EXHIBIT 2.0
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
GREATER BAY BANCORP,
GBB ACQUISITION CORP.
AND
PENINSULA BANK OF COMMERCE
September 5, 1997
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION.......................................................... 1
ARTICLE I DEFINITIONS.................................................................... 1
"Affiliate" of, or a person "Affiliated"................................................. 1
"Agreement of Merger".................................................................... 1
"Average Closing Price".................................................................. 2
"Banks".................................................................................. 2
"Benefit Arrangements"................................................................... 2
"BHC Act"................................................................................ 2
"Business Day"........................................................................... 2
"C&L".................................................................................... 2
"CFC".................................................................................... 2
"CGCL"................................................................................... 2
"Certificates"........................................................................... 2
"Classified Credits"..................................................................... 2
"Closing"................................................................................ 2
"Closing Date"........................................................................... 2
"CNB".................................................................................... 2
"Code"................................................................................... 2
"Commissioner"........................................................................... 2
"Competing Transaction".................................................................. 2
"Comptroller"............................................................................ 3
"Conversion Ratio"....................................................................... 3
"Covered Person"......................................................................... 3
"DFI".................................................................................... 3
"Effective Time of the Merger"........................................................... 3
"Employee Plans"......................................................................... 3
"Encumbrance"............................................................................ 3
"Environmental Regulations".............................................................. 3
"ERISA".................................................................................. 3
"Exchange Act"........................................................................... 3
"Exchange Agent"......................................................................... 3
"Exchange Fund".......................................................................... 3
"FDIC"................................................................................... 3
"Financial Statements of GBB"............................................................ 3
"Financial Statements of PBC"............................................................ 3
"FRB".................................................................................... 3
"GBB 401(k) Plan"........................................................................ 4
"GBB Conflicts and Consents List"........................................................ 4
"GBB Dissenting Shares".................................................................. 4
"GBB Filings"............................................................................ 4
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"GBB Perfected Dissenting Shares"........................................................ 4
"GBB Shareholders' Meeting".............................................................. 4
"GBB Stock".............................................................................. 4
"GBB Stock Option Plan".................................................................. 4
"GBB Supplied Information"............................................................... 4
"Governmental Entity".................................................................... 4
"Hazardous Materials".................................................................... 4
"▇▇▇▇▇▇ Agreement"....................................................................... 4
"Immediate Family"....................................................................... 4
"Investment Security".................................................................... 4
"IRS".................................................................................... 4
"Joint Proxy Statement and Prospectus"................................................... 4
"Merger"................................................................................. 4
"MPB".................................................................................... 5
"Newco".................................................................................. 5
"Operating Loss"......................................................................... 5
"PBC 401(k) Plan"........................................................................ 5
"PBC Conflicts and Consents List"........................................................ 5
"PBC Contract List"...................................................................... 5
"PBC Dissenting Shares".................................................................. 5
"PBC Employee Plan List"................................................................. 5
"PBC Environmental Compliance List"...................................................... 5
"PBC Filings"............................................................................ 5
"PBC Filings List"....................................................................... 5
"PBC Fully Diluted Book Value Per Share"................................................. 5
"PBC Indemnification List"............................................................... 5
"PBC Insurance List"..................................................................... 5
"PBC Investment Securities List"......................................................... 5
"PBC List"............................................................................... 5
"PBC Litigation List".................................................................... 5
"PBC Loan List".......................................................................... 5
"PBC Offices List"....................................................................... 5
"PBC Option List"........................................................................ 6
"PBC Operating Losses List".............................................................. 6
"PBC Perfected Dissenting Shares"........................................................ 6
"PBC Personal Property List"............................................................. 6
"PBC Real Property List"................................................................. 6
"PBC Shareholders' Meeting".............................................................. 6
"PBC Stock".............................................................................. 6
"PBC Stock Option"....................................................................... 6
"PBC Stock Option Plans"................................................................. 6
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"PBC Supplied Information".............................................................. 6
"PBC Tax List".......................................................................... 6
"Person"................................................................................ 6
"PREC".................................................................................. 6
"Related Group of Persons".............................................................. 6
"Registration Statement on Form S-4".................................................... 6
"Scheduled Contracts"................................................................... 6
"SEC"................................................................................... 6
"Securities Act"........................................................................ 6
"Surviving Corporation"................................................................. 7
"Tanks"................................................................................. 7
"Top Up Option"......................................................................... 7
"Transaction Expenses".................................................................. 7
"Understanding"......................................................................... 7
ARTICLE II TERMS OF MERGER............................................................... 7
2.1 Effect of Merger and Surviving Corporation.................................... 7
2.2 Stock of Newco................................................................ 7
2.3 Conversion of PBC Stock....................................................... 7
2.4 Effect on GBB Stock........................................................... 8
2.5 Fractional Shares............................................................. 9
2.6 Exchange Procedures........................................................... 9
2.7 Directors of Surviving Corporation and GBB.................................... 10
2.8 Executive Officers of Surviving Corporation and GBB........................... 11
ARTICLE III THE CLOSING................................................................... 11
3.1 Closing Date.................................................................. 11
3.2 Execution of Agreements....................................................... 11
3.3 Further Assurances............................................................ 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PBC......................................... 11
4.1 Incorporation, Standing and Power............................................. 11
4.2 Capitalization................................................................ 12
4.3 Subsidiaries.................................................................. 12
4.4 Financial Statements.......................................................... 12
4.5 Reports and Filings........................................................... 13
4.6 Authority of PBC.............................................................. 13
4.7 Insurance..................................................................... 14
4.8 Personal Property............................................................. 14
4.9 Real Estate................................................................... 14
4.10 Litigation.................................................................... 14
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4.11 Taxes......................................................................... 15
4.12 Compliance with Laws and Regulations.......................................... 16
4.13 Performance of Obligations.................................................... 18
4.14 Employees..................................................................... 18
4.15 Brokers and Finders........................................................... 18
4.16 Material Contracts............................................................ 18
4.17 Certain Material Changes...................................................... 20
4.18 Licenses and Permits.......................................................... 21
4.19 Undisclosed Liabilities....................................................... 21
4.20 Employee Benefit Plans........................................................ 21
4.21 Corporate Records............................................................. 23
4.22 Accounting Records............................................................ 23
4.23 Offices and ATMs.............................................................. 23
4.24 Operating Losses.............................................................. 23
4.25 Loan Portfolio................................................................ 24
4.26 Investment Securities......................................................... 24
4.27 Power of Attorney............................................................. 24
4.28 Facts Affecting Regulatory Approvals.......................................... 24
4.29 Accounting and Tax Matters.................................................... 24
4.30 Indemnification............................................................... 24
4.31 Community Reinvestment Act.................................................... 25
4.32 Derivative Transactions....................................................... 25
4.33 Trust Administration.......................................................... 25
4.34 Disclosure Documents and Applications......................................... 25
4.35 Accuracy and Currentness of Information Furnished............................. 25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF GBB......................................... 26
5.1 Incorporation, Standing and Power............................................. 26
5.2 Capitalization................................................................ 26
5.3 Financial Statements.......................................................... 26
5.4 Reports and Filings........................................................... 27
5.5 Authority..................................................................... 27
5.6 Subsidiaries.................................................................. 28
5.7 Brokers and Finders........................................................... 28
5.8 Certain Material Changes...................................................... 29
5.9 Licenses and Permits.......................................................... 29
5.10 Corporate Records............................................................. 29
5.11 Accounting Records............................................................ 29
5.12 Facts Affecting Regulatory Approvals.......................................... 30
5.13 Accounting and Tax Matters.................................................... 30
5.14 Disclosure Documents and Applications......................................... 30
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5.15 Nasdaq Listing................................................................ 30
5.16 Accuracy and Currentness of Information Furnished............................. 30
ARTICLE VI COVENANTS OF PBC PENDING EFFECTIVE TIME OF
THE MERGER.................................................................... 31
6.1 Limitation on PBC's Conduct Prior to Effective Time of the Merger............. 31
6.2 Affirmative Conduct of PBC Prior to Effective Time of the Merger.............. 34
6.3 Access to Information......................................................... 36
6.4 Review by Accountants......................................................... 36
6.5 Filings....................................................................... 37
6.6 Notices; Reports.............................................................. 37
6.7 PBC Shareholders' Meeting..................................................... 37
6.8 Certain Loans and Other Extensions of Credit.................................. 37
6.9 Applications.................................................................. 38
6.10 Affiliates and Five Percent Shareholder Agreements............................ 38
6.11 Coordination of Dividends..................................................... 38
6.12 D&O Coverage.................................................................. 39
ARTICLE VII COVENANTS OF GBB PENDING EFFECTIVE TIME OF
THE MERGER.................................................................... 39
7.1 Limitation on GBB's Conduct Prior to Effective Time of the Merger............. 39
7.2 Affirmative Conduct of GBB and Subsidiaries Prior to Effective Time
of the Merger................................................................. 40
7.3 Access to Information......................................................... 40
7.4 Filings........................................................................ 41
7.5 Applications.................................................................. 41
7.6 Blue Sky...................................................................... 41
7.7 GBB Shareholders' Meeting..................................................... 42
7.8 Notices; Reports.............................................................. 42
7.9 Removal of Conditions......................................................... 42
7.10 Stock Options................................................................. 42
ARTICLE VIII ADDITIONAL COVENANTS.......................................................... 43
8.1 Best Efforts.................................................................. 43
8.2 Public Announcements.......................................................... 43
8.3 Appointment of Directors...................................................... 43
8.4 Environmental Assessment and Remediation...................................... 43
ARTICLE IX CONDITIONS PRECEDENT TO THE MERGER............................................ 44
9.1 Shareholder Approval.......................................................... 44
9.2 No Judgments or Orders........................................................ 44
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9.3 Regulatory Approvals.......................................................... 44
9.4 Securities Laws............................................................... 44
9.5 Listing....................................................................... 45
9.6 Tax Opinions.................................................................. 45
9.7 Pooling of Interests.......................................................... 45
ARTICLE X CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PBC................................ 45
10.1 Legal Opinion................................................................. 45
10.2 Representations and Warranties; Performance of Covenants...................... 45
10.3 Authorization of Merger....................................................... 46
10.4 Absence of Certain Changes.................................................... 46
10.5 Officers' Certificate......................................................... 46
10.6 Fairness Opinion.............................................................. 46
10.7 Appointment of Directors...................................................... 46
ARTICLE XI CONDITIONS PRECEDENT TO OBLIGATIONS OF GBB
AND NEWCO..................................................................... 46
11.1 Legal Opinion................................................................. 46
11.2 Representations and Warranties; Performance of Covenants...................... 47
11.3 Authorization of Merger....................................................... 47
11.4 Third Party Consents.......................................................... 47
11.5 Absence of Certain Changes.................................................... 47
11.6 Officers' Certificate......................................................... 47
11.7 Fairness Opinion.............................................................. 47
11.8 Shareholder's Agreements...................................................... 48
11.9 Agreements Not to Compete..................................................... 48
11.10 Affiliates Agreements......................................................... 48
11.11 Employee Benefit Plans........................................................ 48
11.12 Dissenting Shares............................................................. 48
11.13 Remediation................................................................... 48
11.14 Execution of Stock Option Agreement........................................... 48
11.15 PBC Fully Diluted Book Value Per Share........................................ 48
11.16 Termination of PBC Stock Option Plans......................................... 49
ARTICLE XII EMPLOYEE BENEFITS............................................................. 49
12.1 Employee Benefits............................................................. 49
ARTICLE XIII TERMINATION................................................................... 49
13.1 Termination................................................................... 49
13.2 Termination Date.............................................................. 50
13.3 Effect of Termination......................................................... 50
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13.4 Force Majeure................................................................. 51
ARTICLE XIV MISCELLANEOUS................................................................. 51
14.1 Expenses...................................................................... 51
14.2 Competing Transaction Fee..................................................... 51
14.3 Notices....................................................................... 52
14.4 Successors and Assigns........................................................ 53
14.5 Counterparts.................................................................. 53
14.6 Effect of Representations and Warranties...................................... 53
14.7 Third Parties................................................................. 53
14.8 Lists; Exhibits; Integration.................................................. 53
14.9 Knowledge..................................................................... 53
14.10 Governing Law................................................................. 53
14.11 Captions...................................................................... 53
14.12 Severability.................................................................. 53
14.13 Waiver and Modification; Amendment............................................ 54
14.14 Attorneys' Fees............................................................... 54
EXHIBIT LIST................................................................................. 56
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AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and
entered into as of the 5th day of September, 1997, by and among GREATER BAY
BANCORP, a California corporation ("GBB"), GBB ACQUISITION CORP., a California
corporation and wholly-owned subsidiary of GBB ("Newco"), and PENINSULA BANK OF
COMMERCE, a California state chartered bank ("PBC").
WHEREAS, the Boards of Directors of GBB, Newco and PBC deem advisable
and in the best interests of their respective shareholders the merger of Newco
with and into PBC (the "Merger") upon the terms and conditions set forth herein
and in accordance with the California General Corporation Law (the "CGCL") (PBC,
following the effectiveness of the Merger, being hereinafter sometimes referred
to as the "Surviving Corporation"); and
WHEREAS, the Boards of Directors of GBB, Newco and PBC have approved
the Merger pursuant to this Agreement and pursuant to the Agreement of Merger by
and between Newco and PBC (the "Agreement of Merger"), in substantially the form
of Exhibit A attached hereto, pursuant to which Newco will merge with and into
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PBC and each outstanding share of PBC common stock, no par value ("PBC Stock"),
excluding any PBC Perfected Dissenting Shares (as defined below), will be
converted into the right to receive a specified amount of GBB common stock, no
par value ("GBB Stock"), upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, on the basis of the foregoing recitals and in
consideration of the mutual covenants, agreements, representations and
warranties contained herein, the parties hereto do covenant and agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Except as otherwise expressly provided for in this Agreement, or
unless the context otherwise requires, as used throughout this Agreement the
following terms shall have the respective meanings specified below:
"Affiliate" of, or a person "Affiliated" with, a specific person(s) is
a person that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person(s)
specified.
