion of First Charter convertible preferred stock into First Community common stock, preferred dividends are eliminated in the pro forma combined condensed income statements.
NOTE 2: PURHCASE PRICE OF FIRST CHARTER ACQUISITION
The purchase price is based on issuing approximately 661,609 common shares of First Community common stock. The price of First Community common stock on the acquisition date was $21.50 resulting in a total purchase price of approximately $14,225,000.
NOTE 3: ALLOCATION OF PURCHASE PRICE OF FIRST CHARTER ACQUISITION
The purchase price of First Charter has been allocated as follows (in thousands):
| Cash and cash equivalents | $ | 28,913 | |||
| Time deposits in financial institutions | 3,038 | ||||
| Securities | 20,795 | ||||
| Net loans | 66,951 | ||||
| Goodwill | 7,867 | ||||
| Premises and equipment | 628 | ||||
| Other real estate owned | 1,292 | ||||
| Other assets | 3,079 | ||||
| Deposits | (108,610 | ) | |||
| Borrowed funds | (6,000 | ) | |||
| Other liabilities | (3,728 | ) | |||
| Total purchase price | $ | 14,225 | |||
In allocating the purchase price, the following adjustments were made to First Charter's historical amounts. Other liabilities were increased by $2,721,000, representing the estimated merger costs. Other assets were increased by $427,000, representing the tax effects of the estimated merger costs. Substantially all of other assets and liabilities are either variable rate or short-term in nature and fair market value adjustments were considered to be immaterial to the financial presentation. These preliminary purchase price adjustments are subject to further refinement.
F–6
In accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," beginning on January 1, 2002, amortization of goodwill and intangibles with indefinite lives will cease.
NOTE 4: MERGER COSTS OF FIRST CHARTER
The unaudited pro forma combined condensed financial data reflect First Community's and First Charter's respective management's current estimate, for purposes of pro forma presentation, of the aggregate estimated merger costs of $2,721,000 ($2,294,000 net of taxes, computed using the combined federal and state tax rate of 42.0%) expected to be incurred in connection with the First Charter 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 sheets in order to disclose the aggregate effect of these activities on First Community's pro forma combined financial position. The estimated aggregate costs include the following:
| Employee costs | $ | 446,000 | |
| Conversion costs | 400,000 | ||
| Other costs | 170,000 | ||
| 1,016,000 | |||
| Tax benefits | 427,000 | ||
| 589,000 | |||
| Investment banking and other professional fees | 1,705,000 | ||
| $ | 2,294,000 | ||
These cost estimates are forward-looking. While the costs represent management's current estimate of merger costs that will be incurred, the ultimate level and timing of recognition of such costs will be based on the final merger and integration plan to be completed prior to consummation of the merger of First Charter with First Community, which will be developed by various of First Community's and First Charter's task forces and integration committees. Readers are cautioned that the completion of the merger and integration plan and the resulting management plans detailing actions to be undertaken to effect the merger and resultant integration of operations will impact these estimates; the type and amount of costs incurred could vary materially from these estimates if future developments differ from the underlying assumptions used by management in determining the current estimate of these costs.
NOTE 5: KEY TO PRO FORMA ADJUSTMENTS OF FIRST CHARTER ACQUISITION
Summarized below are the pro forma adjustments necessary to reflect the acquisition of First Charter based on the purchase method of accounting:
F–7
NOTE 6: BASIS OF PRESENTATION OF PROFESSIONAL ACQUISITION
On January 16, 2001, Professional Bancorp, Inc. merged (the "Professional Merger") with and into First Community, with First Community as the surviving entity. The merger was consummated pursuant to the terms of an Agreement and Plan of Merger, dated as of August 7, 2000, by and between First Community and Professional Bancorp (the "Professional Merger Agreement").
Pursuant to the Professional Merger Agreement, each issued and outstanding share of common stock of Professional Bancorp prior to the Professional Merger (other than as provided in the Professional Merger Agreement) was converted into the right to receive either 0.55 shares of First Community Common Stock or $8.00 in cash. Upon consummation of the Professional Merger, First Community issued approximately 504,747 shares of common stock to former holders of Professional Bancorp common stock, and as a result, the former shareholders of Professional Bancorp common stock own shares of First Community common stock representing approximately 11.3% of the outstanding shares of First Community common stock.
The Professional Merger was accounted for using the purchase method. Therefore, operating results of First Community for the year ended December 31, 2000 do not include the operations of Professional Bancorp. Also, the balance sheet of First Community as of December 31, 2000 does not include the balance sheet of Professional Bancorp. Due to the materiality of this acquisition, the Unaudited Pro Forma Combined Condensed Statement of Income for the one year period ended December 31, 2000 includes the operations of Professional Bancorp, Inc. as if the Professional Merger occurred at the beginning of the period and the Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 2000 includes Professional Bancorp, Inc. as if the Professional Merger had occurred on that date.
The information for Professional Bancorp, Inc. for the year ended December 31, 2000 is derived from the audited consolidated financial statements of Professional Bancorp. This information should be read in conjunction with the historical consolidated financial statements of Professional Bancorp, Inc. including the respective notes thereto, which are included in this proxy statement — prospectus. The unaudited pro forma combined condensed financial data does not give effect to any operating efficiencies anticipated in conjunction with the Professional Merger.
Certain historical data of Professional Bancorp, Inc. have been reclassified on a pro forma basis to conform to First Community's classifications.
NOTE 7: PURCHASE PRICE AND FUNDING OF PROFESSIONAL MERGER
The purchase price is based on $8 per share for Professional Bancorp, Inc. shareholders receiving the cash consideration and an exchange ratio of 0.55 First Community shares for Professional Bancorp shareholders receiving the stock consideration. Based on the $14.81 closing price of First Community on the day prior to the completion of the Professional Merger, those Professional Bancorp, Inc. shareholders choosing the stock consideration received a value of $8.15 per share.
F–8
The total consideration paid in connection with the Professional Merger is calculated as:
| |
Stock Consideration |
Cash Consideration |
Total |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Professional Bancorp common shares outstanding | 917,722 | 1,113,032 | 2,030,754 | |||||||
| Exchange ratio | 0.55 | |||||||||
| 504,747 | 1,113,032 | |||||||||
| Value received | $ | 14.81 | $ | 7.96 | * | |||||
| Total purchase price | $ | 7,475,000 | $ | 8,858,000 | $ | 16,333,000 | ||||
The cash portion of the purchase price was financed through a combination of the issuance of $8 million of trust preferred securities which occurred in September 2000, a revolving line of credit and dividends from First Community's subsidiary banks. (Note: Trust preferred securities count as Tier 1 capital for regulatory purposes.)
Professional Bancorp, Inc. shareholders had the option to elect cash of $8 or 0.55 shares of First Community common stock for each share of Professional Bancorp, Inc. common stock owned. Based upon the elections, 917,722 shares of Professional Bancorp Common Stock were exchanged for approximately 504,747 shares of First Community Common Stock and 1,113,032 shares of Professional Bancorp Common Stock were exchanged for approximately $8,904,000.
As a result of the issuance of trust preferred, historical interest expense on the accompanying pro forma combined condensed income statements for the year ended December 31, 2000, has been increased by $582,000 representing the interest expense on the trust preferred.
NOTE 8: ALLOCATION OF PURCHASE PRICE OF PROFESSIONAL MERGER
The purchase price of Professional Bancorp, Inc. has been allocated as follows:
| Cash and cash equivalents | $ | 95,002,000 | |||
| Time deposits in financial institutions | 447,000 | ||||
| Securities | 61,370,000 | ||||
| Net loans | 102,376,000 | ||||
| Goodwill | 4,634,000 | ||||
| Premises and equipment | 817,000 | ||||
| Other assets | 7,763,000 | ||||
| Deposits | (249,135,000 | ) | |||
| Borrowed funds | (679,000 | ) | |||
| Other liabilities | (6,262,000 | ) | |||
| Total purchase price | $ | 16,333,000 | |||
In allocating the purchase price, the following adjustments were made to Professional Bancorp, Inc.'s historical amounts. Other liabilities were increased by $3,144,000, representing the estimated merger costs. Other assets were increased by $2,923,000, representing the tax effects of the estimated merger costs and the reduction of the valuation reserve against the deferred tax asset. Substantially all of other assets and liabilities are either variable rate or short-term in nature and fair value adjustments were considered to be immaterial to the financial presentation. Goodwill is amortized on a straight line basis over fifteen years. These preliminary purchase price adjustments are subject to further refinement.
F–9
NOTE 9: MERGER COSTS OF PROFESSIONAL MERGER
The table below reflects First Community's current estimate, for purposes of pro forma presentation, of the aggregate estimated merger costs of $3,144,000 ($221,000 net of taxes, computed using the combined federal and state tax rate of 42.0%) 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 First Community's pro forma combined financial position. The estimated aggregate costs, primarily comprised of anticipated cash charges, include the following:
| Employee costs (severance and retention costs) | $ | 2,220,000 | ||
| Professional services | 169,000 | |||
| Conversion and other costs | 755,000 | |||
| Total | 3,144,000 | |||
| Tax benefits of above costs | 1,003,000 | |||
| Reversal of tax valuation allowance | 1,920,000 | |||
| Net merger costs | $ | 221,000 | ||
First Community management's cost estimates are forward-looking. While the costs represent First Community management's current estimate of merger costs associated with the merger that will be incurred, the ultimate level and timing of recognition of such costs will be based on the final integration in connection with consummation of the merger. Readers are cautioned that the completion of this integration and other actions that may be taken in connection with the merger will impact these estimates. The type and amount of actual costs incurred could vary materially from these estimates if future developments differ from the underlying assumptions used by management in determining the current estimate of these costs.
NOTE 10: KEY TO PRO FORMA ADJUSTMENTS OF PROFESSIONAL MERGER
Summarized below are the pro forma adjustments necessary to reflect the acquisition of Professional Bancorp, Inc. based on the purchase method of accounting:
F–10
NOTE 11: BASIS OF PRESENTATION OF PACIFIC WESTERN ACQUISITION
On August 21, 2001, First Community entered into an agreement with Pacific Western National Bank ("Pacific Western," the "Pacific Western Agreement"), whereby Pacific Western would merge with and into a subsidiary of First Community (the "Pacific Western Acquisition"). It is expected that the Pacific Western Acquisition will close in the first quarter of 2002.
Pursuant to the Pacific Western Agreement, each issued and outstanding share of common stock of Pacific Western prior to the Pacific Western Acquisition (other than as provided in the Pacific Western Agreement) will be converted into the right to receive $37.15 in cash, for a total purchase price of approximately $36.6 million. First Community anticipates raising $30,000,000 through a rights offering of 1,538,000 shares of First Community Common Stock. The remainder of the purchase price will be funded through cash available at Pacific Western.
The Pacific Western Acquisition will be accounted for using purchase accounting. Therefore, operating results of First Community for the year ended December 31, 2000 and the six-month period ended June 30, 2001 will not include the operations of Pacific Western. Also, the balance sheets of First Community as of June 30, 2001 and December 31, 2000 will not include the balance sheet of Pacific Western. Due to the materiality of this acquisition, the Unaudited Pro Forma Combined Condensed Statements of Income for the six-month period ended June 30, 2001 and the one year period ended December 31, 2000 includes the operations of Pacific Western as if the Pacific Western Acquisition occurred at the beginning of the periods and the Unaudited Pro Forma Combined Condensed Balance Sheets as of June 30, 2001 and December 31, 2000 include Pacific Western as if the Pacific Western Acquisition had occurred on those dates.
The information for Pacific Western as of and for the year ended December 31, 2000 is derived from the audited consolidated financial statements of Pacific Western. This information should be read in conjunction with the historical consolidated financial statements of Pacific Western including the respective notes thereto, which are included in this proxy statement-prospectus. The unaudited pro forma combined condensed financial data does not give effect to any operating efficiencies anticipated in conjunction with the Pacific Western Acquisition.
Certain historical data of Pacific Western have been reclassified on a pro forma basis to conform to First Community's classifications.
NOTE 12: PURCHASE PRICE AND FUNDING OF PACIFIC WESTERN ACQUISITION
The purchase price is based on $37.15 per share for Pacific Western shareholders.
