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Agreement to Merge and Plan of Reorganization |
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2005 |
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AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
DATED AS OF MAY 19, 2005
BY AND AMONG
COMMUNITY BANCORP,
COMMUNITY BANK OF NEVADA
AND
BANK OF COMMERCE
<PAGE>
AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
THIS AGREEMENT TO MERGE AND PLAN OF REORGANIZATION ("AGREEMENT") is
entered into as of May 19, 2005, among Community Bank of Nevada, a Nevada
banking corporation ("BANK"), being located in Las Vegas, Nevada, Community
Bancorp, a corporation and registered bank holding company organized under the
laws of Nevada ("COMPANY") located in Las Vegas, Nevada, and Bank of Commerce, a
Nevada banking corporation ("SELLER"), located in Las Vegas, Nevada.
R E C I T A L S:
A. Bank is a wholly owned subsidiary of Company.
B. Company and Seller believe that it would be in their respective best
interests and in the best interests of their respective shareholders for Seller
to merge with and into Bank (the "Bank Merger"), all in accordance with the
terms set forth in this Agreement and applicable law.
C. The respective Boards of Directors of Company, Bank, and Seller have
adopted by at least majority vote resolutions approving and authorizing the Bank
Merger, this Agreement and the transactions contemplated herein.
D. Company, Bank, and Seller desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
E. It is the intention of the parties to this Agreement that the business
combination contemplated hereby be treated as a "reorganization" under Section
368 of the Internal Revenue Code, as amended (the "Code").
1
<PAGE>
A G R E E M E N T
IN CONSIDERATION of the premises and mutual covenants hereinafter
contained, Company, Bank, and Seller agree as follows:
ARTICLE 1
DEFINITIONS AND DETERMINATIONS
1.1 Definitions. Capitalized terms used in this Agreement shall have the
meanings set forth below:
"Aggregate Amount of Cash for Options" shall have the meaning given such
term in Section 2.8(b).
"Aggregate Amount of Stock for Options" shall have the meaning given such
term in Section 2.8(b).
"Agreement of Bank Merger" means the Agreement of Merger substantially in
the form attached as Exhibit A.
"Affiliate" means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the person specified.
"Average Closing Price" means the average of the daily closing price of a
share of Company's Stock reported over NASDAQ National Market during the twenty
(20) consecutive trading days ending at the end of the third trading day
immediately preceding the Effective Day.
"Bank" shall have the meaning given such term in the introductory clause.
"Bank Merger" shall have the meaning given such term in the Recitals.
"Bank Stock" means the common stock, $ 1.00 par value, of Bank.
"Benefit Arrangement" means any plan or arrangement maintained or
contributed to by a Party, including an "employee benefit plan" within the
meaning of ERISA, (but exclusive of base salary and base wages) which provides
for any form of current or deferred compensation, bonus, stock option, profit
sharing, benefit, retirement, incentive, group health or insurance, welfare or
similar plan or arrangement for the benefit of any employee, officer or director
or class of employee, officer or director, whether active or retired, of a
Party.
2
<PAGE>
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on which
commercial banks in Nevada are authorized or required to be closed.
"Cash Election" shall have the meaning given such term in Section 2.7(a).
"Cash Proration Factor" shall have the meaning given such term in Section
2.7(d).
"Certificates" shall have the meaning given such term in Section 2.5(b).
"Change in Recommendation" shall have the meaning given such term in
Section 6.6.
"Charter Documents" means, with respect to any business organization, any
certificate of incorporation, or articles of incorporation and any bylaws, each
as amended to date, that regulate the basic organization of the business
organization and its internal relations.
"Closing" means the consummation of the Bank Merger on the Effective Day
at the main office of Company or at such other place as may be agreed upon by
the Parties.
"Code" shall have the meaning given such term in the Recitals.
"Combination Cash Election" shall have the meaning given such term in
Section 2.7(a).
"Combination Stock Election" shall have the meaning given such term in
Section 2.7(a).