"Agreement of Merger" means the Agreement of Merger substantially in
the form attached hereto as "Exhibit A."
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1
"Average Closing Price" means the average of the daily closing price
of a share of GBB Stock reported on the Nasdaq National Market System during the
15 consecutive trading days ending at the end of the third trading day
immediately preceding the Effective Time of the Merger.
"Banks" means CNB and MPB.
"Benefit Arrangements" has the meaning set forth in Section 4.20(b).
"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 a bank chartered under the laws of the State of California is closed.
"C&L" means Coopers & ▇▇▇▇▇▇▇ LLP, GBB's and PBC's independent
accountants.
"CFC" means California Financial Code.
"CGCL" means California General Corporation Law.
"Certificates" has the meaning set forth in Section 2.5(b).
"Classified Credits" has the meaning set forth in Section 6.8.
"Closing" means the consummation of the Merger provided for in Article
II of this Agreement on the Closing Date (as defined herein) at the offices of
Greater Bay Bancorp, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such
other place as the parties may agree upon.
"Closing Date" means the date which is the first Friday which follows
the last to occur of (i) the approval of this Agreement and the transactions
contemplated hereby by the shareholders of GBB and PBC, (ii) the receipt of all
permits, authorizations, approvals and consents specified in Section 9.3 hereof,
(iii) the expiration of all applicable waiting periods under the law, (iv) the
expiration of the 30 day periods following the mailing by PBC and GBB to their
respective shareholders of a notice of approval of the Merger by the outstanding
shares pursuant to Section 1301 of the CGCL; provided, however, that the Closing
Date shall not be prior to January 10, 1998, unless otherwise agreed to by a
majority of the Boards of Directors of each of the parties hereto.
"CNB" means Cupertino National Bank & Trust, a national banking
association and wholly-owned subsidiary of GBB.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commissioner" means the Commissioner of the Department of Financial
Institutions of the State of California.
"Competing Transaction" has the meaning set forth in Section 6.1(n).
2
"Comptroller" means the Comptroller of the Currency.
"Conversion Ratio" has the meaning set forth in Section 2.3(a).
"Covered Person" has the meaning set forth in Section 4.30.
"DFI" means the Department of Financial Institutions of the State of
California.
"Effective Time of the Merger" means the date upon which the Merger is
consummated and the Agreement of Merger is filed with the Secretary of State of
the State of California.
"Employee Plans" has the meaning set forth in Section 4.20(a).
"Encumbrance" shall mean any option, pledge, security interest, lien,
charge, encumbrance or restriction (whether on voting or disposition or
otherwise), whether imposed by agreement, understanding, law or otherwise.
"Environmental Regulations" has the meaning set forth in Section
4.12(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means U.S. Stock Transfer Corporation.
"Exchange Fund" has the meaning set forth in Section 2.5(a) hereof.
"FDIC" means the Federal Deposit Insurance Corporation
"Financial Statements of GBB" means the audited consolidated
financial statements of GBB consisting of the consolidated statements of
condition as of December 31, 1992, 1993, 1994, 1995 and 1996, the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended and the related notes thereto and related opinions thereon for
the years then ended and GBB's unaudited consolidated statements of financial
condition and consolidated statement of income and cash flows as of and for the
six month period ended June 30, 1997.
"Financial Statements of PBC" means the audited consolidated financial
statements of PBC consisting of the consolidated statements of condition as of
December 31, 1992, 1993, 1994, 1995 and 1996, the related statements of
operations, stockholders' equity and cash flows for the years then ended and the
related notes thereto and related opinions thereon for the years then ended and
PBC's unaudited consolidated statements of financial conditions and statements
of operations and cash flows as of and for the six month period ended June 30,
1997.
"FRB" means the Board of Governors of the Federal Reserve System.
3
"GBB 401(k) Plan" means the Greater Bay Bancorp 401(k) Profit Sharing
Plan.
"GBB Conflicts and Consents List" has the meaning set forth in
Section 5.5.
"GBB Dissenting Shares" means shares of GBB Stock held by "dissenting
shareholders" within the meaning of Chapter 13 of the CGCL.
"GBB Filings" has the meaning set forth in Section 5.4.
"GBB Perfected Dissenting Shares" means Dissenting Shares which the
holders thereof have not withdrawn or caused to lose their status as GBB
Dissenting Shares.
"GBB Shareholders' Meeting" means the meeting of GBB's shareholders
referred to in Section 7.7.
"GBB Stock" means the common stock, no par value, of GBB.
"GBB Stock Option Plan" means the Greater Bay Bancorp 1996 Stock
Option Plan.
"GBB Supplied Information" has the meaning set forth in Section 5.26.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any United States federal, state, municipal, domestic, foreign
or other administrative authority or instrumentality.
"Hazardous Materials" has the meaning set forth in Section 4.12(b).
"▇▇▇▇▇▇ Agreement" means the letter agreement dated April 15, 1997
between ▇▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated and PBC.
"Immediate Family" means a person's spouse, parents, in-laws,
children and siblings.
"Investment Security" means any equity security or debt security as
defined in Statement of Financial Accounting Standards No. 115.
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement and Prospectus" means the Joint Proxy Statement
and Prospectus that is included as part of the Registration Statement on Form S-
4 (as defined herein) and used to solicit proxies for the GBB Shareholders'
Meeting and the PBC Shareholders' Meeting (as defined herein) and to offer and
sell the shares of GBB Stock to be issued in connection with the Merger.
"Merger" means the merger of Newco with and into PBC pursuant to this
Agreement and the Agreement of Merger.
4
"MPB" means Mid-Peninsula Bank, a California state chartered bank and
wholly-owned subsidiary of GBB.
"Newco" means GBB Acquisition Corp., the California corporate
subsidiary of GBB formed for the sole purpose of facilitating the acquisition of
PBC by GBB by means of the Merger.
"Operating Loss" has the meaning set forth in Section 4.24.
"PBC 401(k) Plan" means the Peninsula Bank of Commerce 401(k) Plan.
"PBC Conflicts and Consents List" has the meaning set forth in
Section 4.6.
"PBC Contract List" has the meaning set forth in Section 4.16.
"PBC Dissenting Shares" means any shares of PBC Stock held by
"dissenting shareholders" within the meaning of Chapter 13 of the CGCL.
"PBC Employee Plan List" has the meaning set forth in Section 4.20.
"PBC Environmental Compliance List" has the meaning set forth in
Section 4.12.
"PBC Filings" has the meaning set forth in Section 4.5.
"PBC Filings List" has the meaning set forth in Section 4.5.
"PBC Fully Diluted Book Value Per Share" means the sum of (a)
shareholders' equity as reflected on the financial statements to be provided by
PBC to GBB pursuant to Section 11.15, plus (b) the consideration to be paid upon
the exercise of any PBC Stock Option then issued and outstanding, divided by the
sum of (y) the number of shares of PBC Stock then issued and outstanding, plus
(z) such number of shares of PBC Stock issuable upon the exercise of any PBC
Stock Option.
"PBC Indemnification List" has the meaning set forth in Section 4.30.
"PBC Insurance List" has the meaning set forth in Section 4.7.
"PBC Investment Securities List" has the meaning set forth in Section
4.26.
"PBC List" means any list required to be furnished by PBC to GBB
herewith.
"PBC Litigation List" has the meaning set forth in Section 4.10.
"PBC Loan List" has the meaning set forth in Section 4.25.
"PBC Offices List" has the meaning set forth in Section 4.23.
5
"PBC Option List" has the meaning set forth in Section 4.2.
"PBC Operating Losses List" has the meaning set forth in Section
4.24.
"PBC Perfected Dissenting Shares" means PBC Dissenting Shares which
the holders thereof have not withdrawn or caused to lose their status as PBC
Dissenting Shares.
"PBC Personal Property List" has the meaning set forth in Section
4.8.
"PBC Real Property List" has the meaning set forth in Section 4.9.
"PBC Shareholders' Meeting" means the meeting of PBC's shareholders
referred to in Section 6.7.
"PBC Stock" means the common stock, no par value, of PBC.
"PBC Stock Option" means any option issued pursuant to the PBC Stock
Option Plan.
"PBC Stock Option Plans" means the Peninsula Bank of Commerce 1992
Stock Option Plan and the Peninsula Bank of Commerce 1996 Directors Stock Option
Plan.
"PBC Supplied Information" has the meaning set forth in Section 4.30.
"PBC Tax List" has the meaning set forth in Section 4.11.
"Person" means any individual, corporation, association, partnership,
trust, joint venture, other entity, unincorporated body, government or
governmental department or agency.
"PREC" means Peninsula Real Estate Corporation, a wholly-owned
subsidiary of PBC.
"Related Group of Persons" means Affiliates, members of an Immediate
Family or Persons the obligations of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC (as defined herein).
"Registration Statement on Form 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 GBB Stock to be issued in the Merger under the Securities Act and
to clear use of the Joint Proxy Statement and Prospectus in connection with the
GBB Shareholders' Meeting and PBC Shareholders' Meeting pursuant to the
regulations promulgated under the Exchange Act.
"Scheduled Contracts" has the meaning set forth in Section 4.16.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
6
"Surviving Corporation" means the California state chartered bank
created by the Merger of Newco with and into PBC.
"Tanks" has the meaning set forth in Section 4.12(b).
"Top Up Option" means, in the event that the Average Closing Price is
less than $30.00, the right of GBB to elect to issue that number of shares of
GBB Stock equal to the quotient obtained by dividing $37.50 by the Average
Closing Price.
"Transaction Expenses" means expenses incurred by PBC in connection
with the Merger consisting of PBC's (i) legal fees up to $90,000; (ii)
investment banking fees payable pursuant to the ▇▇▇▇▇▇ Agreement; and (iii)
normal and customary accounting and printing expenses.
"Understanding" means any contract, agreement, understanding,
commitment or offer, whether oral or written, which may become a binding
obligation if accepted by another Person.
ARTICLE II
TERMS OF MERGER
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2.1 Effect of Merger and Surviving Corporation. At the Effective
------------------------------------------
Time of the Merger, Newco will be merged with and into PBC under the charter of
PBC pursuant to the terms, conditions and provisions of the Agreement of Merger
and in accordance with the applicable provisions of the CGCL. By virtue of the
Merger, all the rights, privileges, powers and franchises and all property and
assets of every kind and description of Newco and PBC shall be vested in and be
held and enjoyed by the Surviving Corporation, without further act or deed, and
all the interests of every kind of Newco and PBC, including all debts due to
either of them on whatever account, shall be the property of the Surviving
Corporation as they were of Newco and PBC and the title to any interest in real
property and any interest in personal property vested by deed or otherwise in
either Newco or PBC shall not revert or be in any way impaired by reason of the
Merger; and all rights of creditors and liens upon any property of Newco and PBC
shall be preserved unimpaired and all debts, liabilities and duties of Newco and
PBC shall be debts, liabilities and duties of the Surviving Corporation and may
be enforced against it to the same extent as if said debts, liabilities and
duties had been incurred or contracted by it.
2.2 Stock of Newco. Each share of common stock, no par value, of
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Newco issued and outstanding immediately prior to the Effective Time of the
Merger shall, without any further action on the part of Newco or the holder of
such shares, be converted pursuant to the terms of the Agreement of Merger.
From and after the Effective Time of the Merger, each certificate that, prior to
the Effective Time of the Merger, represented shares of Newco shall evidence
ownership of shares of the Surviving Corporation on the basis set forth above.
2.3 Conversion of PBC Stock. (a) On the Effective Time of the
-----------------------
Merger, pursuant to the Agreement of Merger, each outstanding share of PBC Stock
excluding any PBC Perfected Dissenting Shares or shares of PBC Stock held by GBB
or the Banks (other than those held in a
7
fiduciary capacity or as a result of debts previously contracted) shall, without
any further action on the part of PBC or the holders of any such shares, be
converted into shares of GBB Stock (the "Conversion Ratio") as follows:
(i) If the Average Closing Price is greater than $36.67,
a number of shares of GBB Stock equal to the quotient obtained by dividing (A)
$44.00 plus the product of .3333 times the difference between the Average
Closing Price and $36.67, by (B) the Average Closing Price.
(ii) If the Average Closing Price is between $33.33 and
$36.67, 1.2 shares of GBB Stock.
(iii) If the Average Closing Price is $32.01 or more and
less than $33.33, a number of shares of GBB Stock equal to the quotient obtained
by dividing $40.00 by the Average Closing Price.
(iv) If the Average Closing Price is less than $32.01,
1.25 shares of GBB Stock; provided, however, if the Average Closing Price is
less than $30.00, GBB may exercise the Top Up Option, in which case the
Conversion Ratio will equal that number of shares of GBB Stock equal to the
quotient obtained by dividing $37.50 by the Average Closing Price. If GBB does
not elect to exercise the Top Up Option, PBC may terminate the Agreement
pursuant to Section 13.1(j) or may proceed with the Merger, in which case the
Conversion Ratio will be 1.25 shares of GBB Stock.
(b) PBC Perfected Dissenting Shares shall not be converted into
shares of GBB Stock, but shall, after the Effective Time of the Merger, be
entitled only to such rights as are granted them by Chapter 13 of the CGCL. Each
dissenting shareholder who is entitled to payment for his shares of PBC Stock
shall receive such payment in an amount as determined pursuant to Chapter 13 of
the CGCL.
(c) Each outstanding share of PBC Stock held by GBB or the Banks
(other than those held in a fiduciary capacity or as a result of debts
previously contracted) shall be canceled.