The total consideration to be paid in connection with the Pacific Western Acquisition is calculated as:
| |
Shares |
Price/ "In the Money" |
Total Consideration (In thousands) |
||||||
|---|---|---|---|---|---|---|---|---|---|
| Common shares | 921,274 | $ | 37.15 | $ | 34,225 | ||||
| Options | 111,802 | $ | 21.54 | 2,408 | |||||
| Total purchase price | $ | 36,633 | |||||||
It is anticipated that the purchase price will be financed through the issuance $20,000,000 of trust preferred securities and the issuance of approximately 1,111,100 shares of Company Common Stock for $20 million through a rights offering.
F–11
NOTE 13: ALLOCATION OF PURCHASE PRICE OF PACIFIC WESTERN ACQUISITION
The purchase price of Pacific Western has been preliminarily allocated as follows (in thousands):
| Cash and cash equivalents | $ | 44,292 | |||
| Securities | 6,339 | ||||
| Net loans | 176,443 | ||||
| Goodwill | 21,397 | ||||
| Premises and equipment | 3,004 | ||||
| Other assets | 3,810 | ||||
| Deposits | (213,635 | ) | |||
| Other liabilities | (5,017 | ) | |||
| Total purchase price | $ | 36,633 | |||
In allocating the purchase price, the following adjustments were made to Pacific Western's historical amounts. Other liabilities were increased by $4,074,000, representing the estimated merger costs. Other assets were increased by $855,000, representing the tax effects of the estimated merger costs. Substantially all of other assets and liabilities are either variable rate or short-term in nature and fair value adjustments were considered to be immaterial to the financial presentation. These preliminary purchase price adjustments are subject to further refinement.
In accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets", goodwill and intangibles with indefinite lives are not amortized for acquisitions initiated after June 30, 2001.
NOTE 14: MERGER COSTS OF PACIFIC WESTERN ACQUISITION
The table below reflects First Community's current estimate, for purposes of pro forma presentation, of the aggregate estimated merger costs of $4,074,000 ($3,219,000 net of taxes, computed using the combined federal and state tax rate of 42.0%) expected to be incurred in connection with the acquition. 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 sheets in order to disclose the aggregate effect of these activities on First Community's pro forma combined financial position. The estimated aggregate costs, primarily comprised of anticipated cash charges, include the following:
| Employee costs | $ | 1,065,000 | |
| Conversion costs | 400,000 | ||
| Other costs | 570,000 | ||
| 2,035,000 | |||
| Tax benefits | 855,000 | ||
| 1,180,000 | |||
| Investment banking and other professional fees | 2,039,000 | ||
| $ | 3,219,000 | ||
First Community management's cost estimates are forward-looking. While the costs represent First Community management's current estimate of merger costs associated with the merger that will be incurred, the ultimate level and timing of recognition of such costs will be based on the final integration in connection with consummation of the merger. Readers are cautioned that the completion of this integration and other actions that may be taken in connection with the merger will impact these estimates. The type and amount of actual costs incurred could vary materially from these estimates if
F–12
future developments differ from the underlying assumptions used by management in determining the current estimate of these costs.
NOTE 15: KEY TO PRO FORMA ADJUSTMENTS OF PACIFIC WESTERN ACQUISITION
Summarized below are the pro forma adjustments necessary to reflect the acquisition of Pacific Western based on the purchase method of accounting:
F–13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following are the estimated expenses of the issuance of the Rights being registered, all of which will be paid by the Registrant:
| Securities and Exchange Commission registration fee | $ | 5,000 | ||
| Printing, postage, and mailing | ||||
| Legal fees and expenses | ||||
| Accounting fees and expenses | 25,000 | |||
| NASD filing fee | ||||
| Blue sky fees and expenses (including counsel fees) | ||||
| Transfer agent fees and expenses | ||||
| Miscellaneous | ||||
| Total | $ | |||
Item 15. Indemnification of Directors and Officers
Article Five of First Community's articles of incorporation provides that First Community shall eliminate the liability of its directors for monetary damages to the fullest extent permissible under California law. It also provides that First Community is authorized to provide indemnification for its agents to the extent permissible under California law. In both cases, indemnification for breach of duty may be in excess of that expressly permitted by Section 317 of the California General Corporation Law. Section 317 sets forth the provisions pertaining to the indemnification of corporate "agents." For purposes of this law, an agent is any person who is or was a director, officer, employee or other agent of a corporation, or is or was serving at the request of a corporation in such capacity with respect to any other corporation, partnership, joint venture, trust or other enterprise. Section 317 mandates indemnification of an agent for expenses where the agent's defense is successful on the merits. In other cases, Section 317 allows a corporation to indemnify an agent for expenses, judgments, fines, settlements and other amounts actually and reasonably incurred if the agent acted in good faith and in a manner the agent believed to be in the best interests of the corporation and its shareholders. Such indemnification must be authorized by (1) a majority vote of a quorum of the board of directors consisting of directors who are not parties to the proceedings, (2) approval of the shareholders, with the shares owned by the person to be indemnified not being entitled to vote thereon or (3) the court in which the proceeding is or was pending upon application by designated parties. Under certain circumstances, a corporation can indemnify an agent even when the agent is found liable. Section 317 also allows a corporation to advance expenses to an agent for certain actions upon receiving an undertaking by the agent that he or she will reimburse the corporation if it is later determined that he or she is not entitled to be indemnified.
II–1
| Exhibit No. |
Description |
|
|---|---|---|
| 2.1 | Agreement and Plan of Merger, dated as of August 21, 2001 by and between Pacific Western National Bank and First Community Bancorp. The registrant agrees to furnish supplementally a copy of Exhibits A-C to the SEC upon request. | |
4.1 |
Form of Subscription Warrant.* |
|
5.1 |
Opinion of Sullivan & Cromwell.* |
|
23.1 |
Consent of KPMG LLP, First Community Bancorp, filed herewith. |
|
23.2 |
Consent of KPMG LLP, Professional Bancorp 2000, filed herewith. |
|
23.3 |
Consent of KPMG LLP, Professional Bancorp 1998, filed herewith. |
|
23.4 |
Consent of Sullivan & Cromwell (included within Exhibit 5.1).* |
|
23.5 |
Consent of Vavrinek, Trine, Day & Co., LLP. |
|
23.6 |
Consent of Moss Adams LLP. |
|
23.7 |
Consent of Grant Thornton LLP. |
|
24 |
Powers of Attorney (included on the signature page hereof). |
|
99.1 |
Form of Instruction Booklet.* |
|
99.2 |
Form of Notice of Guaranteed Delivery.* |
|
99.3 |
Form of Subscription Agent Agreement.* |
|
99.4 |
Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees.* |
|
99.5 |
DTC Participant Oversubscription Privilege Exercise Form.* |
|
99.6 |
Form of Standby Stock Purchase Agreement.* |
|
99.7 |
Form of Nominee Holder Certification.* |
|
99.8 |
Form of Transmittal Letter to Holders of Common Stock.* |
|
99.9 |
Form of Letter of Transmittal to Holders of Common Stock whose addresses are outside the continental United States and Canada or who have A.P.O. or F.P.O. addresses.* |
|
99.10 |
Form of Letter to Clients of Securities Dealers, Commercial Banks, Trust Companies and Other Nominees.* |
The undersigned registrant hereby undertakes:
II–2
individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, that are incorporated by reference in this registration statement.
II–3
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Village of Rancho Santa Fe, state of California, on this 31st day of October, 2001.
| FIRST COMMUNITY BANCORP | |||
By: |
/s/ MATTHEW P. WAGNER President, Chief Executive Officer and Acting Chief Financial Officer |
||
We, the undersigned directors and officers of First Community Bancorp (the "Company"), do hereby constitute and appoint Matthew P. Wagner and Arnold C. Hahn, and each and either of them, our true and lawful attorneys-in-fact and agents, to do any and all acts and things in our name and our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our name in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said Company to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, including specifically, but without limitation, any and all amendments, including post-effective amendments, hereto; and we hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue thereof.
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.
| Signature |
Title |
Date |
||
|---|---|---|---|---|
| /s/ JOHN M. EGGEMEYER, III John M. Eggemeyer, III |
Director and Chairman of the Board | October 25, 2001 | ||
/s/ MATTHEW P. WAGNER Matthew P. Wagner |
President, Chief Executive Officer, Acting Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
October 31, 2001 |
||
/s/ HAROLD W. CLARK Harold W. Clark |
Director |
October 25, 2001 |
||
/s/ STEPHEN DUNN Stephen Dunn |
Director |
October 25, 2001 |
II–4
/s/ BARRY C. FITZPATRICK Barry C. Fitzpatrick |
Director |
October 25, 2001 |
||
/s/ ROBERT E. HERRMANN Robert E. Herrmann |
Director |
October 25, 2001 |
||
/s/ TIMOTHY B. MATZ Timothy B. Matz |
Director |
October 25, 2001 |
||
/s/ ROBERT A. SCHOELHORN Robert A. Schoelhorn |
Director |
October 25, 2001 |
||
/s/ ROBERT A. STINE Robert A. Stine |
Director |
October 25, 2001 |
||
/s/ DALE E. WALTER Dale E. Walter |
Director |
October 25, 2001 |
||
/s/ DAVID S. WILLIAMS David S. Williams |
Director |
October 25, 2001 |
II–5
| Exhibit No. |
Description |
|
|---|---|---|
| 2.1 | Agreement and Plan of Merger, dated as of August 21, 2001 by and between Pacific Western National Bank and First Community Bancorp. The registrant agrees to furnish supplementally a copy of Exhibits A-C to the SEC upon request. | |
4.1 |
Form of Subscription Warrant.* |
|
5.1 |
Opinion of Sullivan & Cromwell.* |
|
23.1 |
Consent of KPMG LLP, First Community Bancorp, filed herewith. |
|
23.2 |
Consent of KPMG LLP, Professional Bancorp 2000, filed herewith. |
|
23.3 |
Consent of KPMG LLP, Professional Bancorp 1998, filed herewith. |
|
23.4 |
Consent of Sullivan & Cromwell (included within Exhibit 5.1).* |
|
23.5 |
Consent of Vavrinek, Trine, Day & Co. LLP. |
|
23.6 |
Consent of Moss Adams LLP. |
|
23.7 |
Consent of Grant Thornton LLP. |
|
24 |
Powers of Attorney (included on the signature page hereof). |
|
99.1 |
Form of Instruction Booklet.* |
|
99.2 |
Form of Notice of Guaranteed Delivery.* |
|
99.3 |
Form of Subscription Agent Agreement.* |
|
99.4 |
Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees.* |
|
99.5 |
DTC Participant Oversubscription Privilege Exercise Form.* |
|
99.6 |
Form of Standby Stock Purchase Agreement.* |
|
99.7 |
Form of Nominee Holder Certification.* |
|
99.8 |
Form of Transmittal Letter to Holders of Common Stock.* |
|
99.9 |
Form of Letter of Transmittal to Holders of Common Stock whose addresses are outside the continental United States and Canada or who have A.P.O. or F.P.O. addresses.* |
|
99.10 |
Form of Letter to Clients of Securities Dealers, Commercial Banks, Trust Companies and Other Nominees.* |
II–6
dated
as of August 21, 2001
by and between
FIRST COMMUNITY BANCORP
and
PACIFIC WESTERN NATIONAL BANK
| |
|
|
||
|---|---|---|---|---|
| 1.01. | Certain Definitions | 1 |
| |
|
|
||
|---|---|---|---|---|
| 2.01. | The Merger | 5 | ||
| 2.02. | Effective Date and Effective Time | 6 |
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
| |
|
|
||
|---|---|---|---|---|
| 3.01. | Merger Consideration | 6 | ||
| 3.02. | Rights as Shareholders; Stock Transfers | 6 | ||
| 3.03. | Exchange Procedures | 6 | ||
| 3.04. | Company Stock Options | 7 | ||
| 3.05. | Anti-Dilution Provisions | 7 | ||
| 3.06. | Dissenters' Rights | 7 |
ARTICLE IV
ACTIONS PENDING ACQUISITION
| |
|
|
||
|---|---|---|---|---|
| 4.01. | Forebearances of the Company | 8 | ||
| 4.02. | Forebearances of Parent | 10 |
ARTICLE V
REPRESENTATIONS AND WARRANTIES
| |
|
|
||
|---|---|---|---|---|
| 5.01. | Disclosure Schedules | 10 | ||
| 5.02. | Standard | 11 | ||
| 5.03. | Representations and Warranties of the Company | 11 | ||
| 5.04. | Representations and Warranties of Parent | 18 |
| |
|
|
||
|---|---|---|---|---|
| 6.01. | Reasonable Best Efforts | 20 | ||
| 6.02. | Shareholder Approval | 20 | ||
| 6.03. | Proxy Statement | 20 | ||
| 6.04. | Press Releases | 21 | ||
| 6.05. | Access; Information | 21 | ||
| 6.06. | Acquisition Proposals | 21 | ||
| 6.07. | Certain Policies | 22 |
i
| 6.08. | Regulatory Applications | 22 | ||
| 6.09. | Indemnification | 23 | ||
| 6.10. | Benefit Plans | 24 | ||
| 6.11. | Notification of Certain Matters | 24 | ||
| 6.12. | Parent Approval | 24 | ||
| 6.13. | Covenant Relating to the Tax Status of the Agreement | 24 |
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
| |
|
|
||
|---|---|---|---|---|
| 7.01. | Conditions to Each Party's Obligation to Effect the Merger | 25 | ||
| 7.02. | Conditions to Obligation of the Company | 25 | ||
| 7.03. | Conditions to Obligation of Parent and Merger Subsidiary | 25 |
| |
|
|
||
|---|---|---|---|---|
| 8.01. | Termination by Mutual Consent | 26 | ||
| 8.02. | Termination by Either Parent or the Company | 26 | ||
| 8.03. | Termination by the Company | 27 | ||
| 8.04. | Termination by Parent | 27 | ||
| 8.05. | Effect of Termination and Abandonment | 27 |
| |
|
|
||
|---|---|---|---|---|
| 9.01. | Survival | 28 | ||
| 9.02. | Waiver; Amendment | 28 | ||
| 9.03. | Counterparts | 29 | ||
| 9.04. | Governing Law | 29 | ||
| 9.05. | Expenses | 29 | ||
| 9.06. | Notices | 29 | ||
| 9.07. | Entire Understanding; No Third Party Beneficiaries | 29 | ||
| 9.08. | Effect | 30 | ||
| 9.09. | Severability | 30 | ||
| 9.10. | Enforcement of the Agreement | 30 | ||
| 9.11. | Interpretation | 30 | ||
EXHIBIT A Form of Shareholder Agreement |
||||
| EXHIBIT B Form of Non-Compete Agreement | ||||
| EXHIBIT C Form of Non-Solicitation and Severance Agreement | ||||
Company's Disclosure Schedules |
||||
| Parent's Disclosure Schedules | ||||
ii
AGREEMENT AND PLAN OF MERGER, dated as of August 21, 2001 (this "Agreement"), by and between Pacific Western National Bank, a national banking association (the "Company") and First Community Bancorp, a California corporation ("Parent").