"Company" shall have the meaning given such term in the introductory
clause.
"Company Benefit Arrangement" means the Benefit Arrangements maintained or
otherwise contributed to by Company or Bank.
"Company Property" shall have the meaning given such term in Section 3.24.
"Company Stock" means the common stock, $0.001 par value, of Company.
"Company Stock Option" means any option issued pursuant to the Company
Stock Option Plans.
3
<PAGE>
"Company Stock Option Plans" means the Company's 1995 Stock Option and
Awards Plan and 2005 Equity Based Compensation Plan, as amended.
"Competing Transaction" shall have the meaning given such term in Section
6.12.
"Confidential Information" means all information exchanged heretofore or
hereafter between Seller and its affiliates and agents, on the one hand, and
Company and Bank, their affiliates and agents, on the other hand, which is
information related to the business, financial position or operations of the
Person responsible for furnishing the information or an Affiliate of such Person
(such information to include, by way of example only and not of limitation,
client lists, company manuals, internal memoranda, strategic plans, budgets,
forecasts/ projections, computer models, marketing plans, files relating to
loans originated by such Person, loans and loan participations purchased by such
Person from others, investments, deposits, leases, contracts, employment
records, minutes of board of directors meetings (and committees thereof) and
stockholder meetings, legal proceedings, reports of examination by any
Governmental Entity, and such other records or documents such Person may supply
to the other Party pursuant to the terms of this Agreement or as contemplated
hereby). Notwithstanding the foregoing, "Confidential Information" shall not
include any information that (i) at the time of disclosure or thereafter is
generally available to and known by the public (other than as a result of a
disclosure directly or indirectly by the recipients or any of their officers,
directors, employees or other representatives or agents), (ii) was available to
the recipients on a nonconfidential basis from a source other than Persons
responsible for furnishing the information, provided that such source is not and
was not bound by a confidentiality agreement with respect to the information, or
(iii) has been independently acquired or developed by the recipients without
violating any obligations under this Agreement.
"Consents" means every required consent, approval, absence of disapproval,
waiver or authorization from, or notice to, or registration or filing with, any
Person.
"DFI" means the Nevada Division of Financial Institutions.
"Directors' Agreement" shall mean an agreement substantially in the form
attached as Exhibit 2.6a.
"Disclosure Letter" means a disclosure letter from the Party making the
disclosure and delivered to the other Party.
"DPC Property" means voting securities, other personal property and real
property acquired by foreclosure or otherwise, in the ordinary course of
collecting a debt previously contracted for in
4
<PAGE>
good faith, retained with the object of sale for any applicable statutory
holding period, and recorded in the holder's business records as such.
"Effective Day" means the day on which the Effective Time occurs.
"Effective Time" shall have the meaning given such term in Section 2.2.
"Election" shall have the meaning given such term in Section 2.7(a).
"Election Deadline" shall have the meaning given such term in Section
2.7(b).
"Election Form" shall have the meaning given such term in Section 2.7(a).
"Election Form Record Date" shall have the meaning given such term in
Section 2.7(a).
"Encumbrances" means any option, pledge, security interest, lien, charge,
encumbrance, mortgage, assessment, claim or restriction (whether on voting,
disposition or otherwise), whether imposed by agreement, understanding, law or
otherwise.
"Environmental Laws" shall have the meaning given such term in Section
4.25.
"Equity Securities" means capital stock or any options, rights, warrants
or other rights to subscribe for or purchase capital stock, or any plans,
contracts or commitments that are exercisable in such capital stock or that
provide for the issuance of, or grant the right to acquire, or are convertible
into, or exchangeable for, such capital stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means Computershare Trust Company, Inc., or such other
financial institution appointed by Company to reflect the exchange contemplated
by Section 2.5 hereof.
"Exchange Fund" shall have the meaning given such term in Section 2.5.