(d) If, prior to the Effective Time of the Merger, GBB shall
declare a stock dividend or distribution upon or subdivide, split up, reclassify
or combine the GBB Stock, or make a distribution on the GBB Stock in any
security convertible into GBB Stock, as of a record date prior to the Effective
Time of the Merger, appropriate adjustment or adjustments (rounded to four
digits to the right of the decimal point) will be made to the Conversion Ratio.
2.4 Effect on GBB Stock. On the Effective Time of the Merger, each
-------------------
outstanding share of GBB Stock shall remain an outstanding share of GBB Stock
and shall not be converted or otherwise affected by the Merger, except that any
GBB Perfected Dissenting Shares shall remain outstanding subject to the right of
the holder of such shares to receive payment for such shares in an amount as
determined pursuant to Chapter 13 of the CGCL.
8
2.5 Fractional Shares. No fractional shares of GBB Stock shall be
-----------------
issued in the Merger. In lieu thereof, each holder of PBC 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 (a) the Average Closing Price times (b) the fraction of the share of
GBB Stock to which such holder would otherwise be entitled. No such holder
shall be entitled to dividends or other rights in respect of any such fraction.
2.6 Exchange Procedures.
-------------------
(a) As of the Effective Time of the Merger, GBB shall have
deposited with the Exchange Agent for the benefit of the holders of shares of
PBC Stock, for exchange in accordance with this Section 2.6 through the Exchange
Agent, certificates representing the shares of GBB Stock issuable pursuant to
Section 2.3 in exchange for shares of PBC Stock outstanding immediately prior to
the Effective Time of the Merger, and funds in an amount not less than the
amount of cash payable in lieu of fractional shares of GBB Stock which would
otherwise be payable in connection with Section 2.3 hereof but for the operation
of Section 2.5 of this Agreement (collectively, the "Exchange Fund").
(b) GBB shall direct the Exchange Agent to mail, promptly after
the Effective Time of the Merger, to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of PBC Stock (the "Certificates") whose shares
were converted into the right to receive shares of GBB Stock pursuant to Section
2.3 hereof, (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 and shall be in such
form and have such other provisions as GBB and PBC may reasonably specify), and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of GBB Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by GBB, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor that amount of cash and a certificate representing that number
of whole shares of GBB Stock which such holder has the right to receive pursuant
to the provisions of Sections 2.3 and 2.4 hereof, and the Certificate so
surrendered shall forthwith be canceled. In the event a certificate is
surrendered representing PBC Stock, the transfer of ownership which is not
registered in the transfer records of PBC, a certificate representing the proper
number of shares of GBB Stock may be issued to a transferee if the Certificate
representing such PBC 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 2.6, each Certificate shall be deemed at any time
after the Effective Time of the Merger to represent only the right to receive
upon such surrender the certificate representing shares of GBB Stock and cash in
lieu of any fractional shares of stock as contemplated by this Section 2.5.
Notwithstanding anything to the contrary set forth herein, if any holder of
shares of PBC should be unable to surrender the Certificates for such shares,
because they have been lost or destroyed, such holder may deliver in lieu
thereof such bond in form and substance and with surety reasonably satisfactory
to GBB and shall be entitled to receive the certificate representing the proper
number of shares of GBB Stock and cash in lieu of fractional shares in
accordance with Sections 2.3 and 2.5 hereof.
9
(c) No dividends or other distributions declared or made after
the Effective Time of the Merger with respect to GBB Stock with a record date
after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of GBB Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.5 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, there shall be
paid to the record holder of the certificates representing whole shares of GBB
Common Stock issued in exchange thereof, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
GBB Stock to which such holder is entitled pursuant to Section 2.5 and the
amount of dividends or other distributions with a record date after the
Effective Time of the Merger theretofore paid with respect to such whole shares
of GBB Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time of the Merger
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of GBB Stock.
(d) All shares of GBB Stock issued upon the surrender for
exchange of PBC Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.5) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of PBC Stock, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of PBC Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to GBB for any reason, they shall
be canceled and exchanged as provided in this Agreement.
(e) Any portion of the Exchange Fund which remains undistributed
to the shareholders of PBC following the passage of six months after the
Effective Time of the Merger shall be delivered to GBB, upon demand, and any
shareholders of PBC who have not theretofore complied with this Section 2.6
shall thereafter look only to GBB for payment of their claim for GBB Stock, any
cash in lieu of fractional shares of GBB Stock and any dividends or
distributions with respect to GBB Stock.
(f) Neither GBB nor PBC shall be liable to any holder of shares
of PBC 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 GBB 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 GBB Stock
for the account of the Persons entitled thereto.
2.7 Directors of Surviving Corporation and GBB. Immediately after
------------------------------------------
the Effective Time of the Merger, the Board of Directors of the Surviving
Corporation shall be comprised of the persons serving as directors of PBC
immediately prior to the Effective Time of the Merger and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
or, if unable to serve, such other person designated by GBB and reasonably
acceptable to PBC. Such persons shall serve until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified. Immediately after the Effective Time of
10
the Merger, the Board of Directors of GBB shall be comprised of the persons
serving as directors of GBB immediately prior to the Effective Time of the
Merger and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or, if unable to serve, such other person designated
by PBC and reasonably acceptable to GBB. Such persons shall serve until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified.
2.8 Executive Officers of Surviving Corporation and GBB. Immediately
---------------------------------------------------
after the Effective Time of the Merger, the executive officers of GBB shall be
comprised of the persons serving as executive officers of GBB immediately prior
to the Effective Time of the Merger. Such persons shall serve until the earlier
of their resignation or removal. Immediately after the Effective Time of the
Merger, the executive officers of the Surviving Corporation shall be comprised
of the persons serving as executive officers of PBC immediately prior to the
Effective Time of the Merger.
ARTICLE III
THE CLOSING
-----------
3.1 Closing Date. The Closing shall take place on the Closing Date.
------------
3.2 Execution of Agreements. As soon as practicable after execution
-----------------------
of this Agreement, the Agreement of Merger together with all other agreements
necessary to consummate the transactions described herein shall be executed by
GBB, Newco and PBC. On the Closing Date, the Agreement of Merger, together with
all requisite certificates, shall be duly filed with the Secretary of State of
the State of California as required by applicable law and regulations.
3.3 Further Assurances. At the Closing, the parties hereto shall
------------------
deliver, or cause to be delivered, such documents or certificates as may be
necessary in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement. From and after the
Effective Time of the Merger, each of the parties hereto covenants and agrees,
without the necessity of any further consideration whatsoever, to execute,
acknowledge and deliver any and all other documents and instruments and take any
and all such other action as may be reasonably necessary or desirable to more
effectively carry out the intent and purpose of this Agreement and the Agreement
of Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PBC
-------------------------------------
PBC represents and warrants to GBB as follows:
4.1 Incorporation, Standing and Power. PBC is a California state
---------------------------------
chartered bank duly organized, validly existing and in good standing and is
authorized by the DFI to conduct a general banking business. PREC has been duly
organized, is validly existing and in good standing as a corporation under the
laws of the State of California. PBC's deposits are insured by the FDIC in
11
the manner and to the extent provided by law. Each of PBC and PREC has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as presently conducted. Neither the
scope of the business of PBC or PREC nor the location of any of their respective
properties requires that either PBC or PREC be licensed to do business in any
jurisdiction other than the State of California where the failure to be so
licensed would, individually or in the aggregate, have a material adverse effect
on the business, financial condition, results of operations or prospects of PBC.
PBC has delivered to GBB true and correct copies of its and PREC's Articles of
Incorporation and Bylaws, as amended, and in effect as of the date hereof.
4.2 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized capital
stock of PBC consists of 2,000,000 shares of PBC Stock, of which 673,862 shares
are outstanding and 1,000,000 shares of preferred stock, no par value, none of
which are outstanding. All of the outstanding shares of PBC Stock are duly
authorized, validly issued, fully paid and nonassessable (except for assessments
that may be ordered by the Commissioner under the authority of Section 662 of
the CFC). Except for PBC Options covering 108,427 shares of PBC Stock granted
pursuant to the PBC Stock Option Plans, there are no outstanding options,
warrants or other rights in or with respect to the unissued shares of PBC Stock
nor any securities convertible into such stock, and PBC is not obligated to
issue any additional shares of its common stock or any additional options,
warrants or other rights in or with respect to the unissued shares of such stock
or any other securities convertible into such stock. PBC has furnished GBB a
list (the "PBC Option List") setting forth the name of each holder of a PBC
Option, the number of shares of PBC Stock covered by each such option, the
vesting schedule of such option, the exercise price per share and the expiration
date of each such PBC Option.
(b) As of the date of this Agreement, the authorized capital
stock of PREC consists of 2,000,000 shares of common stock, of which 500 shares
are outstanding and owned of record and beneficially by PBC. All of the
outstanding shares of such common stock are duly authorized, validly issued,
fully paid and nonassessable. There are no outstanding options, warrants or
other rights in or with respect to the unissued shares of such common stock or
any other securities convertible into such stock, and PREC is not obligated to
issue any additional shares of its common stock or any options, warrants or
other rights in or with respect to the unissued shares of its common stock or
any other securities convertible into such stock.
4.3 Subsidiaries. Other than PREC, PBC does not own, directly or
------------
indirectly (except as pledgee pursuant to loans or upon acquisition in
satisfaction of debt previously contracted), the outstanding stock or equity or
other voting interest in any corporation, partnership, joint venture or other
entity. Other than serving as trustee on deeds of trust, PREC has conducted no
business or activities subsequent to December 31, 1992 and, as of the date
hereof, has no material assets or liabilities.
4.4 Financial Statements. PBC has previously furnished to GBB a copy
--------------------
of the Financial Statements of PBC. The Financial Statements of PBC: (a)
present fairly the consolidated financial condition of PBC as of the respective
dates indicated and its consolidated results of operations and changes in cash
flows, for the respective periods then ended, subject, in the case of the
unaudited interim financial statements, to normal recurring adjustments; (b)
have been prepared
12
in accordance with generally accepted accounting principles consistently applied
(except as otherwise indicated therein); (c) set forth as of the respective
dates indicated adequate reserves for loan losses and other contingencies and
(d) are based upon the books and records of PBC.
4.5 Reports and Filings. Except as set forth in a list (the "PBC
-------------------
Filings List"), since January 1, 1994, each of PBC and PREC has filed all
reports, returns, registrations and statements (such reports and filings
referred to as "PBC Filings"), together with any amendments required to be made
with respect thereto, that were required to be filed with (a) the FDIC, (b) the
DFI and (c) any other applicable Governmental Entity, including taxing
authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a
material adverse effect on the business, financial condition, results of
operations or prospects of PBC. No administrative actions have been taken or
orders issued in connection with such PBC Filings. As of their respective
dates, each of such PBC Filings (y) complied in all material respects with all
laws and regulations enforced or promulgated by the Governmental Entity with
which it was filed (or was amended so as to be in compliance promptly following
discovery of any such noncompliance); and (z) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statement contained in any of such PBC Filings fairly presented the financial
position of PBC on a consolidated basis and was prepared in accordance with
generally accepted accounting principles or banking regulations consistently
applied, except as stated therein, during the periods involved. PBC has
furnished GBB with true and correct copies of all PBC Filings filed by PBC since
January 1, 1994.
4.6 Authority of PBC. The execution and delivery by PBC of this
----------------
Agreement and of the Agreement of Merger and, subject to the requisite approval
of the shareholders of PBC of this Agreement and the transactions contemplated
hereby, the consummation of the transactions contem plated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of PBC, and this Agreement is, and the Agreement of Merger will be, upon
due execution and delivery by the respective parties thereto, a valid and
binding obligation of PBC enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, liquidation,
receivership, conservatorship, insolvency, moratorium or other similar laws
affecting the rights of creditors generally and by general equitable principles.
Except as set forth in a list furnished by PBC to GBB (the "PBC Conflicts and
Consents List"), neither the execution and delivery by PBC of this Agreement or
the Agreement of Merger, the consummation of the transactions contemplated
herein or therein, nor compliance by PBC with any of the provisions hereof or
thereof, will: (a) conflict with or result in a breach of any provision of its
or PREC's Articles of Incorporation, as amended, or Bylaws, as amended; (b)
constitute a breach of or result in a default (or give rise to any rights of
termination, cancellation or acceleration, or any right to acquire any
securities or assets) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, agreement or other
instrument or obligation to which PBC or PREC is a party, or by which PBC or
PREC or any of their respective properties or assets are bound; (c) result in
the creation or imposition of any Encumbrance on any of the properties or assets
of PBC or PREC; or (d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to PBC or PREC or any of their respective
properties or assets. Except as set forth in the PBC Conflicts and Consents
List, no consent of, approval of, notice to or filing with any Governmental
Entity having jurisdiction over any aspect of the business or assets of PBC or
PREC, and no consent of, approval
13
of or notice to any other Person, is required in connection with the execution
and delivery by PBC of this Agreement, the Agreement of Merger or the
consummation by PBC of the Merger or the transactions contemplated hereby or
thereby, except (i) the approval of this Agreement and the Agreement of Merger
and the transactions contemplated hereby and thereby by the shareholders of PBC;
(ii) such approvals as may be required by the FDIC, the FRB and the DFI; (iii)
the filing of the Joint Proxy Statement and Prospectus and Registration
Statement on Form S-4 with the SEC; and (iv) the filing of the Agreement of
Merger with the Secretary of State.
4.7 Insurance. Each of PBC and PREC has policies of insurance and
---------
bonds with respect to its assets and business against such casualties and
contingencies and in such amounts, types and forms as are customarily
appropriate for its business, operations, properties and assets. All such
insurance policies and bonds are in full force and effect. Except as set forth
in a list furnished by PBC to GBB (the "PBC Insurance List"), no insurer under
any such policy or bond has canceled or indicated an intention to cancel or not
to renew any such policy or bond or generally disclaimed liability thereunder.