A. The Company. The Company is a national banking association having its principal place of business in Brea, California.
B. Parent. Parent is a California corporation, having its principal place of business in Rancho Santa Fe, California.
C. Merger Subsidiary. Upon execution of this Agreement, Parent shall form an interim national banking association ("Merger Subsidiary"), all of the outstanding capital stock of which shall be owned by Parent.
D. Intentions of the Parties. It is the intention of the parties to this Agreement that the business combination contemplated hereby be accounted for under the purchase accounting method and treated as a purchase of all of the stock of the Company for U.S. federal income tax purposes.
E. Board Action. The respective Boards of Directors of each of Parent and the Company have determined that it is in the best interests of their respective companies and their shareholders to consummate the strategic business combination transaction provided for herein.
F. Shareholder Agreements. As a condition to, and simultaneously with, the execution of this Agreement, each Shareholder (as defined herein) is entering into an agreement, in the form of Exhibit A hereto (collectively, the "Shareholder Agreements"), pursuant to which each Shareholder has agreed, among other things, to vote its shares in favor of this Agreement and the Merger.
G. Non-Compete Agreements. As a condition to, and simultaneously with, the execution of this Agreement, each non-employee director of the Company is entering into an agreement, in the form of Exhibit B hereto (collectively, the "Non-Compete Agreements").
H. Non-Solicitation and Severance Agreement. As a condition to, and simultaneously with, the execution of this Agreement, Douglass Faist, President and Chief Executive Officer of the Company, is entering into an agreement, in the form of Exhibit C hereto (the "Non-Solicitation Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. Certain Definitions. The following terms are used in this Agreement with the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 6.06.
"Agreement" means this Agreement, as amended or modified from time to time in accordance with Section 9.02.
"Agreement of Merger" has the meaning set forth in Section 2.01(b).
"ALL" has the meaning set forth in Section 5.03(t).
"Bank Insurance Fund" means the Bank Insurance Fund maintained by the FDIC.
"Benefit Plans" has the meaning set forth in Section 5.03(m).
1
"Business Day" means Monday through Friday of each week, except a legal holiday recognized as such by the U.S. Government or any day on which banking institutions in the State of California are authorized or obligated to close.
"Certificate" has the meaning set forth in Section 3.01(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Community Reinvestment Act" means the Community Reinvestment Act of 1977, as amended.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Articles" means the Articles of Association of the Company, as amended.
"Company Board" means the Board of Directors of the Company.
"Company By-Laws" means the By-Laws of the Company.
"Company Loan Property" has the meaning set forth in Section 5.03(o).
"Company Meeting" has the meaning set forth in Section 6.02.
"Company Stock" means the common stock, $5.00 par value per share, of the Company.
"Company Stock Option" has the meaning set forth in Section 3.04.
"Costs" has the meaning set forth in Section 6.09(a).
"Derivatives Contract" has the meaning set forth in Section 5.03(q).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenters' Shares" means shares of Company Stock held by a Company shareholder with respect to which such shareholder, in accordance with the National Bank Act, perfects such shareholder's right to dissent to the Merger.
"Dissenting Shareholder" means any holder of Dissenters' Shares.
"Effective Date" has the meaning set forth in Section 2.02.
"Effective Time" has the meaning set forth in Section 2.02.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" has the meaning set forth in Section 5.03(o).
"Equal Credit Opportunity Act" means the Equal Credit Opportunity Act, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Exchange Funds" has the meaning set forth in Section 3.03.
"Fair Housing Act" means the Fair Housing Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Act" means the Federal Reserve Act, as amended.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve System.
2
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any court, administrative agency or commission or other federal, state or local governmental authority or instrumentality.
"Hazardous Substance" has the meaning set forth in Section 5.03(o).
"Indemnified Party" has the meaning set forth in Section 6.09(a).
"Insurance Amount" has the meaning set forth in Section 6.09(b).
"Insurance Policies" has the meaning set forth in Section 5.03(s).
"Knowledge" of the Company or Parent, as the case may be, means to the actual knowledge after reasonable investigation of any director or any officer with the title of Vice President or above of the Company or Parent, as the case may be, or of any employee of Company or Parent, as the case may be, with primary responsibility for the subject matter as to which Knowledge is at issue.
"Lien" means any charge, mortgage, pledge, security interest, restriction, claim, lien or encumbrance or any other encumbrance or exception to title of any kind.
"Material Adverse Effect" means, with respect to Parent or Company, any effect, circumstance, occurrence or change that (i) is material and adverse to the financial position, results of operations or business of Parent and its Subsidiaries taken as a whole or Company, respectively, or (ii) would materially impair the ability of either Parent or Company to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by this Agreement; provided, however, that "Material Adverse Effect" shall not be deemed to include the impact of (a) changes in banking and similar laws of general applicability or interpretations thereof by courts or governmental authorities, (b) changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks and their holding companies generally, (c) any modifications or changes to valuation policies and practices in connection with the Merger or restructuring charges taken in connection with the Merger, in each case in accordance with GAAP, (d) changes agreed to in writing by Parent and Company and (e) changes resulting from general economic conditions throughout the United States affecting banks and their holding companies.
"Merger" has the meaning set forth in Section 2.01(a).
"Merger Consideration" has the meaning set forth in Section 2.01(a).
"Merger Subsidiary" has the meaning set forth in the recitals to this Agreement.
"Merger Subsidiary Board" means the Board of Directors of Merger Subsidiary.
"Merger Subsidiary Stock" means the stock, par value per share to be determined, of Merger Subsidiary.
"Nasdaq" means The Nasdaq Stock Market, Inc.'s National Market System.
"National Bank Act" means the National Bank Act, as amended.
"National Labor Relations Act" means the National Labor Relations Act, as amended.
"Non-Compete Agreements" has the meaning set forth in the preamble to this Agreement.
"Non-Solicitation Agreement" has the meaning set forth in the preamble to this Agreement.
"OCC" means the Office of the Comptroller of the Currency.
"OCC Documents" has the meaning set forth in Section 5.03(g).
3
"Offer Price" has the meaning set forth in Section 3.01(a).
"Parent" has the meaning set forth in the preamble to this Agreement.
"Parent Board" means the Board of Directors of Parent.
"Parent By-Laws" means the By-Laws of Parent.
"Parent Common Stock" means the common stock, no par value per share, of Parent.
"Parent Loan Property" has the meaning set forth in Section 5.04(j).
"Parent Preferred Stock" means the preferred stock, no par value per share, of Parent.
"Parent Stock" means, collectively, Parent Common Stock and Parent Preferred Stock.
"Parent Subsidiaries" means Rancho Santa Fe National Bank, First Community Bank of the Desert and First Professional Bank, N.A.
"Paying Agent" has the meaning set forth in Section 3.03(a).
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Person" means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company or unincorporated organization.
"Previously Disclosed" by the Company shall mean information set forth in a section of the Disclosure Schedule corresponding to the section of this Agreement where such term is used.
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Regulatory Authorities" has the meaning set forth in Section 5.03(i).
"Rights" means, with respect to any Person, securities or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock of such Person.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 5.04(g).
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
"Shareholder Agreements" has the meaning set forth in the recitals to this Agreement.
"Shareholders" shall mean the following shareholders of the Company: each director and executive officer of the Company.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to those terms in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" has the meaning set forth in Section 6.06.
"Surviving Association" has the meaning set forth in Section 2.01(a).
"Tax" and "Taxes" mean all federal, state, local or foreign taxes, charges, fees, levies or other assessments, however denominated, including, without limitation, all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment or other
4
taxes, custom duties, fees, assessments, levies or charges of any kind whatsoever, imposed on or with respect to the income, properties or operations of the Company by any taxing authority whether arising before, on or after the Effective Date, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties.
"Tax Returns" means any return, amended return and any other report (including elections, declarations, forms, disclosures, schedules, estimates and information returns) required to be filed with any taxing authority having jurisdiction over the Company on or before the Effective Date with respect to any Taxes of the Company including, without limitation, any documentation required to be filed with any taxing authority or to be retained by the Company in respect of information reporting requirements imposed by the Code or any similar foreign, state or local law.
"Termination Date" has the meaning set forth in Section 8.02.
"Treasury Stock" shall mean shares of Company Stock held by the Company or by Parent or any of its Subsidiaries, in each case other than in a fiduciary (including custodial or agency) capacity or as a result of debts previously contracted in good faith.
ARTICLE II
THE MERGER
2.01. The Merger (a) The Combination. At the Effective Time, Merger Subsidiary shall merge with and into the Company (the "Merger"), the separate corporate existence of Merger Subsidiary shall cease and the Company shall survive and continue to exist as a national banking association (the Company, as the surviving association in the Merger, sometimes being referred to herein as the "Surviving Association"). Parent may, at any time prior to the Effective Time (including, to the extent permitted by applicable law, after the Company's shareholders have approved this Agreement), change the method of effecting the acquisition of the Company (including, without limitation, the provisions of this Article II and including, without limitation, by electing not to merge Merger Subsidiary with and into the Company, but rather merge any of the Parent Subsidiaries with and into the Company or conducting a second stage merger in which the Surviving Association would be merged with and into one of the Parent Subsidiaries) if and to the extent it deems such change to be necessary, appropriate or desirable; provided, however, that no such change shall (i) alter or change the amount or kind of consideration to be issued to holders of Company Stock as provided for in this Agreement (the "Merger Consideration"), (ii) adversely affect the tax treatment of the Company's shareholders as a result of receiving the Merger Consideration, (iii) impede or delay consummation of the transactions contemplated by this Agreement or (iv) otherwise be materially prejudicial to the interests of the shareholders of the Company.
(b) Filings. Subject to the satisfaction or waiver of the conditions set forth in Article VII, the Merger shall become effective upon the Effective Date, as specified in the notice filed with the OCC in accordance with OCC regulations. Prior to or contemporaneously with the filing of such notice, an executed agreement of merger (the "Agreement of Merger") in form acceptable to the OCC shall be filed pending the occurrence of the Effective Date.
(c) Articles of Association and By-Laws. The articles of association and by-laws of the Surviving Association immediately after the Merger shall be those of the Company as in effect immediately prior to the Effective Time.