"Exchange Ratio" means, subject to the provisions of Section 10.1(g), the
number of shares of Company Stock into which a share
5
<PAGE>
of Seller Stock shall be converted, which shall be equal to the result (to the
nearest ten thousandth) of dividing $33.00 by the Average Closing Price.
However, the Exchange Ratio shall be adjusted for the amount by which the Merger
Expenses exceed $200,000. In the event of an adjustment to the Exchange Ratio
resulting from the Merger Expenses, the Exchange Ratio shall be calculated (to
the nearest ten thousandth) in accordance with the following formula:
$33.00 - X
---------------------
Average Closing Price
Where "X" represents the dollar amount of Merger Expenses in excess of $200,000
divided by the outstanding shares of Seller Stock, determined as of the day on
which the Average Closing Price is determined.
"Executive Officer" means with respect to any company a natural Person who
participates or has the authority to participate (other than solely in the
capacity of a director) in major policy making functions of the company, whether
or not such Person has a title or is serving with salary or compensation and, in
the case of Seller, shall mean Seller's Chief Executive Officer and Chief
Financial Officer.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of Company" means the audited consolidated financial
statements (balance sheets, statements of income, statements of cash flow and
statements of changes in financial position) and notes thereto of Company and
the related opinions thereon for the years ended December 31, 2002, 2003 and
2004 and the unaudited consolidated statements of financial condition and
statements of operations and cash flow of Company for the three months ended
March 31, 2005.
"Financial Statements of Seller" means the audited financial statements
(balance sheets, statements of income, statements of cash flow and statements of
changes in financial position) and notes thereto of Seller and the related
opinions thereon for the years ended December 31, 2002, 2003 and 2004 and the
unaudited statements of financial condition and statements of operations and
cash flow of Seller for the three months ended March 31, 2005.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
"GAAP" means generally accepted accounting principles accepted in the
United States of America.
"Governmental Entity" means any court or tribunal in any jurisdiction or
any United States federal, state, district,
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<PAGE>
domestic, or other administrative agency, department, commission, board, bureau
or other governmental authority or instrumentality.
"Hazardous Materials" shall have the meaning given such term in Section
4.25.
"Immediate Family" shall mean a Person's spouse, parents, in-laws,
children and siblings.
"Insurance Amount" shall have the meaning given such term in Section 5.8.
"IRS" shall mean the Internal Revenue Service.
"Investment Securities" means any equity security or debt security as
defined in Statement of Financial Accounting Standard No. 115.
"Mailing Date" shall have the meaning given such term in Section 2.7(a).
"Merger Expenses" means the pre-tax amount of all fees and expenses of
legal counsel, investment bankers, and advisors (except accountants fees in
connection with the transactions contemplated by this Agreement and legal fees
incurred by Seller's litigation counsel in connection with the settlement of
litigation in 2005) during 2005 incurred by, or on behalf of, Seller on or prior
to the Effective Time in connection with the transactions contemplated by this
Agreement (irrespective of whether such fees and expenses have actually been
paid or accrued prior to the Effective Time).
"NRS" means the Nevada Revised Statutes.
"Operating Loss" shall have the meaning given such term in Section 4.24.
"Party" means Company/Bank or Seller.
"Per Share Cash Consideration" is $33.00, subject to the provisions of
Section 10.1(g). However, the Per Share Cash Consideration shall be adjusted for
the amount by which the Merger Expenses exceed $200,000. In the event of an
adjustment to the Per Share Cash Consideration resulting from the Merger
Expenses, the Per Share Cash Consideration shall be calculated (to the nearest
penny) in accordance with the following formula:
$33.00 - X
Where "X" represents the dollar amount of Merger Expenses in excess of $200,000
divided by the outstanding shares of Seller Stock, determined as of the day on
which the Average Closing Price is determined.
7
<PAGE>
"Permit" means any United States federal, foreign, state, local or other
license, permit, franchise, and certificate of authority, order of approval
necessary or appropriate under applicable Rules.