Except as set forth in the PBC Insurance List, neither PBC nor PREC is in
default under any such policy or bond and all material claims thereunder have
been filed in a timely fashion. Set forth in the PBC Insurance List is a list
of all policies of insurance carried and owned by either PBC or PREC showing the
name of the insurance company, the nature of the coverage, the policy limit, the
annual premiums and the expiration dates. There has been delivered to GBB a
copy of each such policy of insurance.
4.8 Personal Property. Each of PBC and PREC has good and marketable
-----------------
title to all its material properties and assets, other than real property, owned
or stated to be owned by PBC or PREC, free and clear of all Encumbrances except:
(a) as set forth in the Financial Statements of PBC; (b) for Encumbrances for
current taxes not yet due; (c) for Encumbrances incurred in the ordinary course
of business; (d) for Encumbrances that are not substantial in character, amount
or extent and that do not materially detract from the value, or interfere with
present use, of the property subject thereto or affected thereby, or otherwise
materially impair the conduct of business of PBC; or (e) as set forth in a list
furnished by PBC to GBB (the "PBC Personal Property List.")
4.9 Real Estate. PBC has furnished GBB a list of real property,
-----------
including leaseholds and all other interests in real property (other than
security interests), owned by PBC or PREC (the "PBC Real Property List"). Each
of PBC and PREC has duly recorded or caused to be recorded, in the appropriate
county, all recordable interests in such real property. Either PBC or PREC has
good and marketable title to the real property, and valid leasehold interests in
the leaseholds, described in the PBC Real Property List, free and clear of all
Encumbrances, except (a) for rights of lessors, co-lessees or sublessees in such
matters that are reflected in the lease; (b) for current taxes not yet due and
payable; (c) for Encumbrances of public record; (d) for such Encum brances, if
any, as do not materially detract from the value of or materially interfere with
the present use of such property; and (e) as described in the PBC Real Property
List. PBC has furnished GBB with true and correct copies of all leases included
in the PBC Real Property List, all title insurance policies and all documents
evidencing recordation of all recordable interests in real property included in
the PBC Real Property List.
4.10 Litigation. Except as set forth in the PBC Filings or in a list
----------
furnished by PBC to GBB (the "PBC Litigation List"), there is no private or
governmental suit, claim, action or
14
proceeding pending, nor to PBC's knowledge threatened, against PBC or PREC or
against any of their respective directors, officers or employees relating to the
performance of their duties in such capacities or against or affecting any
properties of PBC or PREC which, if adversely determined, would have a material
adverse effect upon the business, financial condition or results of operations
of PBC or the transactions contemplated hereby, or which may involve a judgment
against PBC or PREC in excess of $25,000. Also, except as disclosed in the PBC
Filings or in the PBC Litigation List, there are no material judgments, decrees,
stipulations or orders against PBC or PREC or enjoining their respective
directors, officers or employees in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any property or the
conduct of business in any area.
4.11 Taxes.
-----
(a) Except as set forth in the PBC Tax List: (i) all Tax Returns
required to be filed by or on behalf of PBC or any of its subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material aspects; (ii) PBC and its
subsidiaries have paid all Taxes (whether or not shown on any Tax Return) for
any period ending on or before the Effective Time of the Merger or adequate
provision has been made for any such Taxes in the financial statements of PBC
and its subsidiaries (in accordance with generally accepted accounting
principles); (iii) there is no audit examination, deficiency assessment, or
refund litigation currently pending with respect to any Taxes of PBC or any of
its subsidiaries; (iv) all Taxes due with respect to completed and settled
examinations or concluded litigation relating to PBC or any of its subsidiaries
have been paid in full or adequate provision has been made for any such amounts
in the financial statements of PBC and its subsidiaries (in accordance with
generally accepted accounting principles); (v) no extensions or waivers of
statutes of limitations have been given by or requested with respect to any
Taxes of PBC or any of its subsidiaries; and (vi) there are no liens for Taxes
upon the assets or property of any of PBC or its subsidiaries except for
statutory liens for current Taxes not yet due.
(b) Except for the affiliated group among PBC and its
subsidiaries, PBC has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, or a member of
combined, consolidated or unitary group for state, local or foreign Tax
purposes. PBC has not filed a consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state, local or foreign income Tax law) or agreed to have Section 341(f)(2) of
the Code (or any corresponding provision of state, local or foreign income Tax
law) apply to any disposition of any asset owned by it. PBC has not made or will
not make a consent dividend election under Section 565 of the Code.
(c) Except as set forth in the PBC Tax List, PBC has not agreed
to make, nor is it required to make, any adjustment under Sections 481(a) or
263A of the Code or any comparable provision of state or foreign tax laws by
reason of a change in accounting method or otherwise. PBC has taken no action
that is not in accordance with prudent banking practice that could defer a
liability for Taxes of PBC from any taxable period ending on or before the
Effective Time of the Merger to any taxable period ending after such date.
15
(d) PBC is not a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in
connection with the Merger, any change of control of PBC or any other
transaction contemplated by this Agreement, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(e) PBC is not, and has not been, a United States real property
holding corporation (as defined in Section 897(C)(2) of the Code) during the
applicable period specified in Section 897(C)(1)(A)(ii) of the Code.
(f) Except as set forth in the PBC Tax List, to the knowledge of
PBC, as of the date hereof, no shareholder of PBC is other than a United States
person within the meaning of the Code.
(g) PBC does not have and has not had a permanent establishment
in any foreign country, as defined in any applicable Tax treaty or convention
between the United States and such foreign country, and, except as set forth in
the PBC Tax List, PBC has not engaged in a trade or business within any foreign
country.
(h) PBC is not party to any joint venture, partnership, or other
arrangement or contract which could reasonably be expected to be treated as a
partnership for federal income tax purposes.
(i) All outstanding options to acquire equity of PBC that purport
to be or were otherwise intended (when issued) to be treated as "incentive stock
options"("ISOs") within the meaning of Section 422 of the Code (and any
predecessor provision and any similar provision applicable state, local or other
Tax law) were issued in compliance with such section. All such outstanding
options currently qualify for treatment as ISOs, and are held by persons who are
employees of PBC.
(j) As used in this Agreement, (i) the term "Tax" or "Taxes"
means taxes and other impost, levies, assessments, duties, fees or charges
imposed or required to be collected by any federal, state, county, local,
municipal, territorial or foreign governmental authority or subdivision thereof,
including, without limitation, income, excise, gross receipts, ad valorem,
profits, gains, property, sales, transfer, use, payroll, employment, severance,
withholding, duties, intangible, franchise, personal property, and other taxes,
charges, levies or like assessments, together with all penalties and additions
to tax and interest thereon, and (ii) the term "Tax Return" shall mean any
return, report, information return or other document (including elections,
declarations, disclosures, schedules, estimates. and other returns or supporting
documents) with respect to Taxes.
4.12 Compliance with Laws and Regulations.
------------------------------------
(a) Neither PBC nor PREC is in default under or in breach of any
provision its Articles of Incorporation, as amended, or Bylaws, as amended, or
law, ordinance, rule or regulation promulgated by any Governmental Entity, where
such default or breach would have a material adverse effect on the business,
financial condition, results of operations or prospects of PBC.
16
(b) Without limiting Section 4.12(a), to the best of PBC's
knowledge and except as set forth on a list furnished by PBC to GBB (the "PBC
Environmental Compliance List") (i) each of PBC and PREC is in compliance with
all Environmental Regulations; (ii) there are no Tanks on or about PBC Property;
(iii) there are no Hazardous Materials on, below or above the surface of, or
migrating to or from PBC Property; (iv) neither PBC nor PREC has loans
outstanding secured by real property that is not in compliance with
Environmental Regulations or which has a leaking Tank or upon which there are
Hazardous Materials on or migrating to or from; and (v) without limiting Section
4.10 or the foregoing representations and warranties contained in clauses (i)
through (iv), as of the date of this Agreement, there is no claim, action, suit,
or proceeding or notice thereof before any Governmental Entity pending against
PBC or PREC or concerning property securing PBC loans and there is no
outstanding judgment, order, writ, injunction, decree, or award against or
affecting PBC Property or property securing PBC or PREC loans, relating to the
foregoing representations (i) - (iv), in each case the noncompliance with which,
or the presence of which would have a material adverse effect on the business,
financial condition, results of operations or prospects of PBC. For purposes of
this Section 4.12(b), the term "Environmental Regulations" shall mean all
applicable statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises, and similar
items, of all Governmental Entities and all applicable judicial, administrative,
and regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation: all
requirements, including, but not limited to those pertaining to reporting,
licensing, permitting, investigation, and remediation of emissions, discharges,
releases, or threatened releases of Hazardous Materials, chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials or wastes
whether solid, liquid, or gaseous in nature, into the air, surface water,
groundwater, or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature and all
requirements pertaining to the protection of the health and safety of employees
or the public. "PBC Property" shall mean real estate currently owned, leased, or
otherwise used by PBC, or in which PBC has an investment or security interest
(by mortgage, deed of trust, sale and lease-back or otherwise), including,
without limitation, properties under foreclosure and properties held by PBC in
its capacity as a trustee or otherwise. "Tank" shall mean treatment or storage
tanks, sumps, or water, gas or oil ▇▇▇▇▇ and associated piping transportation
devices. "Hazardous Materials" shall mean any substance the presence of which
requires investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action, policy or common law; or which is or
becomes defined as a hazardous waste, hazardous substance, hazardous material,
used oil, pollutant or contaminant under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601, et seq.); the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901, et seq.); the Clean Air Act, as amended (42 U.S.C.
Section 7401, et seq.); the Federal Water Pollution Control Act, as amended (33
U.S.C. Section 1251, et seq.); the Toxic Substances Control Act, as amended (15
U.S.C. Section 9601, et seq.); the Occupational Safety and Health Act, as
amended (29 U.S.C. Section 651; the Emergency Planning and Community Right-to-
Know Act of 1986 (42 U.S.C. Section 11001, et seq.); the Mine Safety and Health
Act of 1977, as amended (30 U.S.C. Section 801, et seq.); the Safe Drinking
Water Act (42 U.S.C. Section 300f, et seq.); and all comparable state and local
laws, including without limitation, the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇-▇▇▇▇▇▇ Hazardous
Substance Account Act (State Superfund), the ▇▇▇▇▇▇-Cologne Water Quality
Control Act, Section 25140,
17
25501(j) and (k), 25501.1,25281 and 25250.1 of the California Health and Safety
Code and/or Article I of Title 22 of the California Code of Regulations,
Division 4, Chapter 30; laws of other jurisdictions or orders and regulations;
or the presence of which causes or threatens to cause a nuisance, trespass or
other common law tort upon real property or adjacent properties or poses or
threatens to pose a hazard to the health or safety of persons or without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons; polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde
foam insulation.
(c) PBC has provided to GBB phase I environmental assessments
with respect to each interest in real property set forth on the PBC Real
Property List as to which such a phase I environmental investigation has been
prepared by or on behalf of PBC or PREC. The PBC Real Property list shall
disclose each such property as to which such an assessment has not been prepared
on behalf of PBC or PREC.
4.13 Performance of Obligations. Each of PBC and PREC has performed
--------------------------
in all material respects all of the obligations required to be performed by it
to date and is not in default under or in breach of any term or provision of any
covenant, contract, lease, indenture or any other covenant to which it is a
party, is subject or is otherwise bound, and no event has occurred that, with
the giving of notice or the passage of time or both, would constitute such
default or breach, where such default or breach would have a material adverse
effect on the business, financial condition, results of operations or prospects
of PBC. Except for loans and leases made by PBC or PREC in the ordinary course
of business, to PBC's knowledge, no party with whom PBC or PREC has an agreement
that is of material importance to the business of PBC is in default thereunder.
4.14 Employees. There are no controversies pending or threatened
---------
between either PBC or PREC and any of its employees that are likely to have a
material adverse effect on the business, financial condition, results of
operations or prospects of PBC. Neither PBC nor PREC is a party to any
collective bargaining agreement with respect to any of its employees or any
labor organization to which its employees or any of them belong.
4.15 Brokers and Finders. Except for the obligation to ▇▇▇▇▇▇ &
-------------------
▇▇▇▇▇▇ Incorporated as set forth in the ▇▇▇▇▇▇ Agreement, a copy of which has
been delivered to GBB, PBC is not a party to or obligated under any agreement
with any broker or finder relating to the transactions contemplated hereby, and
neither the execution of this Agreement nor the consummation of the transactions
provided for herein will result in any liability to any broker or finder.
4.16 Material Contracts. Except as set forth in a list furnished by
------------------
PBC to GBB (the "PBC Contract List") hereto (all items listed or required to be
listed in such PBC Contract List being referred to herein as "Scheduled
Contracts"), neither PBC nor PREC is a party or otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract that (i) has a remaining term, as of the date of this Agreement, of
more than one year in length of obligation on the part of PBC or PREC and is not
terminable by PBC or PREC within one year without penalty or (ii) requires
payment by PBC or PREC of $25,000 or more per annum;
18
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by PBC or
PREC of $25,000 or more per annum;
(c) any contract or agreement that restricts PBC or PREC (or
would restrict any Affiliate of PBC or PREC or the Surviving Corporation
(including GBB and its subsidiaries) after the Effective Time of the Merger)
from competing in any line of business with any Person or using or employing the
services of any Person;
(d) any lease of real or personal property providing for annual
lease payments by or to PBC or PREC in excess of $25,000 per annum other than
(A) financing leases entered into in the ordinary course of business in which
PBC or PREC is lessor and (B) leases of real property presently used by PBC as
banking offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of PBC or PREC (other than as mortgagor or pledgor in the ordinary course of its
banking business or as mortgagee, secured party or deed of trust beneficiary in
the ordinary course of its business) in personal property having a value of
$25,000 or more;
(f) other than as described in the PBC Filings or as set forth in
the PBC Employee Plan List, any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or
former employees, officers or directors of PBC or PREC;
(g) any agreement to acquire equipment or any commitment to make
capital expenditures of $25,000 or more;
(h) other than agreements entered into in the ordinary course of
business, including sales of other real estate owned, any agreement for the sale
of any property or assets in which PBC or PREC has an ownership interest or for
the grant of any preferential right to purchase any such property or asset;
(i) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of its banking
business and reflected in the financial records of PBC or PREC);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by PBC or PREC (as lessee) that materially
restricts the use, transferability or value of such property;
(k) any guarantee or indemnification which involves the sum of
$25,000 or more, other than letters of credit or loan commitments issued in the
normal course of business;
19
(l) any supply, maintenance or landscape contracts not terminable
by PBC or PREC without penalty on 30 days' or less notice and which provides for
payments in excess of $25,000 per annum;
(m) other than as disclosed with reference to subparagraph (k) of
this Section 4.16, any material agreement which would be terminable other than
by PBC or PREC as a result of the consummation of the transactions contemplated
by this Agreement;
(n) any contract of participation with any other bank in any loan
in excess of $25,000 or any sales of assets of PBC or PREC with recourse of any
kind to PBC or PREC except the sale of mortgage loans, servicing rights,
repurchase or reverse repurchase agreements, securities or other financial
transactions in the ordinary course of business;
(o) any agreement providing for the sale or servicing of any loan
or other asset which constitutes a "recourse arrangement" under applicable
regulation or policy promulgated by a Governmental Entity (except for agreements
for the sale of guaranteed portions of loans guaranteed in part by the U. S.