(d) Directors and Officers of the Surviving Association. The directors and officers of the Surviving Association immediately after the Merger shall be the directors and officers of Merger Subsidiary immediately prior to the Effective Time, until such time as their successors shall be duly elected and qualified.
5
(e) Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in 12 U.S.C. §215a(e), including any regulations or rules promulgated thereunder. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Merger Subsidiary shall vest in the Surviving Association, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Merger Subsidiary shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Association.
2.02. Effective Date and Effective Time. Subject to the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the consummation of the Merger, but subject to the fulfillment or waiver of those conditions), the parties shall cause the filings contemplated by Section 2.01 to be made on (i) the third Business Day after such satisfaction or waiver or (ii) such other date to which the parties may agree in writing. The Merger provided for herein shall become effective upon such filing or filings or on such date as may be specified therein in accordance with OCC regulations, provided however, that the consummation of the Merger shall not occur prior to January 4, 2002. The date of such effectiveness is herein called the "Effective Date". The "Effective Time" of the Merger shall be the time as set forth in such filing.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01. Merger Consideration. Subject to the provisions of this Agreement, at the Effective Time, automatically by virtue of the Merger and without any action on the part of any Person:
(a) Outstanding Company Stock. Each share of Company Stock, excluding Treasury Stock and Dissenters' Shares, issued and outstanding immediately prior to the Effective Time, shall become and be converted into the right to receive from the Surviving Association $37.15 in cash, without interest (the "Offer Price"). At the Effective Time all such shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such shares (a "Certificate") shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration.
(b) Outstanding Merger Subsidiary Stock. Each share of Merger Subsidiary Stock issued and outstanding immediately prior to the Effective Time shall become and be converted into one duly and validly issued, fully paid and nonassessable share of the Surviving Association.
(c) Outstanding Parent Stock. Each share of Parent Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and be unaffected by the Merger.
(d) Treasury Stock. Each share of Company Stock held as Treasury Stock immediately prior to the Effective Time shall automatically be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor.
3.02. Rights as Shareholders; Stock Transfers. At the Effective Time, holders of Company Stock shall cease to be, and shall have no rights as, shareholders of the Company other than to receive the consideration provided under this Article III. After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the Company Stock that was outstanding immediately prior to the Effective Time.
3.03. Exchange Procedures. (a) At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with U.S. Stock Transfer (the "Paying Agent"), for the benefit of the holders of Certificates, for exchange in accordance with this Article III, funds in amounts (the "Exchange Funds") for the payment of the Merger Consideration pursuant to Section 3.01(a) upon surrender of Certificates, it being understood that any and all interest or income earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent.
6
(b) After the Effective Date, Parent shall send or cause to be sent, as promptly as practicable and in no event later than five Business Days after the Effective Date, to each former holder of record of shares of Company Stock immediately prior to the Effective Time transmittal materials for use in exchanging such shareholder's Certificates for the consideration set forth in this Article III. Upon delivery to the Paying Agent of Certificates representing such shares of Company Stock (or indemnity reasonably satisfactory to Parent and the Exchange Agent, if any of such certificates are lost, stolen or destroyed) owned by such shareholder, Parent shall cause the amount of cash into which the shares formerly represented by such Certificates shall have been converted pursuant to this Article III, which such Person shall be entitled to receive, to be delivered to such shareholder and the Certificates so delivered shall forthwith be cancelled. The Paying Agent shall process materials received and issue the Merger Consideration within three Business Days of the receipt of such materials. In the event of a transfer of ownership of Company Stock that is not registered in the stock transfer books of the Company, the proper amount of cash may be paid in exchange therefor to a Person other than the Person in whose name the Certificate so delivered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. No interest will be paid on any such cash which any such Person shall be entitled to receive pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto shall be liable to any former holder of Company Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
(d) Any portion of the Exchange Funds that remains unclaimed by the shareholders of the Company for six months after the Effective Time shall be paid to Parent. Any shareholders of the Company who have not theretofore complied with this Article III shall thereafter look only to Parent for payment of the cash deliverable in respect of each share of Company Stock such shareholder holds as determined pursuant to this Agreement, in each case, without any interest thereon.
3.04. Company Stock Options. (a) At the Effective Time, each holder of outstanding and unexercised options to purchase shares of Company Stock granted under the Company's 1997 Stock Option Plan (each, a "Company Stock Option"), whether or not exercisable or vested, shall be entitled to receive, in full satisfaction of such Company Stock Options, cash in an amount, without interest, equal to the product of (A) the excess, if any, of the Offer Price over the exercise price per share of Company Stock subject to such Company Stock Options and (B) the number of shares of Company Stock subject to such Company Stock Options.
(b) The Surviving Association shall make the payment of the amount determined pursuant to Section 3.04(a) above to holders as soon as reasonably practicable following the Effective Time, but in no event later than 10 Business Days following the Effective Time.
3.05. Anti-Dilution Provisions. In the event the Company changes (or establishes a record date for changing) the number of shares of Company Stock issued and outstanding prior to the Effective Date as a result of a stock split, stock dividend, recapitalization or similar transaction with respect to the outstanding Company Stock (and the record date therefor shall be prior to the Effective Date), the Offer Price shall be proportionately adjusted.
3.06. Dissenters' Rights. Any Dissenting Shareholder who shall be entitled to be paid the value of such shareholder's shares of Company Stock as provided in 12 U.S.C. § 215a, shall not be entitled to the Merger Consideration in respect thereof provided for under Section 3.01 unless and until such Dissenting Shareholder shall have failed to perfect or shall have effectively withdrawn or lost such Dissenting Shareholder's right to dissent from the Merger under the National Bank Act; otherwise, such Dissenting Shareholder shall be entitled to receive only the payment provided for by 12 U.S.C. §
7
215a with respect to such Dissenters' Shares. If any Dissenting Shareholder shall fail to perfect or shall have effectively withdrawn or lost such right to dissent, the Dissenters' Shares held by such Dissenting Shareholder shall thereupon be treated as though such Dissenters' Shares had been converted into the right to receive the Merger Consideration pursuant to Section 3.01 hereof.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01. Forebearances of the Company. From the date hereof until the Effective Time, except as expressly contemplated by this Agreement, without the prior written consent of Parent, the Company will not:
(a) Ordinary Course. Except as Previously Disclosed in Section 4.01(a) of the Company's Disclosure Schedule, and pursuant to the terms of Section 6.12 hereof, conduct the business of the Company other than in the ordinary and usual course or fail to use reasonable best efforts to preserve intact its business organizations and assets and maintain its rights, franchises and existing relations with customers, suppliers, employees and business associates, take any action that would adversely affect or delay the ability of the Company, Parent, Merger Subsidiary or any of the Parent Subsidiaries to perform any of their obligations on a timely basis under this Agreement, or take any action that is reasonably likely to have a Material Adverse Effect on the Company.
(b) Capital Stock. Other than pursuant to the Rights set forth on Schedule 4.01(b) of the Company's Disclosure Schedule and outstanding on the date hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of stock or any Rights, (ii) enter into any agreement with respect to the foregoing or (iii) permit any additional shares of stock to become subject to grants of employee or director stock options, other Rights or similar stock-based employee rights.
(c) Dividends; Etc. (i) Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of stock, or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or renew any employment, consulting, severance or similar agreements or arrangements with any director, officer or employee of the Company or grant any salary or wage increase or increase any employee benefit (including incentive or bonus payments), except (i) for normal individual increases in compensation to employees in the ordinary course of business consistent with past practice, provided that no such increase shall result in an annual adjustment of more than 5%, (ii) for extension of any existing employment agreement for periods of up to one year from the date of expiration thereof, provided that employment under any such agreement is by its terms "at will," (iii) for other changes that are required by applicable law, (iv) to satisfy contractual obligations existing as of the date hereof and set forth in Schedule 4.01(d) of the Company's Disclosure Schedule or (v) for grants of awards to newly hired employees consistent with past practice.
(e) Hiring. Hire any person as an employee of the Company or promote any employee, except (i) to satisfy contractual obligations existing as of the date hereof and set forth on Schedule 4.01(e) of the Company's Disclosure Schedule and (ii) persons hired to fill any vacancies arising after the date hereof and whose employment is terminable at the will of the Company, other than any person to be hired who would have a base salary, including any guaranteed bonus or any similar bonus, considered on an annual basis of more than $50,000.
(f) Benefit Plans. Enter into, establish, adopt or amend (except (i) as may be required by applicable law or (ii) to satisfy contractual obligations existing as of the date hereof and set forth on Schedule 4.01(f) of the Company's Disclosure Schedule) any pension, retirement, stock option, stock
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purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, officer or employee of the Company or take any action to accelerate the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder.
(g) Dispositions. Except as Previously Disclosed in Section 4.01(g) of the Company's Disclosure Schedule and in accordance with Section 6.12, sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business and in a transaction that, together with all other such transactions, is not material to the Company.
(h) Acquisitions. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity except in the ordinary course of business consistent with past practice and in a transaction that, together with all other such transactions, is not material to the Company.
(i) Capital Expenditures. Except as set forth in Schedule 4.01(i) of the Company's Disclosure Schedule, make any capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $10,000 individually or $50,000 in the aggregate.
(j) Governing Documents. Amend the Company Articles or Company By-Laws.
(k) Accounting Methods. Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP.
(l) Contracts. Except as Previously Disclosed in Section 4.01(l) of the Company's Disclosure Schedule and in accordance with Section 6.12, enter into, renew or terminate, or make any payment not then required under, any contract or agreement that calls for aggregate annual payments of $25,000 or more and which is not terminable at will or with 60 calendar days or less notice without payment of a premium or penalty, other than loans and other transactions made in the ordinary course of the banking business or as otherwise expressly permitted under this Agreement.
(m) Claims. Enter into any settlement or similar agreement with respect to, or take any other significant action with respect to the conduct of, any action, suit, proceeding, order or investigation to which the Company is a party on or becomes a party after the date of this Agreement, and as to which the Company is not solely a plaintiff, which settlement, agreement or action involves payment by the Company of an amount, individually or for all such settlements, that exceeds $100,000 or would impose any material restriction on the business of the Surviving Association or create precedent for claims that are reasonably likely to be material to the Company.
(n) Adverse Actions. Take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VII not being satisfied, (iii) a material violation of any provision of this Agreement or (iv) a material delay or impairment of the ability of the Company, Parent, Merger Subsidiary or any of the Parent Subsidiaries to consummate the transactions contemplated by this Agreement, except, in each case, (x) as may be required by applicable law or regulation or (y) as may otherwise be specifically permitted by this Agreement.
(o) Risk Management. Except as required by applicable law or regulation or the OCC, (i) implement or adopt any material change in its interest rate and other risk management policies,
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procedures or practices or (ii) fail to follow its existing policies or practices with respect to managing its exposure to interest rate and other risk.
(p) Indebtedness. Incur any indebtedness for borrowed money (other than deposits, Federal Funds borrowings and borrowings from the Federal Home Loan Bank of San Francisco) or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person.
(q) Loans. Make any loan, loan commitment or renewal or extension thereof to any Person which would, when aggregated with all outstanding loans, commitments for loans or renewals or extensions thereof made to such Person and any affiliate or immediate family member of such Person, exceed $750,000 without submitting complete loan package information to the chief credit officer of Parent for review with a right of comment at least two full Business Days prior to taking such action.
(r) Investments. (i) Other than in the ordinary course of business consistent with past practice in individual amounts not to exceed $1,000,000 or in securities transactions as provided in (ii) below, make any investment either by contributions to capital, property transfers or purchase of any property or assets of any Person or (ii) other than purchases of direct obligations of the United States of America or obligations of U.S. government agencies which are entitled to the full faith and credit of the United States of America, in any case with a remaining maturity at the time of purchase of two years or less, purchase or acquire securities of any type; provided, however, that in the case of investment securities, the Company may purchase investment securities if, within two Business Days after the Company requests in writing (which request shall describe in detail the investment securities to be purchased and the price thereof) that Parent consent to making of any such purchase, Parent has approved such request in writing or has not responded in writing to such request.
(s) Taxes. Settle any material audit, make or change any material tax election, file any amended Tax Return, take any action which would have a Material Adverse Effect on the tax position of the Surviving Association after the Merger or take any other action with respect to Taxes, that is outside the ordinary course of business or inconsistent with past practice.
(t) Commitments. Agree or commit to do any of the foregoing.