"Person" means any natural person, corporation, trust, association,
unincorporated body, partnership, joint venture, Governmental Entity,
statutorily or regulatory sanctioned unit or any other person or organization.
"Proxy Statement" means the proxy statement that is included as part of
the S-4 and used to solicit proxies for the Seller Shareholders' Meeting, to
solicit proxies for the Company Shareholders' Meeting and to offer and sell the
shares of Company Stock to be issued in connection with the Bank Merger.
"Related Group of Persons" means Affiliates, members of an Immediate
Family or Persons the obligation of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC.
"Required Stock Amount" shall have the meaning given such term in Section
2.7(c).
"Rule" means any statute or law or any judgment, decree, injunction,
order, regulation or rule of any Governmental Entity.
"S-4" means the registration statement on Form S-4, and such amendments
thereto, that is filed with the SEC to register the shares of Company Stock to
be issued in the Bank Merger under the Securities Act and includes the Proxy
Statement that will be used to solicit proxies for the Seller, and Company
Shareholders' Meetings.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" mean all reports filed by a Party hereto pursuant to the
Exchange Act with the SEC or other Governmental Entity.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning given such term in the introductory
clause.
"Seller Benefit Arrangement" shall have the meaning given such term in
Section 4.18.
"Seller Dissenting Shares" means shares of Seller Stock held by dissenting
shareholders pursuant to section 92A.300, et seq., of the Nevada Revised
Statutes.
"Seller Perfected Dissenting Shares" means Dissenting Shares, which the
holders thereof have not withdrawn or caused to lose their
8
<PAGE>
status as Seller Dissenting Shares.
"Seller Property" shall have the meaning given such term in Section 4.25.
"Seller Scheduled Contracts" shall have the meaning given such term in
Section 4.29.
"Seller Shareholders' Meeting" shall have the meaning given such term in
Section 6.6.
"Seller Stock" means the common stock, no par value of Seller.
"Seller Stock Option Plan" means Seller's 1999 Stock Option Plan.
"Seller Stock Options" means the stock options issued pursuant to Seller
Stock Option Plan and as listed on Seller's Disclosure Letter pursuant to
Section 4.2.
"Stock Designated Shares" shall have the meaning given such term in
Section 2.7(d).
"Stock Election" shall have the meaning given such term in Section 2.7(a).
"Stock Proration Factor" shall have the meaning given such term in Section
2.7(d).
"Surviving Bank" means the Bank as the Nevada banking corporation
surviving the Bank Merger of Seller with and into Bank.
"Tank" shall have the meaning given such term in Section 4.25.
"Third Party Consent" shall have the meaning given such term in subsection
(b) of Section 5.6.
"To the knowledge" shall have the meaning given such term in Section
11.13.
"Total Consideration" shall have the meaning given such term in Section
2.7(c).
"Undesignated Shares" shall have the meaning given such term in Section
2.7(a).
"Voting Agreement" shall mean an agreement substantially in the form
attached as Exhibit 2.6b.
9
<PAGE>
ARTICLE 2
CONSUMMATION OF THE BANK MERGER
2.1 The Bank Merger; Plan of Reorganization.
(a) Subject to the terms and conditions of this Agreement and the
Agreement of Bank Merger, at the Effective Time, Seller will be merged into Bank
in accordance with the procedures specified in Section 666.015, et seq., of the
NRS. Bank will be the Surviving Bank in the Bank Merger. The Surviving Bank will
continue operations as a Nevada banking corporation retaining the use of Bank's
name. The main office of the Surviving Bank will be 400 South 4th Street, Suite
215, Las Vegas, Nevada and it will maintain offices at the legally established
offices of Bank and Seller prior to the Bank Merger.
(b) The Charter Documents of Bank as in effect immediately prior to the
Effective Time shall continue in effect after the Bank Merger until thereafter
amended in accordance with applicable law and the members of the Board of
Directors and the Executive Officers of Bank immediately prior to the Bank
Merger shall continue in their respective positions after the Bank Merger and be
the Board of Directors and Executive Officers of the Surviving Bank.