Small Business Administration and related servicing agreements);
(p) any contract relating to the provision of data processing
services to PBC or PREC; or
(q) any other agreement of any other kind which involves future
payments or receipts or performances of services or delivery of items requiring
payment of $25,000 or more to or by PBC or PREC other than payments made under
or pursuant to loan agreements, participation agreements and other agreements
for the extension of credit in the ordinary course of their business.
True copies of all Scheduled Contracts, including all amendments and
supplements thereto, have been delivered to GBB.
4.17 Certain Material Changes. Except as specifically required,
------------------------
permitted or effected by this Agreement, since December 31, 1996, there has not
been, occurred or arisen any of the following (whether or not in the ordinary
course of business unless otherwise indicated):
(a) Any change in any of the assets, liabilities, permits,
methods of accounting or accounting practices, business, or manner of conducting
business, of PBC or PREC or any other event or development that has had or may
reasonably be expected to have a material adverse effect on the assets,
liabilities, permits, business, financial condition, results of operations or
prospects of PBC;
(b) Any damage, destruction or other casualty loss (whether or
not covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, results of operations or prospects of PBC or that may involve a loss
of more than $25,000 in excess of applicable insurance coverage;
(c) Any amendment, modification or termination of any existing,
or entry into any new, material contract or permit that has had or may
reasonably be expected to have a
20
material adverse effect on the assets, liabilities, business, financial
condition, results of operations or prospects of PBC;
(d) Any disposition by PBC or PREC of an asset the lack of which
has had or may reasonably be expected to have a material adverse effect on the
assets, liabilities, business, financial condition, results of operations or
prospects of PBC; or
(e) Any direct or indirect redemption, purchase or other
acquisition by PBC or PREC of any equity securities or any declaration, setting
aside or payment of any dividend (except, in the case of the declaration,
setting aside or payment of a cash dividend, as disclosed in the Financial
Statements of PBC) or other distribution on or in respect of PBC Stock whether
consisting of money, other personal property, real property or other things of
value.
4.18 Licenses and Permits. Each of PBC and PREC has all material
--------------------
licenses and permits that are necessary for the conduct of its business, and
such licenses are in full force and effect, except for any failure to be in full
force and effect that would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of PBC. The respective properties, assets, operations
and businesses of PBC and PREC are and have been maintained and conducted, in
all material respects, in compliance with all applicable licenses and permits.
The respective properties and operations of PBC and PREC are and have been
maintained and conducted, in all material respects, in compliance with all
applicable laws and regulations.
4.19 Undisclosed Liabilities. Neither PBC nor PREC has any
-----------------------
liabilities or obligations, either accrued or contingent, that are material to
PBC and that have not been: (a) reflected or disclosed in the Financial
Statements of PBC; (b) incurred subsequent to December 31, 1996 in the ordinary
course of business; or (c) disclosed in a list furnished by PBC to GBB (the
"Undisclosed Liabilities List") or on any other PBC List. PBC does not know of
any basis for the assertion against it of any liability, obligation or claim
(including, without limitation, that of any regulatory authority) that is likely
to result in or cause a material adverse change in the business, financial
condition, results of operations or prospects of PBC that is not fairly
reflected in the Financial Statements of PBC or otherwise disclosed in this
Agreement.
4.20 Employee Benefit Plans.
----------------------
(a) PBC has previously made available to GBB copies of each
"employee benefit plan," as defined in Section 3(3) of ERISA, which is subject
to any provision of ERISA and covers any employee, whether active or retired, of
PBC, together with all amendments thereto, all related summary plan descriptions
(to the extent one is required by law), the determination letter from the IRS,
and the annual reports for the most recent three years (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any such plan. Such
plans are hereinafter referred to collectively as the "Employee Plans." PBC does
not participate in an employee benefit pension plan that is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA that would subject PBC to a
material amount of liability with respect to any such plan. Each Employee Plan
which is intended to be qualified in form and operation under Section 401(a) of
the Code is so qualified and the associated trust for each such Employee Plan is
exempt from tax under Section 501(a) of the Code. No event has occurred that
will subject such Employee Plans to a material amount of tax
21
under Section 511 of the Code. All amendments required to bring each Employee
Plan into conformity with all of the applicable provisions of ERISA, the Code
and all other applicable laws have been made. Except as disclosed in a list
furnished by PBC to GBB (the "PBC Employee Plan List"), all Employee Plans were
in effect for substantially all of 1996, and there has been no material
amendment thereof (other than amendments required to comply with applicable law)
or increase in the cost thereof or benefits thereunder on or after January 1,
1997.
(b) PBC has previously made available to GBB copies or
descriptions of each plan or arrangement maintained or otherwise contributed to
by PBC which is not an Employee Plan and which (exclusive of base salary and
base wages) 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 or class of employees, whether active or retired, of PBC (such plans
and arrangements being collectively referred to herein as "Benefit
Arrangements"). Except as disclosed in the PBC Employee Plan List hereto, all
Benefit Arrangements which are in effect were in effect for substantially all of
1996. There has been no material amendment thereof or increase in the cost
thereof or benefits payable thereunder since January 1, 1997. Except as set
forth in the PBC Employee Plan List, there has been no material increase in the
compensation of or benefits payable to any senior executive employee of PBC
since December 31, 1996, nor any employment, severance or similar contract
entered into with any such employee, nor any amendment to any such contract,
since December 31, 1996. There is no contract, agreement or benefit arrangement
covering any employee of PBC which individually or collectively could give rise
to the payment of any amount which would constitute an "excess parachute
payment," as such term is defined in Section 280G of the Code.
(c) With respect to all Employee Plans and Benefit Arrangements,
PBC is in material compliance (other than noncompliance the cost or liability
for which is not material) with the requirements prescribed by any and all
statutes, governmental or court orders, or governmental rules or regulations
currently in effect, including but not limited to ERISA and the Code, applicable
to such plans or arrangements. All material government reports and filings
required by law have been properly and timely filed and all information required
to be distributed to participants or beneficiaries has been distributed with
respect to each Employee Plan. PBC has performed all of its obligations under
all such Employee Plans and Benefit Arrangements in all material aspects. There
is no pending or, to the knowledge of PBC, threatened legal action, proceeding
or investigation against or involving any Employee Plan or Benefit Arrangement
which could result in a material amount of liability to such Employee Plan. To
the knowledge of PBC, no condition exists that could constitute grounds for the
termination of any Employee Plan under Section 4042 of ERISA; no "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of the Code,
has occurred with respect to any Employee Plan, or any other employee benefit
plan maintained by PBC which is covered by Title I of ERISA, which could subject
any person (other than a person for whom PBC is not directly or indirectly
responsible) to a material amount of liability under Title I of ERISA or to the
imposition of a material amount of tax under Section 4975 of the Code which
could have a material adverse effect on the business, assets, financial
condition, results of operations or prospects of PBC; nor has any Employee Plan
subject to Part III of Subtitle B of Title I of ERISA or Section 412 of the
Code, or both, incurred any "accumulated funding deficiency," as defined in
Section 412 of the Code, whether or not waived, nor has PBC failed to make any
contribution or pay any amount due and owing as required by the terms of any
Employee
22
Plan or Benefit Arrangement. No "reportable event" as defined in ERISA has
occurred with respect to any of the Employee Plans. To the knowledge of PBC, PBC
has not incurred nor expects to incur, directly or indirectly, a material amount
of liability under Title IV or ERISA arising in connection with the termination
of, or a complete or partial withdrawal from, any plan covered or previously
covered by Title IV of ERISA which could constitute a liability of GBB or of any
of its affiliates (including PBC) at or after the Effective Time of the Merger.
(d) Except for Scheduled Contracts set forth in the PBC Contract
List or as set forth in the PBC Employee Plan List, as the case may be, each
Employee Plan or Benefit Arrangement and each personal services contract, fringe
benefit, consulting contract or similar arrangement with or for the benefit of
any officer, director, employee or other person can be terminated by PBC within
a period of 30 days following the Effective Time of the Merger, without payment
of any amount as a penalty, bonus, premium, severance pay or other compensation
for such termination.
(e) All group health plans of PBC have been operated in
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code in all material respects.
4.21 Corporate Records. The minute books of each of PBC and PREC
-----------------
accurately reflect all material actions taken to this date by the respective
shareholders, board of directors and committees of each of PBC and PREC and
contain true and complete copies of their respective Articles of Incorporation,
Bylaws and other charter documents, and all amendments thereto.
4.22 Accounting Records. Each of PBC and PREC maintains accounting
------------------
records which fairly and validly reflect, in all material respects, its
transactions and accounting controls exist sufficient to provide reasonable
assurances that such transactions are, in all material respects, (i) executed in
accordance with its management's general or specific authorization, and (ii)
recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting procedures. Such records, to the
extent they contain important information pertaining to PBC or PREC which is not
easily and readily available elsewhere, have been duplicated, and such
duplicates are stored safely and securely.
4.23 Offices and ATMs. PBC has furnished to GBB a list (the "PBC
----------------
Offices List") setting forth the headquarters of each of PBC and PREC
(identified as such) and each of the offices and automated teller machines
("ATMs") maintained and operated by PBC or PREC (including, without limitation,
representative and loan production offices and operations centers) and the
location thereof. Except as set forth on the PBC Offices List, neither PBC nor
PREC maintains any other office or ATM or conducts business at any other
location, and neither PBC nor PREC has applied for or received permission to
open any additional branch or operate at any other location.
4.24 Operating Losses. PBC has furnished to GBB a list (the "PBC
----------------
Operating Losses List") setting forth any Operating Loss (as herein defined)
which has occurred at PBC during the period after December 31, 1996 to the date
of the Agreement. To the knowledge of PBC, no action has been taken or omitted
to be taken by any employee of PBC that has resulted in the incurrence by PBC of
an Operating Loss or that might reasonably be expected to result in the
23
incurrence of any individual Operating Loss which, net of any insurance proceeds
payable in respect thereof, would exceed $50,000 on an individual basis or in
the aggregate. For purposes of this section "Operating Loss" means any loss
resulting from cash shortages, lost or misposted items, disputed clerical and
accounting errors, forged checks, payment of checks over stop payment orders,
counterfeit money, wire transfers made in error, theft, robberies, defalcations,
check kiting, fraudulent use of credit cards or ATMs, civil money penalties,
fines, litigation, claims or other similar acts or occurrences.
4.25 Loan Portfolio. PBC has furnished to GBB a list (the "PBC Loan
--------------
List") that sets forth (a) as of April 30, 1997, a description of, by type and
classification, if any, each loan, lease, other extension of credit or
commitment to extend credit by PBC; (b) sets forth as of July 31, 1997, by type
and classification, all loans, leases, other extensions and commitments to
extend credit of PBC that have been classified by its bank examiners or auditors
(external or internal) as "Watch List," "Substandard," "Doubtful," "Loss" or any
comparable classification; and (c) all consumer loans due to PBC as to which any
payment of principal, interest or any other amount is 90 days or more past due.
4.26 Investment Securities. PBC has furnished to GBB a list (the "PBC
---------------------
Investment Securities List") setting forth a description of each Investment
Security held by PBC or PREC on July 31, 1997. The PBC Investment Securities
List sets forth, with respect to each such Investment Security: (i) the issuer
thereof; (ii) the outstanding balance or number of shares; (iii) the maturity,
if applicable; (iv) the title of issue; and (v) the classification under SFAS
No. 115. Neither PBC nor PREC has any Investment Security classified as
trading.
4.27 Power of Attorney. Neither PBC nor PREC has granted any Person a
-----------------
power of attorney or similar authorization that is presently in effect or
outstanding.
4.28 Facts Affecting Regulatory Approvals. To the best knowledge of
------------------------------------
PBC, there is no fact, event or condition applicable to PBC or PREC which will,
or reasonably could be expected to, adversely affect the likelihood of securing
the requisite approvals or consents of any Governmental Entity to the Merger and
the transactions contemplated by this Agreement.
4.29 Accounting and Tax Matters. To the best knowledge of PBC,
--------------------------
neither PBC nor PREC has through the date hereof taken or agreed to take any
action that would prevent GBB from accounting for the business combination to be
effected by the Merger as a pooling-of-interests or would prevent the Merger
from qualifying as a tax-free reorganization under the Code.