4.02. Forebearances of Parent. From the date hereof until the Effective Time, except as expressly contemplated by this Agreement, without the prior written consent of the Company, Parent will not, and will cause Merger Subsidiary and other Parent Subsidiaries not to:
(a) Ordinary Course. Take any action reasonably likely to have an adverse effect on Parent's ability to perform any of its material obligations under this Agreement.
(b) Adverse Actions. Knowingly take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VII not being satisfied, (iii) a material violation of any provision of this Agreement or (iv) a material delay or impairment of the ability of the Company, Parent, Merger Subsidiary or any of the Parent Subsidiaries to consummate the transactions contemplated by this Agreement, except, in each case, as may be required by applicable law or regulation.
(c) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Disclosure Schedules. On or prior to the date hereof, the Company has delivered to Parent a schedule (the "Disclosure Schedule") setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a
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provision hereof or as an exception to one or more representations or warranties contained in Section 5.03 or to one or more of its covenants contained in Article IV; provided, however, that (a) no such item is required to be set forth in the Disclosure Schedule as an exception to a representation or warranty if its absence would not be reasonably likely to result in the related representation or warranty being deemed untrue or incorrect under the standard established by Section 5.02 and (b) the mere inclusion of an item in the Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by a party that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect.
5.02. Standard. No representation or warranty of the Company or Parent contained in Sections 5.03 or 5.04, respectively, shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, event or circumstance unless (a) such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in Section 5.03 or 5.04(a) through (i), has had or is reasonably likely to have a Material Adverse Effect on the party making such representation or warranty or (b) such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in Section 5.04(j) and (k), has had or is reasonably likely to have a Material Adverse Effect on Parent only with respect to clause (ii) of the definition of "Material Adverse Effect".
5.03. Representations and Warranties of the Company. Subject to Sections 5.01 and 5.02 and except as Previously Disclosed, the Company hereby represents and warrants to Parent and to Merger Subsidiary:
(a) Organization, Standing and Authority. The Company is a national banking association. The Company is duly licensed by the OCC as a commercial bank and its deposits are insured by the FDIC through the Bank Insurance Fund in the manner and to the fullest extent provided by law. The Company is duly qualified to do business and is in good standing under the National Bank Act.
(b) Company Capital Stock. As of the date hereof, the authorized capital stock of the Company consists solely of 2,000,000 shares of the Company's Common Stock, par value $5.00 per share, of which 921,185 shares are issued and outstanding. As of the date hereof, no shares of the Company Stock were held in treasury by the Company or otherwise owned by the Company. The outstanding shares of Company Stock have been duly authorized and are validly issued and outstanding, and are not subject to preemptive rights (and were not issued in violation of any preemptive rights). Section 5.03(b) of the Company's Disclosure Schedule sets forth for each Company Stock Option the name of the grantee, the date of the grant, the type of grant, the status of the option grant as qualified or non-qualified under Section 422 of the Code, the number of shares of Company Stock subject to each option, the number and type of shares subject to options that are currently exercisable and the exercise price per share. Except as set forth in the preceding sentence, as of the date hereof, there are no shares of Company Stock authorized and reserved for issuance, the Company does not have any Rights issued or outstanding with respect to Company Stock, and the Company does not have any commitment to authorize, issue or sell any Company Stock or Rights, except pursuant to this Agreement.
(c) Subsidiaries.
(i) The Company has no Subsidiaries.
(ii) The Company does not own beneficially, directly or indirectly, any equity securities or similar interests of any Person or any interest in a partnership or joint venture of any kind.
(d) Corporate Power. The Company has all requisite corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and the Company has
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all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby.
(e) Corporate Authority. As of the date hereof, with respect to each of clauses (i), (ii) and (iii) below, the Company's Board, by resolutions duly adopted by unanimous vote at a meeting duly called and held, has duly (i) determined that this Agreement and the Merger are advisable and fair to and in the best interests of the Company and its shareholders, (ii) approved this Agreement and the Merger and (iii) resolved that such matter be submitted for consideration by its shareholders at a meeting of such shareholders and that such matter be recommended for approval at such meeting. The Company has duly executed and delivered this Agreement and each of this Agreement is a valid and legally binding obligation of the Company, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors' rights or by general equity principles). The Company Board has received the written opinion of Western Financial Corporation to the effect that as of the date hereof the Offer Price is fair to the holders of Company Stock from a financial point of view.
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by the Company in connection with the execution, delivery or performance by the Company of this Agreement or to consummate the Merger except for (A) filings of applications or notices with, and approvals or waivers by, the Federal Reserve Board and the OCC, as required, and (B) filings with federal and state securities authorities and (C) the approval of this Agreement by the affirmative vote of holders of two-thirds of the outstanding shares of the Company Stock. As of the date hereof, to the Knowledge of the Company, there is no reason as to the Company why the approvals set forth in Section 7.01(b) will not be received without the imposition of a condition, restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the approvals referred to in the preceding paragraph, and the expiration of related waiting periods, and required filings under federal and state securities laws, the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture or instrument of the Company or to which the Company or any of its properties is subject or bound, (B) constitute a breach or violation of, or a default under, the articles of association or by-laws (or similar governing documents) of the Company or (C) require any consent or approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports; Reporting Requirements; Undisclosed Liabilities.
(i) The Company's audited financial statements for the fiscal years ended December 31, 2000, December 31, 1999 and December 31, 1998, and all other call reports, registration statements, definitive proxy statements or information statements filed or to be filed by it subsequent to December 31, 1998 with the OCC (collectively, including any such reports filed subsequent to the date hereof and as amended, the "OCC Documents") as of the date filed or to be filed and as amended prior to the date hereof, (A) with respect to filings made or required to be made under the Securities Act or the Exchange Act, if any, complied or will comply in all material respects as to form with the applicable securities regulations of the OCC (including those of the SEC, if applicable) and (B) with respect to filings made or required to be made other than
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under the Securities Act or the Exchange Act, complied or will comply in all material respects with the applicable regulations of the OCC, and (C) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each of the balance sheets (including the related notes and schedules thereto) fairly presents, or will fairly present, the consolidated financial position of the Company as of its date, and each of the consolidated statements of income and changes in shareholders' equity and cash flows or equivalent statements (including any related notes and schedules thereto) fairly presents, or will fairly present, the results of operations, changes in shareholders' equity and changes in cash flows, as the case may be, of the Company for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein, and except as to filings that are not required to comply with GAAP or that are specifically required to comply with accounting principles that differ from GAAP. The Company is not required to file reports with the SEC or the OCC pursuant to Section 12(g) or 15(d) of the Exchange Act.
(ii) Since December 31, 2000, the Company has not incurred any liability other than in the ordinary course of business consistent with past practice (excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby).
(iii) Since December 31, 2000, (A) the Company has conducted its businesses in the ordinary and usual course consistent with past practice (excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby) and (B) no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.03 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to the Company.
(iv) No agreement pursuant to which any loans or other assets have been or shall be sold by the Company entitled the buyer of such loans or other assets, unless there is material breach of a representation or covenant by the Company, to cause the Company to repurchase such loan or other asset or the buyer to pursue any other form of recourse against the Company. No cash, stock or other dividend or any other distribution with respect to (A) the capital stock of the Company or (B) except as disclosed in writing to Parent as of the date hereof or hereafter, has been declared, set aside or paid. No shares of the capital stock of the Company have been purchased, redeemed or otherwise acquired, directly or indirectly, by the Company since December 31, 2000, and no agreements have been made to do the foregoing.
(h) Litigation. No litigation, claim or other proceeding before any court or Governmental Authority is pending against the Company and, to the Company's Knowledge, no such litigation, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, claim or other proceeding.
(i) Regulatory Matters. Neither the Company nor any of its properties is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, any federal or state Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits (including, without limitation, the Federal Reserve Board) or the supervision or regulation of it (collectively, the "Regulatory Authorities"). The Company has paid all assessments made or imposed by any Regulatory Authority. The Company has not been advised by, and does not have any Knowledge of facts which could give rise to an advisory notice by, any Regulatory Authority that such Regulatory Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter, supervisory letter or similar submission.
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(j) Compliance With Laws. The Company:
(i) is in compliance with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act and all other applicable fair lending laws and other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit them to own or lease their properties and to conduct their businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to the Company's Knowledge, no suspension or cancellation of any of them is threatened; and
(iii) has received, since December 31, 1999, no notification or communication from any Governmental Authority (A) asserting that the Company is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (B) threatening to revoke any license, franchise, permit or governmental authorization (nor, to the Company's Knowledge, do any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults. The Company is not a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral) (i) that is a "material contract" within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii) that materially restricts the conduct of business by the Company. The Company is not in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. No power of attorney or similar authorization given directly or indirectly by the Company is currently outstanding.
(l) No Brokers. No action has been taken by the Company that would give rise to any valid claim against any party hereto for a brokerage commission, finder's fee or other like payment with respect to the transactions contemplated by this Agreement, excluding a Previously Disclosed fee to be paid to Western Financial Corporation.
(m) Employee Benefit Plans.
(i) All benefit and compensation plans, contracts, policies or arrangements covering current or former employees of the Company (the "Employees") and current or former directors of the Company including, but not limited to, "employee benefit plans" within the meaning of Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans, and life and health insurance continuation plans (the "Benefit Plans"), are Previously Disclosed in the Disclosure Schedule. True and complete copies of all Benefit Plans including, but not limited to, any trust instruments and insurance contracts forming a part of any Benefit Plans and all amendments thereto have been provided or made available to Parent.
(ii) All Benefits Plans covering Employees, to the extent subject to ERISA, are in substantial compliance with ERISA. Each Benefit Plan which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service, and the Company is not aware of any circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Pension Plan under Section 401(a) of the Code. There is no material pending or threatened litigation relating to
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the Benefits Plans. The Company has not engaged in a transaction with respect to any Benefit Plan or Pension Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject the Company to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material.
(iii) No Benefit Plan, ongoing, frozen or terminated "single-employer plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by the Company, or single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") is a "defined benefit plan" as defined in Section 414(j) of the Code. The Company has not incurred, and does not expect to incur, any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate).
(iv) All contributions required to be made under the terms of any Benefit Plan have been timely made. The Company has not provided, or is required to provide, security to any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(v) The Company does not have any obligations for retiree or director health and life benefits under any Benefit Plan. Except as Previously Disclosed, the Company may amend or terminate any such Benefit Plan at any time without incurring any liability thereunder.
(vi) None of the execution of this Agreement, shareholder approval of this Agreement or consummation of the transactions contemplated by this Agreement will (A) entitle any employees of the Company to severance pay or any increase in severance pay upon any termination of employment after the date hereof, (B) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Benefit Plans, (C) result in any breach or violation of, or a default under, any of the Benefit Plans or (D) result in any payment that would be a "parachute payment" to a "disqualified individual" as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future.
(n) Labor Matters. The Company is not a party to and is not bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is the Company the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel the Company to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to the Company's Knowledge, threatened, nor is the Company aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.
(o) Environmental Matters. The Company has complied at all times with applicable Environmental Laws; (ii) no real property (including buildings or other structures) currently or formerly owned or operated by the Company, or, to the Knowledge of the Company, any property in which the Company has held a security interest, Lien or a fiduciary or management role ("Company Loan Property"), has been contaminated with, or has had any release of, any Hazardous Substance; (iii) the Company could not be deemed the owner or operator of any Company Loan Property under any Environmental Law which such Company Loan Property has been contaminated with, or has had any release of, any Hazardous Substance; (iv) the Company is not subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) the Company has not received any notice, demand letter, claim or request for information alleging any violation of, or liability under, any Environmental Law; (vi) the Company is not subject to any order, decree, injunction or other agreement with any Governmental Authority or any third party relating to any Environmental Law;
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(vii) to the Company's Knowledge, there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or automotive services) involving the Company, any currently or formerly owned or operated property, or any Company Loan Property, that could reasonably be expected to result in any claims, liability or investigations against the Company, result in any restrictions on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any Company Loan Property and (viii) the Company has delivered to Parent copies of all environmental reports, studies, sampling data, correspondence, filings and other environmental information in its possession or reasonably available to it relating to the Company, and any currently or formerly owned or operated property or any Company Loan Property.
As used herein, the term "Environmental Laws" means any federal, state or local law, regulation, order, decree, permit, authorization, common law or agency requirement relating to: (A) the protection or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance and the term "Hazardous Substance" means any substance in any concentration that is: (A) listed, classified or regulated pursuant to any Environmental Law, (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon or (C) any other substance which is the subject of regulatory action by any Governmental Authority in connection with any Environmental Law.