(c) The Charter Documents of Company as in effect immediately prior to the
Effective Time shall continue in effect after the Bank Merger until thereafter
amended in accordance with applicable law, the members of the Board of Directors
and the Executive Officers of Company immediately prior to the Bank Merger shall
continue in their respective positions after the Bank Merger and be the Board of
Directors and Executive Officers of Company and the operations of Company shall
continue in effect after the Bank Merger.
(d) At the Effective Time, the corporate existence of Seller shall be
merged and continued in Bank under Bank's certificate of authority. All assets,
rights, franchises, titles and interests of Seller and Bank, in and to every
type of property (real, personal and mixed, including all the right, title and
interest to Seller's names, trade names, service marks and the like) and choses
in action shall be transferred to and vested in Surviving Bank by virtue of the
Bank Merger without any deed or other transfer, and Bank, without order or
action on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interests in the same manner and to the same extent
that such rights, franchises and interests were held by Seller and Bank at the
Effective Time. At the Effective Time, the Surviving Bank shall be liable for
all liabilities of Seller and Bank, and all debts, liabilities, obligations and
contracts of Seller and Bank, whether matured or unmatured, accrued, absolute,
contingent or otherwise, and whether or not reflected or reserved against on
balance sheets, books of
10
<PAGE>
accounts or records of Seller and Bank, shall be those of Surviving Bank; and
all rights of creditors or other obligees and all liens on property of Seller
and Bank shall be preserved unimpaired.
2.2 Effective Time. The Closing shall take place as soon as practicable
following (i) the satisfaction or waiver of the conditions set forth in Sections
8.1, 8.2 and 8.3, (ii) receipt of approval of all required Governmental Entities
for the Bank Merger, and (iii) the expiration of all required waiting periods,
or such other time and date as to which the Parties may agree. The Merger shall
be effective upon the filing of the Agreement of Merger, along with a certified
copy of the approval of the Merger by the DFI, with the Nevada Secretary of
State. Such time is referred to herein as the "Effective Time."
2.3 Conversion of Shares. At the Effective Time and pursuant to the
Agreement of Bank Merger:
(a) Subject to the exceptions and limitations in Section 2.4, each
outstanding share of Seller Stock shall, by virtue of the Bank Merger, be
converted into the right to receive, at the election of the holder thereof as
provided in Section 2.7, either:
(1) shares of Company Stock in accordance with the Exchange
Ratio; or
(2) cash in the amount of the Per Share Cash Consideration.
(b) Each outstanding share of Company Stock shall remain outstanding and
shall not be converted or otherwise affected by the Bank Merger.
(c) If, following the date of this Agreement and prior to the Effective
Time, the outstanding shares of Company Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar change in
capitalization, then an appropriate and proportionate adjustment shall be made
to the Exchange Ratio.
2.4 Certain Exceptions and Limitations. (A) Any shares of Seller Stock
held by Company or any subsidiary of Company (other than shares held in a
fiduciary capacity or as DPC Property) will be canceled at the Effective Time;
(B) Seller Perfected Dissenting Shares shall not be converted, but shall, after
the Effective Time, be entitled only to such rights as are granted them by NRS
section 92A.300, et seq. (each dissenting shareholder who is entitled to payment
for his shares of Seller Stock shall receive such payment in an amount as
determined pursuant to NRS 92A.320), and (C) no fractional shares of Company
Stock shall be issued in the Bank
11
<PAGE>
Merger and, in lieu thereof, each holder of Seller Stock who would otherwise be
entitled to receive a fractional share shall receive an amount in cash equal to
the product (calculated to the nearest hundredth) obtained by multiplying such
fractional share interest by the Per Share Cash Consideration.