4.30 Indemnification. Other than pursuant to the provisions of their
---------------
respective Articles of Incorporation or Bylaws, and the ▇▇▇▇▇▇ Agreement,
neither PBC nor PREC is a party to any indemnification agreement with any of its
present officers, directors, employees, agents or other persons who serve or
served in any other capacity with any other enterprise at the request of PBC or
PREC (a "Covered Person"), and to the best knowledge of PBC, there are no claims
for which any Covered Person would be entitled to indemnification by PBC or PREC
if such provisions were deemed in effect, except as set forth in a list
furnished by PBC to GBB (the "PBC Indemnification List").
24
4.31 Community Reinvestment Act. PBC has received rating of
--------------------------
"satisfactory" in its most recent examination or interim review with respect to
the Community Reinvestment Act. PBC has not been advised of any supervisory
concerns regarding PBC's compliance with the Community Reinvestment Act.
4.32 Derivative Transactions. Neither PBC nor PREC is a party to a
-----------------------
transaction in or involving forwards, futures, options on futures, swaps or
other derivative instruments.
4.33 Trust Administration. PBC does not presently exercise trust
--------------------
powers, including, but not limited to, trust administration, and neither it nor
any predecessor has exercised such trust powers for a period of at least 3 years
prior to the date hereof. The term "trusts" as used in this Section 4.33
includes (i) any and all common law or other trusts between an individual,
corporation or other entities and PBC or a predecessor, as trustee or co-
trustee, including, without limitation, pension or other qualified or
nonqualified employee benefit plans, compensation, testamentary, inter vivos,
and charitable trust indentures; (ii) any and all decedents' estates where PBC
or a predecessor is serving or has served as a co-executor or sole executor,
personal representative or administrator, administrator ▇▇ ▇▇▇▇▇ non,
administrator ▇▇ ▇▇▇▇▇ non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar positions
where PBC or a predecessor is serving or has served as a co-grantor or a sole
grantor or a conservator or co-conservator of the estate, or any similar
fiduciary capacity; and (iv) any and all agency and/or custodial accounts and/or
similar arrangements, including plan administrator for employee benefit
accounts, under which PBC or a predecessor is serving or has served as an agent
or custodian for the owner or other party establishing the account with or
without investment authority.
4.34 Disclosure Documents and Applications. None of the information
-------------------------------------
supplied or to be supplied by or on behalf of PBC ("PBC Supplied Information")
for inclusion in (a) the Registration Statement on Form S-4 and the Joint Proxy
Statement and Prospectus and (b) any other documents to be filed with the SEC,
the FRB, the FDIC, the DFI or any other Governmental Entity in connection with
the transactions contemplated in this Agreement, will, at the respective times
such documents are filed or become effective, or with respect to the Joint Proxy
Statement and Prospectus when mailed, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.35 Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by PBC hereby or in the PBC Lists or
schedules hereto do not contain any untrue statement of a material fact or omit
to state any material fact which is necessary under the circumstances under
which they were made to prevent the statements contained herein or in such
schedules from being misleading.
25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GBB
-------------------------------------
GBB represents and warrants to PBC as follows:
5.1 Incorporation, Standing and Power. GBB has been duly organized,
---------------------------------
is validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. Newco has been duly organized, is validly existing and in good standing as
corporation under the laws of the State of California. GBB and Newco have all
requisite corporate power and authority to own, lease and operate their
respective properties and assets and to carry on their respective businesses as
presently conducted. GBB and Newco are duly qualified and in good standing as
foreign corporations, and are authorized to do busi ness, in all states or
other jurisdictions in which such qualification or authorization is necessary,
except where the failure to be so qualified or authorized would not,
individually or in the aggregate, have a material adverse effect on the
business, financial condition, results of operations or prospects of GBB on a
consolidated basis. True and correct copies of the Articles of Incorporation and
Bylaws of each of GBB and Newco have been delivered to PBC. Such Articles of
Incorporation and Bylaws are in full force and effect as of the date hereof.
Newco has not engaged in any business nor has it incurred any liabilities or
obligations since it was incorporated other than relating to this Agreement and
the transactions contemplated hereby.
5.2 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized capital
stock of GBB consists of 6,000,000 shares of common stock, of which 3,335,284
shares are outstanding and 4,000,000 shares of preferred stock, no par value, of
which no shares are outstanding. All of the outstanding shares of GBB Stock are
duly authorized, validly issued, fully paid and nonassessable. The GBB Stock to
be used in the Merger will be duly authorized, validly issued, fully paid and
nonassessable.
(b) As of the date of this Agreement, the authorized capital
stock of Newco consists of 10,000 shares of common stock, of which 100 shares
are outstanding and owned of record and beneficially by GBB. All the outstanding
shares of such common stock are duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding options, warrants or other rights in or
with respect to the unissued shares of such common stock or any other securities
convertible into such stock, and Newco is not obligated to issue any additional
shares of its common stock or any options, warrants or other rights in or with
respect to the unissued shares of its common stock or any other securities
convertible into such stock.
5.3 Financial Statements. GBB has previously furnished to PBC a copy
--------------------
of the Financial Statements of GBB. The Financial Statements of GBB: (a)
present fairly the consolidated financial condition of GBB as of the respective
dates indicated and its consolidated results of operations and changes in cash
flows, as applicable, for the respective periods then ended, subject, in the
case of the unaudited consolidated interim financial statements, to normal
recurring adjustments; (b) have been prepared in accordance with generally
accepted accounting principles
26
consistently applied (except as otherwise indicated therein); (c) set forth as
of the respective dates indicated adequate reserves for loan losses and other
contingencies; and (d) are based upon the books and records of GBB.
5.4 Reports and Filings. Since January 1, 1994, GBB has filed all
-------------------
reports, returns, registrations and statements (such reports and filings
referred to as "GBB Filings"), together with any amendments required to be made
with respect thereto, that were required to be filed with (a) the SEC, (b) the
FRB, and (c) any other applicable Governmental Entity, including taxing
authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis. No administrative
actions have been taken or orders issued in connection with such GBB Filings.
As of their respective dates, each of such GBB Filings (y) complied in all
material respects with all laws and regulations enforced or promulgated by the
Governmental Entity with which it was filed (or was amended so as to be in such
compliance promptly following discovery of any such noncompliance; and (z) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Any
financial statement contained in any of such GBB Filings that was intended to
present the financial position of GBB on a consolidated basis fairly presented
the financial position of GBB on a consolidated basis and was prepared in
accordance with generally accepted accounting principles or banking regulations
consistently applied, except as stated therein, during the periods involved.
GBB has furnished or made available to PBC true and correct copies of all GBB
Filings filed by GBB since January 1, 1994.
5.5 Authority.
---------
(a) Of GBB. The execution and delivery by GBB of this Agreement,
------
and subject to the requisite approval of the shareholders of GBB of this
Agreement and the transactions contemplated hereby, the consummation of the
transactions contemplated hereby, have been duly and validly authorized by all
necessary corporate action on the part of GBB, and this Agreement will be upon
execution and delivery by the respective parties hereto, a valid and binding
obligation of GBB enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, liquidation, receivership,
conservatorship, insolvency, moratorium or other similar laws affecting the
rights of creditors generally and by general equitable principles. Except as set
forth in a list furnished by GBB to PBC (the "GBB Conflicts and Consents List"),
neither the execution and delivery by GBB of this Agreement, the consummation of
the transactions contemplated herein, nor compliance by GBB with any of the
provisions hereof or thereof, will: (a) conflict with or result in a breach of
any provision of its Articles of Incorporation, as amended, or Bylaws, as
amended; (b) constitute a breach of or result in a default (or give rise to any
rights of termination, cancellation or acceleration, or any right to acquire any
securities or assets) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, agreement or other
instrument or obligation to which GBB or any subsidiary of GBB is a party, or by
which GBB, or any subsidiary of GBB or any of its respective properties or
assets is bound; (c) result in the creation or imposition of any Encumbrance on
any of the properties or assets of GBB or any subsidiary; or (d) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to GBB
or any subsidiary of GBB or any of their respective properties or assets. Except
as set forth in the "GBB
27
Conflicts and Consents List," no consent of, approval of, notice to or filing
with any Governmental Entity having jurisdiction over any aspect of the business
or assets of GBB, and no consent of, approval of or notice to any other Person,
is required in connection with the execution and delivery by GBB of this
Agreement or the Agreement of Merger, or the consummation by GBB of the Merger
or the transactions contemplated hereby or thereby, except (i) the approval of
this Agreement and the transactions contemplated hereby by the shareholders of
GBB; (ii) such approvals as may be required by the SEC, the FRB, the FDIC and
the DFI; (iii) filing of the Agreement of Merger with the Secretary of State of
the State of California; and (iv) such approvals as may be required by NASD to
approve for inclusion on the Nasdaq National Market System the GBB Stock to be
issued in the Merger.
(b) Of Newco. The execution and delivery by Newco of this
--------
Agreement and the Agreement of Merger and, subject to the requisite approval of
the shareholder of Newco, the consummation of the transactions contemplated
thereby, will be duly and validly authorized by all necessary corporate action
on the part of Newco, and this Agreement and the Agreement of Merger will be,
upon due execution and delivery by the respective parties, a valid and binding
obligation of Newco enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, liquidation, receivership,
conservatorship, insolvency, moratorium or other similar laws affecting the
rights of creditors generally and by general equitable principles. Neither the
consummation of the transactions contemplated by this Agreement and the
Agreement of Merger, nor compliance by Newco with any of the provisions hereof
or thereof, will: (a) conflict with or result in a breach of any provision of
its Articles of Incorporation, or Bylaws; (b) constitute a breach of or result
in a default (or give rise to any rights of termination, cancellation or
acceleration, or any right to acquire any securities or assets) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
franchise, license, permit, agreement or other instrument or obligation to which
Newco is a party, or by which Newco or any of its properties or assets is bound:
(c) result in the creation or imposition of any Encumbrance on any of the
properties or assets of Newco; or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Newco or any of its properties
or assets. No consent of, approval of, notice to or filing with any Governmental
Entity having jurisdiction over any aspect of the business or assets of Newco,
and no consent of, approval of or notice to any other Person, is required in
connection with the execution and delivery by Newco of this Agreement or the
Agreement of Merger or the consummation by Newco of the transactions
contemplated hereby or thereby, except (i) the approval of the Agreement of
Merger and the transactions contemplated hereby by the shareholder and directors
of Newco, (ii) such approvals as may be required by the SEC, the FRB, the FDIC,
the DFI or any other Governmental Authority; and (iii) filing of the Agreement
of Merger with the Secretary of State of the State of California.
5.6 Subsidiaries. As of the date of this Agreement, GBB owns 100% of
------------
the outstanding stock of each of CNB, MPB and Newco. As of the date of this
Agreement, and except for its investments in the Banks, GBB Capital I and Newco,
GBB does not own, directly or indirectly (except as a pledgee pursuant to loans
or upon acquisition in satisfaction of debt previously contracted), the
outstanding stock or equity or other voting interest in any other corporation,
partnership, joint venture or other entity.
5.7 Brokers and Finders. Except for the obligation to ▇▇▇▇▇
-------------------
Financial, Inc., as set forth in a letter agreement dated July 30, 1997, a copy
of which has been delivered to PBC, GBB
28
is not a party to or obligated under any agreement with any broker or finder
relating to the transactions contemplated hereby, and neither the execution of
this Agreement nor the consummation of the transactions provided for herein will
result in any liability to any broker or finder.
5.8 Certain Material Changes. Except as specifically required,
------------------------
permitted or effected by this Agreement or as disclosed in any GBB Filings,
since June 30, 1997, there has not been, occurred or arisen any of the following
(whether or not in the ordinary course of business unless otherwise indicated):
(a) Any change in any of the assets, liabilities, permits,
methods of accounting or accounting practices, business, or manner or conducting
business, of GBB or its subsidiaries or any other event or development that has
had or may reasonably be expected to have a material adverse effect on the
assets, liabilities, permits, business, financial condition, results of
operations or prospects of GBB on a consolidated basis;
(b) Any damage, destruction or other casualty loss (whether or
not covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of GBB on a consolidated basis;
(c) Any amendment, modification or termination of any existing,
or entry into any new, material contract or permit that has had or may
reasonably be expected to have a material adverse effect on the assets,
liabilities, permits, business, financial condition, results of operations or
prospects of GBB on a consolidated basis; or
(d) Any disposition by GBB of an asset the lack of which has had
or may reasonably be expected to have a material adverse effect on the assets,
liabilities, permits, business, financial condition, results of operations or
prospects of GBB on a consolidated basis.
5.9 Licenses and Permits. GBB and each subsidiary of GBB have all
--------------------
material licenses and permits that are necessary for the conduct of their
respective businesses, and such licenses are in full force and effect, except
for any failure to be in full force and effect that would not, individually or
in the aggregate, have a material adverse effect on the business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
The respective properties, assets, operations and businesses of GBB and each
subsidiary of GBB are and have been maintained and conducted, in all material
respects, in compliance with all applicable licenses and permits. The
properties and operations of GBB and each subsidiary of GBB are and have been
maintained and conducted, in all material respects, in compliance with all
applicable laws and regulations.
5.10 Corporate Records. The minute books of GBB and its subsidiaries
-----------------
accurately reflect all material actions taken to this date by the respective
shareholders, boards of directors and committees of GBB and its subsidiaries and
contain true and complete copies of their respective Articles of Incorporation,
Bylaws and other charter documents, and all amendments thereto.
5.11 Accounting Records. GBB and its subsidiaries maintain accounting
------------------
records which fairly and validly reflect, in all material respects, their
transactions and accounting controls exist
29
sufficient to provide reasonable assurances that such transactions are, in all
material respects, (i) executed in accordance with their management's general or
specific authorization, and (ii) recorded as necessary to permit the preparation
of financial statements in conformity with generally accepted accounting
procedures. Such records, to the extent they contain important information
pertaining to GBB and its subsidiaries which is not easily and readily available
elsewhere, have been duplicated, and such duplicates are stored safely and
securely.