(p) Tax Matters.
(i) (A) The Company (I) has prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all Tax Returns required to have been filed by it and all such filed Tax Returns are materially true, complete and accurate; (II) has paid in full or accrued all Taxes that are required to have been paid or accrued and has withheld from amounts owing to any employee, creditor or third party all amounts that the Company is obligated to have withheld; (III) in the case of any Tax Return required to be retained by the Company prior to the Effective Date in respect of any information reporting or other tax requirements, has retained properly completed Tax Returns in the Company's files; and (IV) has materially complied with all information reporting (and related withholding) requirements related to payments to, and transaction completed for, customers, (B) the Tax Returns referred to in clause (i)(A) have been examined by the Internal Revenue Service or the appropriate taxing authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired, (C) all deficiencies asserted or assessments made as a result of such examinations have been paid in full or otherwise finally resolved, (D) no issues that have been raised by the relevant taxing authority in connection with the examination of any of the Tax Returns referred to in clause (i)(A) are currently pending, (E) the Company has not waived any statute of limitations with respect to Taxes that has continuing effect or agreed to any extension of time with respect to a Tax assessment or deficiency that has continuing effect, (F) as of the date hereof, the Company has not been advised in writing by an appropriate taxing authority of any audits, examinations, investigations or other proceedings in respect of Taxes or tax matters, and (G) as of the date hereof, the Company has made available to Parent true and correct copies of all material income, franchise, capital and similar Tax Returns filed by the Company for all taxable years or periods for which the relevant statute of limitations has not expired.
(ii) There are no Liens on any of the Company's assets that arose in connection with any failure (or alleged failure) to pay any Tax, except with respect to Liens for the payment of taxes not yet due and payable.
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(iii) The Company will not be required, as a result of (A) a change in accounting method for a Tax period beginning on or before the Effective Time to include any adjustment under Section 481(c) of the Code (or any similar provision of state, local or foreign law), in taxable income for any Tax period beginning on or after the Effective Time, or (B) any "closing agreement" as described in Section 7121 of the Code (or any similar provision of state, local or foreign Tax law), to include any item of income in or exclude any item of deduction from any Tax period beginning on or after the Effective Time.
(iv) The Company or any predecessor to the Company has not made with respect to the Company or any predecessor of the Company any consent under Section 341 of the Code.
(v) The Company will not, as a result of the transactions contemplated by this Agreement, be obligated to make a payment that will not be deductible under Section 280G of the Code.
(vi) The Company does not have any liability with respect to income, franchise or similar Taxes that accrued on or before the end of the most recent period covered by the OCC Documents filed prior to the date hereof in excess of the amounts accrued with respect thereto that are reflected in the financial statements included in the OCC Documents filed on or prior to the date hereof.
(vii) The Company is not a party to any Tax allocation or sharing agreement, is not nor has been a member of an affiliated, combined, consolidated or unitary Tax group filing consolidated unitary or combined Tax Returns (other than, for purposes of filing consolidated U.S. federal income tax return, a group the common parent of which is or was the Company) and does not otherwise have any liability for the Taxes of any Person (other than the Company).
(viii) No closing agreements, private letter rulings, technical advice memoranda or similar agreement or rulings have been entered into or issued by any taxing authority with respect to the Company.
(ix) (A) No Tax is required to be withheld pursuant to Section 1445 of the Code as a result of the transaction contemplated by this Agreement and (B) all Taxes that the Company is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required by applicable law, have been paid to the proper Governmental Authority or other Person.
(q) Risk Management Instruments. The Company is not a party nor has it agreed to enter into an exchange traded or over-the-counter equity, interest rate, foreign exchange or other swap, forward, future, option, cap, floor or collar or any other contract that is not included on the balance sheet and is a derivatives contract (including various combinations thereof) (each, a "Derivatives Contract") or owns securities that (i) are referred to generically as "structured notes," "high risk mortgage derivatives," "capped floating rate notes" or "capped floating rate mortgage derivatives" or (ii) are likely to have changes in value as a result of interest or exchange rate changes that significantly exceed normal changes in value attributable to interest or exchange rate changes, except for those Derivatives Contracts and other instruments legally purchased or entered into in the ordinary course of business, consistent with safe and sound banking practices and regulatory guidance. All of such Derivatives Contracts or other instruments, are legal, valid and binding obligations of the Company enforceable in accordance with their terms (except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally), and are in full force and effect. The Company has duly performed in all material respects all of its material obligations thereunder to the extent that such obligations to perform have accrued; and, to the Company's Knowledge, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder which would have or would reasonably be expected to have a Material Adverse Effect on the Company.
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(r) Books and Records. The books and records of the Company have been fully, properly and accurately maintained in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein, and they fairly present the financial position of the Company.
(s) Insurance. The Company has Previously Disclosed all of the insurance policies, binders, or bonds maintained by the Company ("Insurance Policies"). The Company is insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent in accordance with industry practices. All the Insurance Policies are in full force and effect; the Company is not in material default thereunder; and all claims thereunder have been filed in a due and timely fashion.
(t) Allowance For Loan Losses. The Company's Allowance for Loan Losses ("ALL") is, and shall be as of the Effective Date, in compliance with the Company's existing methodology for determining the adequacy of its ALL as well as the standards established by applicable Governmental Authorities and the Financial Accounting Standards Board and is and shall be adequate under all such standards.
(u) Transactions With Affiliates. The Company has had no transactions with Affiliates within the meaning of Sections 23A and 23B of the Federal Reserve Act.
5.04. Representations and Warranties of Parent. Subject to Section 5.02, Parent hereby represents and warrants to the Company as follows:
(a) Organization, Standing and Authority. Parent is duly organized, validly existing and in good standing under the laws of the State of California. Parent is duly qualified to do business and is in good standing in the states of the United States and foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified. Parent has in effect all federal, state, local, and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted.
(b) Parent Stock. As of the date hereof, the authorized capital stock of Parent consists solely of 15,000,000 shares of Parent Common Stock, of which no more than 4,609,619 shares were outstanding as of the date hereof, and 5,000,000 shares of Parent Preferred Stock, of which no shares were outstanding as of the date hereof.
(c) Subsidiaries. Each of the Parent Subsidiaries has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business and in good standing in the jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and it owns, directly or indirectly, all the issued and outstanding equity securities of each of the Parent Subsidiaries. Each of the Parent Subsidiaries is duly licensed by the relevant Regulatory Authority, and its deposits are insured by the Bank Insurance Fund in the manner and to the fullest extent provided by law.
(d) Corporate Power. Each of Parent and the Parent Subsidiaries have all requisite corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; Parent has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.
(e) Corporate Authority. This Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of Parent and the Parent Board. This Agreement has been duly executed and delivered by Parent and this Agreement is a valid and legally binding agreement of Parent enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors' rights or by general equity principles).
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(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Parent or any of its Subsidiaries in connection with the execution, delivery or performance by Parent of this Agreement or to consummate the Merger except for (A) filings of applications or notices with and approvals or waivers by the Federal Reserve Board and the OCC, as required, and (B) filings with federal and state securities authorities. As of the date hereof, to the Knowledge of Parent, there is no reason as to Parent why the approvals set forth in Section 7.01(b) will not be received in a timely manner and without the imposition of a condition, restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt, or the making, of the consents, approvals and filings referred to in the preceding paragraph and expiration of the related waiting periods, the execution, delivery and performance of this Agreement by Parent and the consummation of the transactions contemplated hereby do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or Agreement, indenture or instrument of Parent or of any of the Parent Subsidiaries or to which Parent or any of the Parent Subsidiaries or properties is subject or bound, (B) constitute a breach or violation of, or a default under, the articles of association or by-laws (or similar governing documents) of Parent or any of the Parent Subsidiaries or (C) require any consent or approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect.
(i) Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it subsequent to December 31, 2000 under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed or to be filed (collectively, Parent's "SEC Documents") with the SEC, as of the date filed or to be filed, (A) complied or will comply in all material respects as to form with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each of the balance sheets contained in or incorporated by reference into any such SEC Document (including the related notes and schedules thereto) fairly presents, or will fairly present, the financial position of Parent and the Parent Subsidiaries as of its date, and each of the statements of income and changes in shareholders' equity and cash flows or equivalent statements in such SEC Documents (including any related notes and schedules thereto) fairly presents, or will fairly present, the results of operations, changes in shareholders' equity and changes in cash flows, as the case may be, of Parent and the Parent Subsidiaries for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein.
(ii) Since December 31, 2000, Parent and the Parent Subsidiaries have conducted their respective businesses in the ordinary and usual course consistent with past practice (excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby) and no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.04 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to Parent or the Parent Subsidiaries.
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(h) No Brokers. Except for a fee paid to Castle Creek Capital LLC, no action has been taken by Parent or the Parent Subsidiaries that would give rise to any valid claim against any party hereto for a brokerage commission, finder's fee or other like payment with respect to the transactions contemplated by this Agreement.
(i) Financing. Parent has the financial resources to complete the transactions contemplated by this Agreement, or reasonably and in good faith expects (i) to have binding commitments for the provision of the capital required to complete such transactions within the timeframe contemplated by this Agreement and (ii) that no material conditions or restrictions will be imposed by any Regulatory Authority that would impair its ability to use such capital for the purpose of completing such transactions within the timeframe contemplated by this Agreement.
(j) Litigation. No litigation, claim or other proceeding before any court or Governmental Authority is pending against Parent or any of the Parent Subsidiaries and, to Parent's Knowledge, no such litigation, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, claim or other proceeding.
(k) Regulatory Matters. Neither Parent, the Parent Subsidiaries nor any of their respective properties is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, any Regulatory Authority. Parent and the Parent Subsidiaries have paid all assessments made or imposed by any Regulatory Authority. Parent has not been advised by, and does not have any Knowledge of facts which could give rise to an advisory notice by, any Regulatory Authority that such Regulatory Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter, supervisory letter or similar submission.
ARTICLE VI
COVENANTS
6.01. Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each of the Company and Parent agree to use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the Merger as promptly as reasonably practicable and otherwise to enable consummation of the transactions contemplated hereby, including the satisfaction of the conditions set forth in Article VII hereof, and shall cooperate fully with the other party hereto to that end.
6.02. Shareholder Approval. The Company agrees to take, in accordance with applicable law and the Company Articles of Association and Company By-Laws, all action necessary to convene as soon as reasonably practicable a meeting of its shareholders to consider and vote upon the approval of this Agreement and the Merger and any other matters required to be approved by the Company's shareholders for consummation of the Merger (including any adjournment or postponement, the "Company Meeting"), in each case within 45 calendar days after delivery of the Proxy Statement. Except with the prior approval of Parent, no other matters shall be submitted for the approval of the Company shareholders. Subject to fiduciary obligations under applicable law, the Company Board shall at all times prior to and during such meeting recommend such approval and shall take all reasonable lawful action to solicit such approval by its shareholders.
6.03. Proxy Statement. (a) After the Merger Agreement is executed, the Company shall promptly mail at its expense a proxy statement (the "Proxy Statement") to its shareholders.
(b) Each of the Company and Parent agrees the Proxy Statement and any amendment or supplement thereto shall, at the date of mailing to shareholders and at the time of the Company
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Meeting not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Each of the Company and Parent further agrees that if such party shall become aware prior to the Effective Date of any information furnished by such party that would cause any of the statements in the Proxy Statement to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other parties thereof and to take the necessary steps to correct the Proxy Statement.
6.04. Press Releases. The Company and Parent shall consult with each other before issuing any press release with respect to the Merger or this Agreement and shall not issue any such press release or make any such public statements without the prior consent of the other party, which consent shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of the other party (but after such consultation, to the extent practicable in the circumstances), issue such press release or make such public statements as may upon the advice of outside counsel be required by law or the rules or regulations of Nasdaq. The Company and Parent shall cooperate to develop all public announcement materials and make appropriate management available at presentations related to the transactions contemplated by this Agreement as reasonably requested by the other party.
6.05. Access; Information. (a) The Company agrees that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford Parent and Parent's officers, employees, counsel, accountants and other authorized representatives such access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, Tax Returns and work papers of independent auditors), properties and personnel and to such other information as Parent may reasonably request and, during such period, it shall, as promptly as is reasonably practicable, furnish to Parent all information concerning its business, properties and personnel as Parent may reasonably request.