2.5 Exchange Procedures.
(a) As of the Effective Time, Company shall have deposited with the
Exchange Agent for the benefit of the holders of shares of Seller Stock, for
exchange in accordance with this Section 2.5 through the Exchange Agent,
certificates representing the shares of Company Stock issuable pursuant to
Sections 2.3 and 2.8 and funds in an amount equal to (i) the product of one-half
the number of shares of Seller Stock outstanding immediately prior to the
Effective Time times the Per Share Cash Consideration and (ii) the amount
required under Section 2.8 and (iii) fractional shares of Company Stock which
would otherwise be payable in connection with Section 2.3 hereof, but for the
operation of Section 2.4 of this Agreement (collectively, the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time, Company
shall direct the Exchange Agent to mail on the Mailing Date (as hereinafter
defined) to each holder of record of a certificate or certificates (the
"Certificates"): (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent), (ii) an Election
Form (as hereinafter defined), and (iii) instructions for use in effecting the
surrender of the Certificates. Upon surrendering of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Company, together with such letters of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the consideration provided herein (subject to the provisions of Section 2.7),
and the Certificate so surrendered shall forthwith be canceled. In the event a
Certificate is surrendered representing Seller Stock, the transfer of ownership
which is not registered in the transfer records of Seller, the consideration
provided herein will be paid if the Certificate representing such Seller Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.5 and except as provided in subsection (g) hereof, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the consideration provided herein. Notwithstanding
anything to the contrary set forth herein, if any holder of shares of Seller
should be unable to surrender the Certificates for such shares, because they
have been lost or
12
<PAGE>
destroyed, such holder may deliver in lieu thereof, in the discretion of
Company, such bond in form and substance and with surety reasonably satisfactory
to Company and thereafter shall be entitled to receive the consideration
provided herein. No interest shall be paid on the Per Share Cash Consideration
(as hereinafter defined).
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Company Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate who
is to receive Company Stock pursuant to the provisions hereof until the holder
of record of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate by a
holder receiving Company Stock pursuant to the provisions hereof, there shall be
paid to the record holder of the certificates representing whole shares of
Company Stock issued in exchange therefore, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Company Stock to which such holder is entitled pursuant to Section 2.4 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Company
Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Company Stock.
(d) There shall be no further registration of transfers on the stock
transfer books of Seller or Company of the shares of Seller Stock, which were
outstanding immediately prior to the Effective Time.
(e) Any portion of the Exchange Fund which remains undistributed to the
shareholders of Seller following the passage of six months after the Effective
Time shall be delivered to Company, upon demand, and any shareholders of Seller
who have not theretofore complied with this Section 2.5 shall thereafter look
only to Company for payment of their claim for the consideration provided
herein.
(f) Neither Company nor Seller shall be liable to any holder of shares of
Seller Stock for such shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of Company Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such shares of Company
Stock for the
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account of the Persons entitled thereto. Former shareholders of record of Seller
who are to receive shares of Company Stock pursuant to the provisions hereof
shall be entitled to vote after the Effective Time at any meeting of Company
shareholders the number of whole shares of Company Stock into which their
respective shares of Seller Stock are converted, regardless of whether such
holders have exchanged their Certificates for certificates representing Company
Stock in accordance with the provisions of this Agreement.
2.6 Directors' and Voting Agreements. Concurrently with the execution of
this Agreement, Seller shall cause each of its directors to enter into a
Directors' Agreement in the form attached hereto as Exhibit 2.6(a), and each
shareholder beneficially owning more than 5% of Seller's outstanding shares to
enter into a Voting Agreement (substantially in the form of Exhibit 2.6(b)).