5.12 Facts Affecting Regulatory Approvals. To the best knowledge of
------------------------------------
GBB, there is no fact, event or condition applicable to GBB or any of its
subsidiaries which will, or reasonably could be expected to, adversely affect
the likelihood of securing the requisite approvals or consents of any
Governmental Entity to the Merger and transactions contemplated by this
Agreement.
5.13 Accounting and Tax Matters. To the best of GBB's knowledge, GBB
--------------------------
has not through the date hereof taken or agreed to take any action that would
prevent it from accounting for the business combination to be effected by the
Merger as a pooling-of-interests or would prevent the Merger from qualifying as
a tax-free reorganization under the Code.
5.14 Disclosure Documents and Applications. None of the information
-------------------------------------
supplied or to be supplied by or on behalf of GBB or any of its subsidiaries
("GBB Supplied Information") for inclusion in (a) the Registration Statement on
Form S-4 and the Joint Proxy Statement and Prospectus to be mailed to the
shareholders of PBC and GBB in connection with obtaining the approval of the
shareholders of PBC and GBB of this Agreement, the Merger and the other
transactions contemplated hereby, and (b) any other documents to be filed with
the SEC, the FRB, the FDIC, the DFI or any other Governmental Entity in
connection with the transactions contemplated in this Agreement, will, at the
respective times such documents are filed or become effective, or with respect
to the Joint Proxy Statement and Prospectus when mailed, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
5.15 Nasdaq Listing. As of the date hereof, GBB Stock is listed on
--------------
the Nasdaq National Market System.
5.16 Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by GBB and Newco hereby or in the GBB Lists
or Schedules hereto do not contain any untrue statement of material fact or omit
to state any material fact which is necessary under the circumstances under
which they were made to prevent the statements contained herein or in such
schedules from being misleading.
30
ARTICLE VI
COVENANTS OF PBC
----------------
PENDING EFFECTIVE TIME OF THE MERGER
------------------------------------
PBC covenants and agrees with GBB and Newco as follows:
6.1 Limitation on PBC's Conduct Prior to Effective Time of the
----------------------------------------------------------
Merger. Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and regulation
generally applicable to California state chartered banks, PBC agrees to conduct
its business in the ordinary course in substantially the manner heretofore
conducted and in accordance with sound banking practices, and PBC shall not,
without the prior written consent of GBB:
(a) issue, sell or grant any PBC Stock (except pursuant to the
exercise of PBC Options outstanding as of the date hereof), any other securities
(including long term debt) of PBC, or any rights, options or securities to
acquire any PBC Stock, or any other securities (including long term debt) of
PBC;
(b) declare, set aside or pay any dividend or make any other
distribution upon or split, combine or reclassify any shares of capital stock or
other securities of PBC, provided, however, that subject to Section 6.11, PBC
may pay to its shareholders its regular cash dividend in amounts consistent with
past practices but in no event in an aggregate amount greater than 65% of net
income, exclusive of Transaction Expenses, for the period beginning January 1,
1997 through the earlier of (i) the last day of the month of the month prior to
Closing, or (ii) December 31, 1997;
(c) purchase, redeem or otherwise acquire any capital stock or
other securities of PBC or any rights, options, or securities to acquire any
capital stock or other securities of PBC;
(d) except as may be required to effect the transactions
contemplated herein, amend its Articles of Incorporation or Bylaws;
(e) grant any general or uniform increase in the rate of pay of
employees or employee benefits;
(f) grant any increase in salary, incentive compensation or
employee benefits or pay any bonus to any Person or voluntarily accelerate the
vesting of any employee benefits, except for salary increases of not more than
5% granted in the ordinary course of business and consistent with past practices
or as required by an existing written employment agreement or pursuant to the
1997 PBC Bonus Plan as approved by the PBC Board of Directors; provided,
however, that payment of the Transaction Expenses shall not be considered in the
determination of bonus payments pursuant to the 1997 PBC Bonus Plan;
(g) make any capital expenditure or commitments with respect
thereto in excess of $25,000 in the aggregate, except for ordinary repairs,
renewals and replacements;
31
(h) compromise or otherwise settle or adjust any assertion or
claim of a deficiency in taxes (or interest thereon or penalties in connection
therewith), extend the statute of limitations with any tax authority or file any
pleading in court in any tax litigation or any appeal from an asserted
deficiency, or file or amend any federal, foreign, state or local tax return, or
make any tax election;
(i) grant, renew or commit to grant or renew any extension of
credit if such extension of credit, together with all other credit then
outstanding to the same Person and all Affiliated Persons, would exceed $100,000
on an unsecured basis, or $750,000 if secured by a lien on real estate or cash
(consent shall be deemed granted if within two Business Days of written notice
delivered to GBB's Chief Credit Officer, written notice of objection is not
received by PBC);
(j) change its tax or accounting policies and procedures or any
method or period of accounting unless required by generally accepted accounting
principles or a Governmental Entity;
(k) [reserved];
(l) close any offices at which business is conducted or open any
new offices;
(m) adopt or enter into any new employment agreement or other
employee benefit plan or arrangement or amend or modify any employment agreement
or employee benefit plan or arrangement of any such type except for such
amendments as are required by law;
(n) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any Competing Transaction (as such term is defined
below), or negotiate with any person in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or any other
representative retained by it or any of its Affiliates to take any such action,
and PBC shall promptly notify GBB (orally and in writing) of all of the relevant
details relating to all inquiries and proposals which it may receive relating to
any of such matters. For purposes of this Agreement, "Competing Transaction"
shall mean any of the following involving PBC: any merger, consolidation, share
exchange or other business combination; a sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets of PBC representing ten percent
(10%) or more of the assets of PBC; a sale of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital stock),
representing ten percent (10%) or more of the voting power of PBC; a tender
offer or exchange offer for at least ten percent (10%) of the outstanding
shares; a solicitation of proxies in opposition to approval of the Merger by
PBC's shareholders; or a public announcement of an unsolicited bona fide
proposal, plan, or intention to do any of the foregoing. Notwithstanding any
other provision in this Section 6.1(n) or elsewhere in this Agreement, the
obligations of PBC in this Agreement are subject to the continuing fiduciary
duties of the Board of Directors of PBC to the shareholders of PBC. In the event
the Board of Directors of PBC receives a bona fide offer for a Competing
Transaction with
32
another entity, and reasonably determines, upon advice of counsel, that as a
result of such offer, any duty to act or to refrain from doing any act pursuant
to this Agreement is inconsistent with the continuing fiduciary duties of said
Board of Directors to the shareholders of PBC, such failure to act or refrain
from doing any act shall not constitute the failure of any condition, breach of
any covenant or otherwise constitute any breach of this Agreement, except that
any such failure to act or refrain from doing any act shall entitle GBB to
terminate this Agreement pursuant to Section 13.1(h) hereof, but in no event
shall this sentence or the previous sentence operate to excuse or modify the
obligations of PBC under Section 14.1 hereof;
(o) change any of PBC's basic policies and practices with respect
to liquidity management and cash flow planning, marketing, deposit origination,
lending, budgeting, profit and tax planning, personnel practices or any other
material aspect of PBC's business or operations, except such changes as may be
required in the opinion of PBC's management to respond to economic or market
conditions or as may be required by any Governmental Entity;
(p) grant any Person a power of attorney or similar authority;
(q) make any investment by purchase of stock or securities
(including an Investment Security), contributions to capital, property transfers
or otherwise in any other Person, except for federal funds or obligations of the
United States Treasury or an agency of the United States Government the
obligations of which are entitled to or implied to have the full faith and
credit of the United States government and which have an original maturity not
in excess of one year, or bank qualified investment grade municipal bonds, in
any case, in the ordinary course of business consistent with past practices and
which are not designated as trading;
(r) amend or modify any Scheduled Contract or enter into any
agreement or contract that would be a Scheduled Contract under Section 4.16
(consent shall be deemed granted if within two Business Days of written notice
delivered to GBB's designee, written notice of objection is not received by
PBC);
(s) sell, transfer, mortgage, encumber or otherwise dispose of
any assets or release or waive any claim, except in the ordinary course of
business and consistent with past practices;
(t) knowingly take any action which would or is reasonably likely
to (i) adversely affect the ability of GBB or PBC to obtain any necessary
approval of any Governmental Entity required for the transactions contemplated
hereby; (ii) adversely affect PBC's ability to perform its covenants and
agreements under this Agreement; or (iii) result in any of the conditions to the
performance of GBB's or PBC's obligations hereunder, as set forth in Articles IX
or X herein not being satisfied;
(u) [reserved];
(v) reclassify any Investment Security from hold-to-maturity or
available for sale to trading;
33
(w) sell any security other than in the ordinary course of
business, or engage in gains trading;
(x) take title to any real property without conducting prior
thereto an environmental investigation, which investigation shall disclose the
absence of any suspected environmental contamination;
(y) agree or make any commitment to take any actions prohibited
by this Section 6.1;
(z) knowingly take or cause to be taken any action which would
disqualify the Merger as a "reorganization" within the meaning of Section 368 of
the Code or prevent GBB from accounting for the business combination to be
effected by the Merger as a pooling-of-interests;
(aa) notwithstanding any recoveries received with respect to
loans previously charged off, reduce the allowance for loan and lease losses,
except as a result of chargeoffs;
(bb) settle any claim, action or proceeding involving any
material liability for monetary damages or enter into any settlement agreement
containing material obligations;
(cc) make, acquire a participation in, or reacquire an interest
in a participation sold of, any loan that is not in compliance with its normal
credit underwriting standards, policies and procedures as in effect on June 30,
1997; or renew, extend the maturity of, or alter any of the material terms of
any such loan for a period of greater than six months;
(dd) incur any indebtedness for borrowed money or assume,
guaranty, endorse or otherwise as an accommodation become responsible for the
obligations of any other person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or (ii)
short-term borrowings made at prevailing market rates and terms; or
(ee) permit PREC to conduct any business or activities, other
than serving as trustee under deeds of trust for loans originated by PBC.
6.2 Affirmative Conduct of PBC Prior to Effective Time of the Merger.
----------------------------------------------------------------
Between the date hereof and the Effective Time of the Merger, PBC shall:
(a) use its commercially reasonable efforts consistent with this
Agreement to maintain and preserve intact its present business organization and
to maintain and preserve its relationships and goodwill with account holders,
borrowers, employees and others having business relationships with PBC;
(b) use its commercially reasonable efforts to keep in full force
and effect all of the existing material permits and licenses of PBC;
34
(c) use its commercially reasonable efforts to maintain insurance
coverage at least equal to that now in effect on all properties for which it is
responsible and on its business operations;
(d) perform its material contractual obligations and not become
in material default on any such obligations;
(e) duly observe and conform in all material respects to all
lawful requirements applicable to its business;
(f) maintain its assets and properties in good condition and
repair, normal wear and tear excepted;
(g) promptly upon learning of such information, advise GBB in
writing of any event or any other transaction within its knowledge whereby any
Person or Related Group of Persons acquires, directly or indirectly, record or
beneficial ownership or control (as defined in Rule 13d-3 promulgated by the SEC
under the Exchange Act) of five percent (5%) or more of the outstanding PBC
Stock prior to the record date fixed for the PBC Shareholders' Meeting or any
adjourned meeting thereof to approve this Agreement and the transactions
contemplated herein;
(h) promptly notify GBB regarding receipt from any tax authority
of any notification of the commencement of an audit, any request to extend the
statute of limitations, any statutory notice of deficiency, any revenue agent's
report, any notice of proposed assessment, or any other similar notification of
potential adjustments to the tax liabilities of PBC, or any actual or threatened
collection enforcement activity by any tax authority with respect to tax
liabilities of PBC;
(i) make available to GBB monthly unaudited balance sheets and
income statements of PBC within twenty-five (25) days after the close of each
calendar month;
(j) not later than the 30th day of each calendar month, amend or
supplement the PBC Lists prepared and delivered pursuant to Article IV to ensure
that the information set forth in the PBC Lists accurately reflects the then-
current status of PBC. PBC shall further amend or supplement the PBC Lists as
of the Closing Date if necessary to reflect any additional information that
needs to be included in the PBC Lists;
(k) use its commercially reasonable efforts to obtain any third
party consent with respect to any contract, agreement, lease, license,
arrangement, permit or release that is material to the business of PBC or that
is contemplated in this Agreement as required in connection with the Merger;
(l) maintain an allowance for loan and lease losses consistent
with practices and methodology as in effect on the date of the execution of this
Agreement; and
(m) furnish to GBB, as soon as practicable, and in any event
within 15 days after it is prepared, a copy of any report submitted to the PBC
Board of Directors or any committee thereof, provided, however, that PBC need
not furnish to GBB communications of PBC's legal
35
counsel regarding PBC's rights and obligations under this Agreement or the
transactions contemplated hereby, or books, records and documents covered by
confidentiality agreements or the attorney-client privilege, or which are
attorneys' work product.
6.3 Access to Information.
---------------------
(a) PBC will afford, upon reasonable notice, to GBB and its
representatives, counsel, accountants, agents and employees reasonable access
during normal business hours to all of its business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
GBB and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, business, assets and
properties of PBC and the condition thereof and to update such examination at
such intervals as GBB shall deem appropriate. Such examination shall be
conducted in cooperation with the officers of PBC and in such a manner as to
minimize any disruption of, or interference with, the normal business operations
of PBC. Upon the request of GBB, PBC will request C&L to provide reasonable
access to representatives of C&L working on behalf of GBB to auditors' work
papers with respect to the business and properties of PBC, including tax accrual
work papers prepared for PBC during the preceding sixty (60) months, other than
(a) books, records and documents covered by the attorney-client privilege, or
that are attorneys' work product, and (b) books, records and documents that PBC
is legally obligated to keep confidential. No examination or review conducted
under this section shall constitute a waiver or relinquishment on the part of
GBB of the right to rely upon the representations and warranties made by PBC
herein; provided, that GBB shall disclose to PBC any fact or circumstance it may
discover which GBB believes renders any representation or warranty made by PBC
hereunder incorrect in any respect. GBB covenants and agrees that it, its
subsidiaries, and their respective representatives, counsel, accountants, agents
and employees will hold in strict confidence all documents and information
concerning PBC so obtained from any of them so obtained (except to the extent
that such documents or information are a matter of public record or require
disclosure in the Joint Proxy Statement and Prospectus or any of the public
information of any applications required to be filed with any Governmental
Entity to obtain the approvals and consents required to effect the transactions
contemplated hereby), and if the transactions contemplated herein are not
consummated, such confidence shall be maintained and all such documents shall be
returned to PBC.