(b) Without limiting the generality of Section 6.05(a), prior to the Effective Time, Parent and Parent's representatives shall have the right to conduct a review to determine (i) that the assets, books, records and operations of the Company are in satisfactory condition and will not in a material way adversely impact Parent after consummation of the transactions contemplated hereby and (ii) the accuracy of the representations and warranties and the satisfaction of the conditions to closing as provided hereunder.
(c) The Company agrees that, subject to applicable laws, it shall cooperate in good faith with Parent on mutually agreed operating issues which the parties agree have priority.
(d) Parent agrees that, upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford the Company and its authorized representatives such access to Parent's personnel as the Company may reasonably request.
(e) The parties acknowledge that each of Parent and the Company have previously executed Confidentiality Agreements, dated as of October 11, 2001, and July 30, 2001, as part of a due diligence review conducted by the parties, which confidentiality agreements shall continue in full force and effect in accordance with their terms.
6.06. Acquisition Proposals. The Company agrees that neither it nor any of its officers or directors shall, and that it shall direct and use its reasonable best efforts to cause its employees, agents and representatives not to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of all or substantially all of the assets of the Company (excluding any sale of all or substantially all the assets of the Company's Subsidiary) or more than 15% of the outstanding equity securities, of the Company (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"). The Company further agrees that
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neither the Company nor any of its respective officers and directors shall, and that it shall direct and use its reasonable best efforts to cause its employees, agents and representatives not to, directly or indirectly, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; provided, however, that nothing contained in this Agreement shall prevent the Company or the Company Board from (A) complying with its disclosure obligations under federal or state law; (B) providing information in response to a request therefor by a Person who has made an unsolicited bona fide written Acquisition Proposal if the Company Board receives from the Person so requesting such information an executed confidentiality agreement; (C) engaging in any negotiations or discussions with any Person who has made an unsolicited bona fide written Acquisition Proposal or (D) recommending such an Acquisition Proposal to the shareholders of the Company, if and only to the extent that, (i) in each such case referred to in clause (B), (C) or (D) above, the Company Board determines in good faith (after consultation with outside legal counsel) that such action would, in the absence of the foregoing proscriptions, be legally required in order for its directors to comply with their respective fiduciary duties under applicable law and (ii) in the case referred to in clause (D) above, the Company Board determines in good faith (after consultation with its financial advisor) that such Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal and would, if consummated, result in a transaction more favorable to the Company's shareholders from a financial point of view than the Merger (any such more favorable Acquisition proposal being referred to in this Agreement as a "Superior Proposal"). The Company agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposals. The Company agrees that it will notify Parent within three calendar days if any such inquiries, proposals or offers are received by, any such information is requested from, or any such discussions or negotiations are sought to be initiated or continued with, any of its representatives.
6.07. Certain Policies. Prior to the Effective Date, the Company shall, consistent with GAAP, the rules and regulations of the OCC and applicable banking laws and regulations, modify or change its loan, OREO, accrual, reserve, tax, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) so as to be applied on a basis that is consistent with that of Parent; provided, however, that in any event, no accrual or reserve made by the Company pursuant to this Section 6.07 shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of the Company or its management with any such adjustments.
6.08. Regulatory Applications (a) Each of Parent and the Company and their respective Subsidiaries shall cooperate and use their respective reasonable best efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary to consummate the transactions contemplated by this Agreement (including the consolidation of any Company branches with Merger Subsidiary branches or branches of any other Subsidiary of Parent or the closure of any Company branches, in each case as Parent in its sole discretion shall deem necessary); and any initial filings with Governmental Authorities shall be made by Parent as soon as reasonably practicable after the execution hereof but, provided that the Company has cooperated as described above, in no event later than 60 calendar days after the date hereof. Each of Parent and the Company shall have the right to review in advance, and to the extent practicable each shall consult with the other, in each case subject to applicable laws relating to the exchange of information, with respect to all material written information submitted to any third party or any Governmental Authority in connection with the transactions
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contemplated by this Agreement. In exercising the foregoing right, each of such parties agrees to act reasonably and as promptly as is reasonably practicable. Each party hereto agrees that it shall consult with the other parties hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary or advisable to consummate the transactions contemplated by this Agreement and each party shall keep the other parties apprised of the status of material matters relating to completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other parties with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other parties or any of their respective Subsidiaries to any third party or Governmental Authority.
6.09. Indemnification (a) Following the Effective Time, Parent shall indemnify, defend and hold harmless each present and former director and officer of the Company (each, an "Indemnified Party") against all costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement or any related agreement, but excluding any Costs arising out of any violation or alleged violation of the Exchange Act or the rules and regulations thereunder with respect to insider trading) to the fullest extent that the Company is permitted to indemnify (and advance expenses to) its directors or officers under the National Bank Act, the Company Articles and the Company By-Laws as in effect on the date hereof; provided that any determination required to be made with respect to whether an officer's or director's conduct complies with the standards set forth under the National Bank Act, the Company Articles and the Company By-Laws shall be made by independent counsel selected by Parent; reasonably acceptable to the Indemnified Party, and provided, further, that in the absence of judicial precedent to the contrary, such counsel, in making such determination, shall presume such officer's or director's conduct complied with such standard and Parent shall have the burden to demonstrate that such officer's or director's conduct failed to comply with such standard.
(b) For a period of three years from the Effective Time, Parent shall use its commercially reasonable efforts to provide that portion of director's and officer's liability insurance that serves to reimburse the present and former officers and directors (determined as of the Effective Time) of the Company (as opposed to the portion that serves to reimburse the Company) with respect to claims against such directors and officers arising from facts or events which occurred before the Effective Time, which insurance shall contain at least the same coverage and amounts, and contain terms and conditions no less advantageous, as that coverage currently provided by the Company; provided, however, that in no event shall Parent be required to expend on an annual basis more than 150% of the current amount expended on an annual basis by the Company (the "Insurance Amount") to maintain or procure such director's and officer's insurance coverage; provided, further, that if Parent is unable to maintain or obtain the insurance called for by this Section 6.09(b), Parent shall use its commercially reasonable efforts to obtain as much comparable insurance as is available for the Insurance Amount; provided, further, that officers and directors of the Company may be required to make application and provide customary representations and warranties to Parent's insurance carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section 6.09(a), upon learning of any claim, action, suit, proceeding or investigation described above, shall as promptly as is reasonably practicable, notify Parent thereof; provided that the failure so to notify shall not affect the obligations of Parent under Section 6.09(a) unless and to the extent that Parent is actually prejudiced as a result of such failure.
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(d) If Parent or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so that the successors and assigns of Parent shall assume the obligations set forth in this Section 6.09.
6.10. Benefit Plans (a) From and after the Effective Time, Parent shall provide former employees of the Company who remain as employees of Parent or any of its Subsidiaries with employee benefit plans no less favorable in the aggregate than those provided to similarly situated employees of Parent and the Parent Subsidiaries. Parent shall cause each employee benefit plan, program, policy or arrangement of Parent in which employees of the Company are eligible to participate to take into account for purposes of eligibility and vesting thereunder the service of such employees with the Company to the same extent as such service was credited for such purpose by the Company. Nothing herein shall limit the ability of Parent to amend or terminate any of the Benefit Plans in accordance with their terms at any time.
(b) Parent shall honor, and the Surviving Association shall continue to be obligated to perform, in accordance with their terms, all benefit obligations to, and contractual rights of, current and former employees and directors of the Company existing as of the Effective Date, as well as all employment or severance agreements, plans or policies of the Company which are Previously Disclosed, except as otherwise agreed to by the directors of the Company in Non-Compete or Non-Solicitation Agreements entered into by and between each of the directors and Parent.
(c) If employees or directors of the Company become eligible to participate in a medical, dental or health plan of Parent, Parent shall cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions covered under the applicable medical, health or dental plans of the Company, (ii) honor under such plans any deductible, co-payment and out-of-pocket expenses incurred by the employees and their beneficiaries during the portion of the calendar year prior to such participation and (iii) waive any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such employee on or after the Effective Time to the extent such employee had satisfied any similar limitation or requirement under an analogous Benefit Plan prior to the Effective Time.
6.11. Notification of Certain Matters. Each of the Company and Parent shall give prompt notice to the other of any fact, event or circumstance known to it that (i) is reasonably likely, individually or taken together with all other facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to it or (ii) would cause or constitute a material breach of any of its representations, warranties, covenants or agreements contained herein.
6.12. Parent Approval. The Company shall keep Parent reasonably informed as to the status of the transactions contemplated in Sections 4.01(a), 4.01(g) and 4.01(l) of the Company's Disclosure Schedule and shall not enter into any additional agreements with respect to such transactions without the prior approval of Parent, which approval shall not be unreasonably withheld or delayed.
6.13. Covenant Relating to the Tax Status of the Agreement. Parent and the Company intend the Agreement to qualify as a stock purchase for all U.S. federal income tax purposes. Each party will (and will cause each of its Subsidiaries to) both before and after the Effective Time (i) use reasonable efforts to cause the Agreement to so qualify; (ii) refrain from taking any action (including making any election under Section 338 of the Code) that would reasonably be expected to cause the Agreement to fail to so qualify; and (iii) take the position for all purposes that the Agreement so qualifies.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each of the parties hereto to consummate the Merger is subject to the fulfillment or written waiver by the parties hereto prior to the Effective Time of each of the following conditions:
(a) Shareholder Approvals. This Agreement and the Merger shall have been duly approved by the affirmative vote of holders of not less than two-thirds of the outstanding shares of the Company Stock.
(b) Regulatory Approvals. All regulatory approvals required to conummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and no such approvals shall contain any conditions, restrictions or requirements which the Parent Board reasonably determines in good faith would (i) following the Effective Time, have a Material Adverse Effect on Parent and its Subsidiaries taken as a whole or (ii) reduce the benefits of the transactions contemplated hereby to such a degree that Parent would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated by this Agreement.
7.02. Conditions to Obligation of the Company. The obligation of the Company to consummate the Merger is also subject to the fulfillment or written waiver by the Company prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of Parent set forth in this Agreement, subject in all cases to the standard set forth in Section 5.02 shall be true and correct as of the date of this Agreement and as of the Effective Date as though made on and as of the Effective Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), and the Company shall have received a certificate, dated the Effective Date, signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to such effect.
(b) Performance of Obligations of Parent. Parent and Merger Subsidiary shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Effective Time, and the Company shall have received a certificate, dated the Effective Date, signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to such effect.
(c) Fairness Opinion. The Company shall have received the written opinion of Western Financial Corporation to the effect that, as of the date of the mailing of the Proxy Statement to the shareholders of the Company in connection with the Company Meeting, the Offer Price is fair to the holders of Company Stock from a financial point of view.
7.03. Conditions to Obligation of Parent and Merger Subsidiary. The obligation of Parent and Merger Subsidiary to consummate the Merger is also subject to the fulfillment or written waiver by Parent and Merger Subsidiary prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the Company set forth in this Agreement, subject in all cases to the standard set forth in Section 5.02, shall be true and correct as of the date of this Agreement and as of the Effective Date as though made on and as of the
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Effective Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), and Parent and Merger Subsidiary shall have received a certificate, dated the Effective Date, signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and Parent and Merger Subsidiary shall have received a certificate, dated the Effective Date, signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) Performance of Obligations of the Shareholders. The Shareholders shall have performed in all material respects all obligations required to be performed by them under the Shareholder Agreements, provided, however, that this condition shall be deemed to be satisfied notwithstanding any failure to perform such obligations unless any such failure or failures, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on the Company and, if requested by Parent, Parent shall have received a certificate, dated the Effective Date, signed by each Shareholder to such effect with respect to such Shareholder.
(d) Shareholders' Equity and Reserves. As of the end of the month immediately preceding the Effective Date, (i) the shareholders' equity of the Company shall not be less than $18.553 million and (ii) the Company's ALL shall not be less than $1.845 million, in each case as determined in accordance with GAAP.
(e) Directors' Resignations. Parent shall have received the written resignation of each director of the Company (in such director's capacity as a director of the Company), effective as of the Effective Time.
ARTICLE VIII
TERMINATION
8.01. Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the adoption of this Agreement by holders of Company Stock referred to in Section 7.01(a), by mutual written consent of the Company and Parent by action of their respective Boards of Directors.