2.7 Election and Proration Procedures.
(a) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing Seller Stock shall pass
only upon delivery of such certificates to the Exchange Agent) in such form as
Company and Seller shall mutually agree ("Election Form") shall be mailed as
soon as reasonably practicable after the Effective Time ("Mailing Date") to each
holder of record of Seller Stock as of the Effective Time ("Election Form Record
Date"). Seller shall provide to the Exchange Agent all information reasonably
necessary for it to perform its obligations as specified herein. Each Election
Form shall permit the holder (or the beneficial owner through appropriate and
customary documentation and instructions) to elect (an "Election") to receive
either (i) Company Stock (a "Stock Election") with respect to all of such
holder's Seller Stock, (ii) cash (a "Cash Election") with respect to all of such
holder's Seller Stock, or (iii) a specified number of shares of Seller Stock to
receive Company Stock (a "Combination Stock Election") and a specified number of
shares of Seller Stock to receive cash (a "Combination Cash Election"), subject
to the provisions contained in this Agreement. Any Seller Stock (other than
Seller Dissenting Shares) with respect to which the holder (or the beneficial
owner, as the case may be) shall not have submitted to the Exchange Agent, an
effective, properly completed Election Form received prior to the Election
Deadline shall be deemed to be "Undesignated Shares" hereunder.
(b) Any Election shall have been properly made and effective only if the
Exchange Agent shall have actually received a properly completed Election Form
by 5:00 P.M. Nevada time on or before the 30th day following the Mailing Date,
or such later time and date as Company and Seller may mutually agree prior to
the Effective Time (the "Election Deadline"). An Election Form shall be deemed
properly completed only if an Election is indicated for each
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<PAGE>
share of Seller Stock covered by such Election Form and if accompanied by one or
more certificates (or customary affidavits and indemnification regarding the
loss or destruction of such certificates or the guaranteed delivery of such
certificates) representing all shares of Seller Stock covered by such Election
Form, together with duly executed transmittal materials included in or required
by the Election Form. Any Election Form may be revoked or changed by the person
submitting such Election Form at or prior to the Election Deadline. In the event
an Election Form is revoked prior to the Election Deadline, the shares of Seller
Stock represented by such Election Form shall automatically become Undesignated
Shares unless and until a new Election is properly completed and made with
respect to such shares on or before the Election Deadline, and Company shall
cause the certificates representing such shares of Seller Stock to be promptly
returned without charge to the person submitting the revoked Election Form upon
written request to that effect from the holder who submitted such Election Form.
Subject to the terms of this Agreement and of the Election Form, the Exchange
Agent shall have reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any decisions of Company required
by the Exchange Agent and made in good faith in determining such matters shall
be binding and conclusive. Neither Company nor the Exchange Agent shall be under
any obligation to notify any person of any defect in an Election Form.
(c) For purposes of this Section 2.7, the following definitions shall
apply:
(i) "Total Consideration" shall mean the sum of (A) the product of
(1) the Average Closing Price and (2) the number of shares of
Company Stock actually issued to holders of Seller Stock in the Bank
Merger pursuant to Stock Elections, Combination Stock Elections or
as a Stock Proration Factor (as hereinafter defined), (B) the amount
of cash actually issued to holders of Seller Stock in the Bank
Merger pursuant to Cash Elections, Combination Cash Elections or as
the Cash Proration Factor (as hereinafter defined), (C) the amount
of cash actually issued to holders of Seller Stock in the Bank
Merger in lieu of fractional shares of Company Stock, (D) an amount
equal to the number of shares of Seller Dissenting Shares (as to
which the holder's demand to exercise dissenter's rights shall not
have been withdrawn as of the Effective Time) multiplied by the Per
Share Cash Consideration and (E) the sum of the Aggregate Amount of
Cash for Options and the Aggregate Amount of Stock for Options
issued to holders of Seller Stock Options pursuant to Section 2.8.
(ii) "Required Stock Amount" shall mean the lowest whole number of
shares of Company Stock, which, if multiplied by the Average Closing
Price, results in a dollar amount
15
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equal to fifty percent (50%) of the Total Consideration.
(d) Company shall use its best efforts to cause the Exchange Agent to
effect the allocation among the holders of Seller Stock of rights to receive
Company Stock or cash in the Bank Merger as follows:
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