8.02. Termination by Either Parent or the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Board of Directors of either Parent or the Company if (a) the Merger shall not have been consummated by the Termination Date, as defined below, whether such date is before or after the adoption of this Agreement by holders of Company Stock, or (b) any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable (whether before or after the adoption of this Agreement by holders of Company Stock); provided that the right to terminate this Agreement pursuant to clause (a) above shall not be available to any party that has breached in any material respect its material obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure of the Merger to be consummated. For purposes of this Agreement, "Termination Date" means February 28, 2002, provided that such date may be extended to April 1, 2002 by written notice from an authorized officer of Parent to the Company, received by the Company on or before February 28, 2002, certifying that: (x) as of February 28, 2002, a regulatory approval set forth in Section 7.01(b) has not yet been obtained or the Parent has not yet consummated or completed an offering in connection with the raising of capital by Parent for the payment of the Merger Consideration set forth in Article III; (y) Parent (A) has written binding commitments for funds or (B) reasonably and in good faith expects to raise funds in a rights offering as to which a registration statement has been filed with the SEC, which (A) and (B) together
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will be sufficient to fund the amount of capital required for it to consummate the transactions contemplated by this Agreement while remaining "well capitalized" as defined in the applicable bank holding company capital regulations, such binding written commitments to require funding on or before April 1, 2002, such binding written commitments to be provided by entities with adequate liquid resources to fund such commitments in accordance with their terms, with funding under such binding written commitments subject only to (A) the passage of time through no later than April 1, 2002, and/or (B) the conditions to Parent's obligations to consummate the Merger being satisfied or waived on or prior to April 1, 2002; and (z) copies of such written binding commitments are attached to such written notice.
8.03. Termination by the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the adoption of this Agreement by holders of Company Stock referred to in Section 7.01(a), by action of the Company Board:
(a) if (i) the Company Board authorizes the Company, subject to complying with the terms of this Agreement, to enter into a binding written agreement concerning a transaction that constitutes a Superior Proposal and the Company notifies Parent in writing that it intends to enter into such an agreement, (ii) Parent does not make, within five Business Days of receipt (not counting the day of receipt) of the Company's written notification of its intention to enter into a binding agreement for a Superior Proposal, an offer that the Company Board determines, in good faith after consultation with its financial advisors, is at least as favorable, from a financial point of view, to the shareholders of the Company as the Superior Proposal and (iii) the Company upon such termination pays to Parent in immediately available funds any fees required to be paid pursuant to Section 8.05; or
(b) if there has been a material breach by Parent or Merger Subsidiary of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within 30 calendar days after written notice of such breach is given by the Company to the party committing such breach, and as a result of any such breach or breaches either of the conditions set forth in Section 7.02(a) or (b) would not be satisfied at Closing.
8.04. Termination by Parent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Parent Board:
(a) if the Company Board shall have withdrawn or adversely modified its approval or recommendation of this Agreement or after an Acquisition Proposal has been made failed to reconfirm its recommendation of this Agreement within ten Business Days after a written request by Parent to do so; or
(b) if there has been a material breach by the Company of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within 30 calendar days after written notice of such breach is given by Parent to the Company, and as a result of any such breach or breaches either of the conditions set forth in Section 7.03(a) or (b) would not be satisfied at the Closing.
8.05. Effect of Termination and Abandonment. (a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VIII, this Agreement (other than as set forth in Section 9.01) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal and financial advisors or other representatives).
(b) In the event that this Agreement is (i) terminated on the Termination Date, provided that as of such termination the conditions to the Company's obligations to close set forth in Sections 7.01 and 7.02 are satisfied but the Company has failed to consummate the Merger for any reason, (ii) terminated by the Company pursuant to Section 8.03(a) or (iii) terminated by Parent pursuant to
27
Section 8.04(a) or (b), then, provided the Company was not entitled as of such termination to terminate this Agreement pursuant to Section 8.03(b) or clause (b) of Section 8.02, the Company shall (x) promptly, but in no event later than two Business Days after the date of such termination, pay Parent a termination fee of $1,800,000 and (y) promptly, but in no event later than two Business Days after being notified of such by Parent, pay all of the charges and expenses, including those of the Paying Agent, incurred by Parent and Merger Subsidiary in connection with this Agreement and the transactions contemplated by this Agreement up to a maximum amount of $200,000, in each case payable by wire transfer of same day funds. In the event that this Agreement is (A) terminated on the Termination Date, provided that as of such termination the conditions to Parent's obligations to close set forth in Sections 7.01 and 7.03 are satisfied but Parent has failed to consummate the Merger because Parent does not have available the capital required to consummate such transactions or for any other reason, or (B) terminated by the Company pursuant to Section 8.03(b), then, provided Parent was not entitled as of such termination to terminate this Agreement pursuant to Section 8.04(a), Section 8.04(b) or clause (b) of Section 8.02, Parent shall (i) promptly, but in no event later than two Business Days after the date of such termination, pay the Company a termination fee of $1,800,000 and (ii) promptly, but in no event later than two Business Days after being notified of such by the Company, pay all of the charges and expenses, including those of the Paying Agent, incurred by the Company in connection with this Agreement and the transactions contemplated by this Agreement up to a maximum amount of $200,000, payable by wire transfer of same day funds. The Company's payment shall be the sole and exclusive remedy of Parent and Merger Subsidiary against the Company and its directors, officers, employees, agents, advisors or other representatives with respect to the breach of any covenant or agreement set forth in this Agreement. Parent's payment shall be the sole and exclusive remedy of the Company against Parent, Merger Subsidiary, other Parent Subsidiaries and their directors, officers, employees, agents, advisors or other representatives with respect to the breach of any covenant or agreement set forth in this Agreement. Each of Parent and the Company acknowledges that the agreements contained in this Section 8.05(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the other party would not enter into this Agreement; accordingly, if either of Parent or the Company fails to promptly pay the amount due pursuant to this Section 8.05(b), and, in order to obtain such payment, the other party, commences a suit which results in a judgment against Parent or the Company, as the case may be, for the fee set forth in this paragraph (b), Parent or the Company, as the case may be, shall pay to the other party such other party's costs and expenses (including attorneys' fees) in connection with such suit, together with interest on the amount of the fee at the lending rate of 10% in effect on the date such payment was required to be made.
9.01. Survival. No representations, warranties, agreements and covenants contained in this Agreement shall survive the Effective Time (other than Section 6.09 and this Article IX, which shall survive the Effective Time, or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other than Sections 6.05(e), 8.05 and this Article IX, which shall survive any such termination.
9.02. Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be (i) waived by the party benefited by the provision or (ii) amended or modified at any time, by an agreement in writing between the parties hereto executed in the same manner as this Agreement, except that after the Company Meeting, this Agreement may not be amended if it would reduce the consideration to be received by the Company shareholders in the Merger or be in violation of applicable law.
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9.03. Counterparts. This Agreement may be executed in one or more counterparts, or facsimile counterparts, each of which shall be deemed to constitute an original.
9.04. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of California applicable to contracts made and to be performed entirely within such State (except to the extent that mandatory provisions of Federal law are applicable).
9.05. Expenses. Each party hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby.
9.06. Notices. All notices, requests and other communications hereunder to a party shall be in writing and shall be deemed given if personally delivered, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) to such party at its address set forth below or such other address as such party may specify by notice to the parties hereto.
If to the Company to:
Pacific
Western National Bank
275 North Brea Boulevard
Brea, California 92821
Attention: Douglass Faist
Facsimile: (714) 674-5380
With copies to:
Luce,
Forward, Hamilton & Scripps, LLP
600 West Broadway, Suite 2600
San Diego, California 92101
Attention: Kurt L. Kicklighter
Facsimile: (619) 645-5339
and
Paul
M. Weil & Associates
Attorneys at Law
5810 El Camino Real, Suite D
Carlsbad, California 92008
Attention: Paul M. Weil
Facsimile: (760) 431-2158
If to Parent or Merger Subsidiary to:
First
Community Bancorp
6110 El Tordo Road
Rancho Santa Fe, California 92067
Attention: Arnold C. Hahn
Facsimile: (858) 756-2980
With a copy to:
Sullivan &
Cromwell
1888 Century Park East, Suite 2100
Los Angeles, California 90067-1725
Attention: Stanley F. Farrar
Facsimile: (310) 712-8800
9.07. Entire Understanding; No Third Party Beneficiaries. This Agreement, the Shareholder Agreements, the Non-Compete Agreements and the Confidentiality Agreements represent the entire
29
understanding of the parties hereto and thereto with reference to the transactions contemplated hereby and thereby and this Agreement, the Shareholder Agreements, the Non-Compete Agreements and the Confidentiality Agreements supersede any and all other oral or written agreements heretofore made. Except for Section 6.09, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
9.08. Effect. No provision of this Agreement shall be construed to require the Company, Parent or any of their respective Subsidiaries, affiliates or directors to take any action or omit to take any action which action or omission would violate applicable law (whether statutory or common law), rule or regulation. However, where such an action is otherwise required by this Agreement, this Section 9.08 shall not relieve a party from liability for failure to perform such action.
9.09. Severability. Except to the extent that application of this Section 9.09 would have a Material Adverse Effect on the Company or Parent, any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
9.10. Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto consents to submit itself (without making such jurisdiction exclusive) to the personal jurisdiction of any federal court in the Southern District of California in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement.
9.11. Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of, or Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation".
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.
| PACIFIC WESTERN NATIONAL BANK | ||||
By: |
/s/ Douglass Faist |
|||
| Name: Douglass Faist Title: President and Chief Executive Officer |
||||
FIRST COMMUNITY BANCORP |
||||
By: |
/s/ Arnold C. Hahn |
|||
| Name: Arnold C. Hahn Title: Chief Financial Officer |
||||
Exhibit 23.1
Independent Auditors' Consent
The
Board of Directors
First Community Bancorp:
We consent to incorporation by reference in the registration statement on Form S-3 of First Community Bancorp of our report dated January 26, 2001, relating to the consolidated balance sheets of First Community Bancorp and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of earnings, shareholders' equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2000, which report appears in the December 31, 2000, annual report on Form 10-K of First Community Bancorp and to the reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
San
Diego, California
November 1, 2001
Exhibit 23.2
Independent Auditors' Consent
The
Board of Directors
Professional Bancorp, Inc.:
We consent to incorporation by reference in the registration statement on Form S-3 of First Community Bancorp of our report dated August 8, 2001, relating to the consolidated balance sheet of Professional Bancorp, Inc. and Subsidiary as of December 31, 2000, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders' equity and cash flows for the year ended December 31, 2000, which report appears in the registration statement (No. 333-65582) on Form S-4 of First Community Bancorp and to the reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
San
Diego, California
November 1, 2001
Exhibit 23.3
Independent Auditors' Consent
The
Board of Directors
Professional Bancorp, Inc.:
We consent to incorporation by reference in the registration statement on Form S-3 of First Community Bancorp of our report dated April 19, 1999, relating to the consolidated statements of operations and comprehensive income (loss), changes in shareholders' equity and cash flows of Professional Bancorp, Inc. and Subsidiary for the year ended December 31, 1998, which report appears in the registration statement (No. 333-65582) on Form S-4 of First Community Bancorp and to the reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
San
Diego, California
November 1, 2001
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our Independent Auditors' Report dated January 8, 2001 regarding the statements of financial condition of Pacific Western National Bank as of December 31, 2000 and 1999, and the related statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000, incorporated by reference in the Registration Statement on Form S-3 of First Community Bancorp, filed with the Securities and Exchange Commission, and the reference to our firm as experts.
/s/ Vavrinek, Trine, Day & Co., LLP
Laguna Hills, California
November 1, 2001
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 (registration No. 333- ) of our report dated January 28, 2000 (except for Note 8 as to which the date was February 1, 2000 and Note 11 as to which the date was March 22, 2000) on the consolidated balance sheet of Professional Bancorp, Inc. and Subsidiary as of December 31, 1999 and the related consolidated statements of operations comprehensive income (loss), changes in stockholders' equity, and cash flows for the year then ended, which is incorporated by reference in this Registration Statement. We also consent to the reference to our Firm under the heading "Experts" in the Registration Statement.
MOSS ADAMS LLP
Los
Angeles, California
November 1, 2001
Exhibit 23.7
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 22, 2001 (except for Note P, as to which the date is July 6, 2001), accompanying the consolidated financial statements of First Charter Bank, N.A. and Subsidiary contained in the Registration Statement and Prospectus (No. 333-65582) of First Community Bancorp on Form S-4/A. We hereby consent to the incorporation by reference of the aforementioned report in the Registration Statement of First Community Bancorp on Form S-3 (File No. 333- ), and to the use of our name as it appears under the caption "Experts."
Grant Thornton LLP
Los
Angeles, California
November 1, 2001