(b) A representative of GBB, selected by GBB in its sole
discretion, shall be authorized and permitted to review each loan, lease, or
other credit funded or renewed by PBC after the date hereof, and all information
associated with such loan, lease or other credit within three Business Days of
such funding or renewal, such review to take place, if possible, on PBC's
premises.
(c) A representative of GBB, selected by GBB in its sole
discretion, shall be permitted by PBC to attend all regular and special Board of
Directors' and committee meetings of PBC from the date hereof until the
Effective Time of the Merger; provided, however, that the attendance of such
representative shall not be permitted at any meeting, or portion thereof, for
the sole purpose of discussing the transactions contemplated by this Agreement
or the obligations of PBC under this Agreement.
6.4 Review by Accountants. Promptly upon request of GBB, PBC will
---------------------
request C&L to permit representatives of C&L working on behalf of GBB to review
and examine the work
36
papers of C&L relating to PBC and the Financial Statements of PBC and to review
and examine the work papers of C&L relating to any future completed audits or
completed reviews of PBC.
6.5 Filings. PBC agrees that through the Effective Time of the
-------
Merger, each of its reports, registrations, statements and other filings
required to be filed with any applicable Governmental Entity will comply in all
material respects with all the applicable statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration,
statement or other filing that is intended to present the financial position of
the entity to which it relates will fairly present the financial position of
such entity and will be prepared in accordance with generally accepted
accounting principles or applicable banking regulations consistently applied
during the periods involved.
6.6 Notices; Reports. PBC will promptly notify GBB of any event of
----------------
which PBC obtains knowledge which has had or may have a materially adverse
effect on the financial condition, operations, business or prospects of PBC or
in the event that PBC determines that it is unable to fulfill any of the
conditions to the performance of GBB's and Newco's obligations hereunder, as set
forth in Articles IX or XI herein, and PBC will furnish GBB (i) as soon as
available, and in any event within one (1) Business Day after it is mailed or
delivered to the Board of Directors of PBC or committees thereof, any report by
PBC for submission to the Board of Directors of PBC or committees thereof, (ii)
as soon as available, all proxy statements, information statements, financial
statements, reports, letters and communications sent by PBC to its shareholders
or other security holders, and all reports filed by PBC with the FRB, the FDIC
or the DFI, and (iii) such other existing reports as GBB may reasonably request
relating to PBC.
6.7 PBC Shareholders' Meeting. Promptly after the execution of this
-------------------------
Agreement, PBC will take action necessary in accordance with applicable law and
its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby so as to permit the consummation of the transactions
contemplated hereby. The Board of Directors of PBC shall, subject to its
fiduciary duties, recommend that its shareholders approve this Agreement and the
transactions contemplated hereby, and the Board of Directors of PBC shall,
subject to its fiduciary duties, use its best efforts to obtain the affirmative
vote of the holders of the largest possible percentage of the outstanding PBC
Stock to approve this Agreement and the transactions contemplated hereby.
6.8 Certain Loans and Other Extensions of Credit. PBC will promptly
--------------------------------------------
inform GBB of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any bank regulatory authority
or by any unit of PBC or by any other Person as "Criticized," "Specially
Mentioned," "Substandard," "Doubtful," "Loss" or any comparable classification
("Classified Credits"). PBC will furnish GBB, as soon as practicable, and in
any event within 20 days after the end of each calendar month, schedules
including the following: (a) Classified Credits (including with respect to each
credit its classification category and the originating unit); (b) nonaccrual
credits (including the originating unit); (c) accrual exception credits that are
delinquent 90 or more days and have not been placed on nonaccrual status
(including its originating unit); (d)
37
credits delinquent as to payment of principal or interest (including its
originating unit), including an aging into current-to-29, 30-59, 60-89, and 90+
day categories; (e) participating loans and leases, stating, with respect to
each, whether it is purchased or sold and the originating unit; (f) loans or
leases (including any commitments) by PBC to any PBC director, officer at or
above the senior vice president level, or shareholder holding ten percent (10%)
or more of the capital stock of PBC, including with respect to each such loan or
lease the identity and, to the knowledge of PBC, the relation of the borrower to
PBC, and the outstanding and undrawn amounts; (g) letters of credit (including
the originating unit); (h) loans or leases wholly or partially charged off
during the previous month (including with respect to each loan or lease, the
originating amount, the write-off amount and its originating unit); and (i)
other real estate or assets acquired in satisfaction of debt.
6.9 Applications. Subject to Section 7.5, PBC will promptly prepare
------------
or cause to be prepared the portions of the Joint Proxy Statement and Prospectus
as it pertains to PBC and any other applications necessary to consummate the
transactions contemplated hereby, and further agrees to provide any information
requested by GBB for the preparation of any applications necessary to consummate
the transactions contemplated hereby. PBC shall afford GBB a reasonable
opportunity to review the portions of the Joint Proxy Statement and Prospectus
pertaining to PBC and all such applications and all amendments and supplements
thereto before the filing thereof. PBC covenants and agrees that, with respect
to the information relating to PBC, the Joint Proxy Statement and Prospectus
will comply in all material respects with the provisions of applicable law, and
will not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. PBC will use its commercially reasonable efforts to obtain all
regulatory approvals or consents necessary to effect the Merger and the
transactions contemplated herein.
6.10 Affiliates and Five Percent Shareholder Agreements. Concurrently
--------------------------------------------------
with the execution of this Agreement, (a) PBC shall deliver to GBB a letter
identifying all persons who are then "affiliates" of PBC for purposes of Rule
145 under the Securities Act and (b) PBC shall advise the persons identified in
such letter of the resale restrictions imposed by applicable securities laws and
shall use reasonable efforts to obtain from each person identified in such
letter a written agreement substantially in the form attached hereto as Exhibit
-------
B. PBC shall use reasonable efforts to obtain from any person who becomes an
-
affiliate of PBC after PBC's delivery of the letter referred to above, and on or
prior to the date of the PBC Shareholders' Meeting to approve this Agreement, a
written agreement substantially in the form attached as Exhibit B hereto as soon
---------
as practicable after obtaining such status. At least 10 Business Days prior to
the issuance of the opinion to be provided for in Section 9.6, PBC shall use its
commercially reasonable efforts to cause each person or group of persons who
holds more than five percent (5%) of the PBC Stock (regardless of whether such
person is an "affiliate" under Rule 145) to deliver to Manatt, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, LLP a letter stating that such shareholder(s) has no present plan or
intention to dispose of GBB Stock that the shareholder(s) will receive in the
Merger, and committing that such shareholder(s) will not dispose of such GBB
Stock in a manner as to cause a violation of the "continuity of shareholder
interest" requirements of Treasury Regulation 1.368-1.
6.11 Coordination of Dividends. PBC shall coordinate with GBB the
-------------------------
declaration of any dividends that may be allowed pursuant to Section 6.1(b)
hereof, and the record date and the
38
payment dates relating thereto, it being the intention of the parties that
holders of PBC Stock shall not receive two dividends, or fail to receive one
dividend, for any applicable dividend period with respect to their shares of PBC
Stock and any shares of GBB Stock any such holder will receive in exchange
therefor in the Merger.
6.12 D&O Coverage. In the event that GBB is unable to have PBC's
------------
directors and officers added to GBB's directors' and officers' liability
insurance policy pursuant to Section 7.2(f) hereof and upon GBB's request, PBC
shall use commercially reasonable efforts to obtain (i) coverage for a period of
at least 36 months following the Effective Time of the Merger for the directors
and officers of PBC under a directors' and officers' liability insurance policy
which is no less protective in terms of coverage or limitations then now
possessed by PBC covering acts or omissions occurring prior to the Effective
Time of the Merger and actions related to this Agreement, and (ii) coverage for
a period of at least 36 months following the Effective Time of the Merger under
a bankers' blanket bond which is no less protective in terms of coverage or
limitations then now possessed by PBC covering acts or omissions occurring prior
to the Effective Time of the Merger and actions related to this Agreement.
ARTICLE VII
COVENANTS OF GBB
----------------
PENDING EFFECTIVE TIME OF THE MERGER
------------------------------------
GBB covenants and agrees with PBC as follows:
7.1 Limitation on GBB's Conduct Prior to Effective Time of the
----------------------------------------------------------
Merger. Between the date hereof and the Effective Time of the Merger, except as
------
contemplated by this Agreement and subject to requirements of law and regulation
generally applicable to bank holding companies and banks, and each of GBB and
its subsidiaries shall not, without prior written consent of PBC (which consent
shall not be unreasonably withheld and which consent (except with respect to
subpara graphs (f) of this Section 7.1) shall be deemed granted if within five
(5) Business Days of PBC's receipt of written notice of a request for prior
written consent, written notice of objection is not received by GBB):
(a) take any action which would or is reasonably likely to (i)
adversely affect the ability of GBB or Newco to obtain any necessary approvals
of any Governmental Entity required for the transactions contemplated hereby;
(ii) adversely affect GBB's or Newco's ability to perform its covenants and
agreements under this Agreement; or (iii) result in any of the conditions to the
performance of GBB's or Newco's obligations hereunder, as set forth in Articles
IX or XI herein not being satisfied;
(b) take or cause to be taken any action which would disqualify
the Merger as a "reorganization" within the meaning of Section 368 of the Code
or prevent GBB from accounting for the business combination to be effected by
the Merger as a pooling-of-interests;
39
(c) amend its articles of incorporation in any respect which
would materially and adversely affect the rights and privileges attendant to the
GBB Stock; or
(d) agree or make any commitment to take any actions prohibited
by this Section 7.1.
7.2 Affirmative Conduct of GBB and Subsidiaries Prior to Effective
--------------------------------------------------------------
Time of the Merger. Between the date hereof and the Effective Time of the
------------------
Merger, GBB shall:
(a) use commercially reasonable efforts consistent with this
Agreement, and cause each of its subsidiaries to use its commercially reasonable
efforts consistent with this Agreement, to maintain and preserve intact their
respective present business organizations and to maintain and preserve the
relationships and goodwill with account holders, borrowers, employees and others
having business relationships with GBB or any subsidiary of GBB;
(b) duly observe and conform in all material respects to all
lawful requirements applicable to the business of GBB or any subsidiary of GBB;
(c) make available to PBC monthly unaudited consolidated balance
sheets and consolidated income statements of GBB within twenty-five (25) days
after the close of each calendar month;
(d) use its commercially reasonable efforts to obtain any third
party consent with respect to any contract, agreement, lease, license,
arrangement, permit or release that is material to the business of GBB on a
consolidated basis or that is contemplated in this Agreement as required in
connection with the Merger;
(e) not later than the 20th day of each calendar month, amend or
supplement the GBB Lists prepared and delivered pursuant to Article V to ensure
that the information set forth in the GBB Lists accurately reflects the then-
current status of GBB and its subsidiaries. GBB shall further amend or
supplement the GBB Lists as of the Closing Date if necessary to reflect any
additional information that needs to be included in the GBB Lists; and
(f) use its commercially reasonable efforts to have PBC's
directors and officers added to GBB's directors' and officers' liability
insurance policy, providing for coverage for a period of at least 36 months
following the Effective Time of the Merger and covering acts or omissions
occurring prior to the Effective Time of the Merger and actions related to this
Agreement.
7.3 Access to Information. Upon reasonable request by PBC, GBB shall
---------------------
(i) make its Chief Operating Officer/Chief Financial Officer and Controller
available to discuss with PBC and its representatives GBB's operations, (ii)
shall provide PBC with written information which is (a) similar to the written
information that PBC reviewed in connection with this Agreement, and (b) related
to GBB's business condition, operations and prospects; and (iii) make available
to PBC the minutes of meetings of the Board of Directors of GBB (except to the
extent that such minutes contain communications of GBB's legal counsel regarding
GBB's rights and obligations under this Agreement or the transactions
contemplated hereby, or matters covered by confidentiality
40
agreements or the attorney-client privilege or which contain attorney's work
product). No examination or review conducted under this section shall constitute
a waiver or relinquishment on the part of PBC of the right to rely upon the
representations and warranties made by GBB herein; provided, that PBC shall
disclose to GBB any fact or circumstance it may discover which PBC believes
renders any representation or warranty made by GBB hereunder incorrect in any
respect. PBC covenants and agrees that it and its representatives, counsel,
accountants, agents and employees will hold in strict confidence all documents
and information concerning GBB so obtained (except to the extent that such
documents or information are a matter of public record or require disclosure in
the Joint Proxy Statement and Prospectus or any of the public information of any
applications required to be filed with any Governmental Entity to obtain the
approvals and consents required to effect the transactions contemplated hereby),
and if the transactions contemplated herein are not consummated, such confidence
shall be maintained and all such documents shall be returned to GBB.
7.4 Filings. GBB agrees that through the Effective Time of the
-------
Merger, each of its reports, registrations, statements and other filings
required to be filed with any applicable Governmental Entity will comply in all
material respects with all the applicable statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration,
statement or other filing that is intended to present the financial position of
the entities or entity to which it relates will fairly present the financial
position of such entities or entity and will be prepared in accordance with
generally accepted accounting principles or applicable banking regulations
consistently applied during the periods involved.
7.5 Applications. GBB will promptly prepare and file or cause to be
------------
prepared and filed (i) an application for approval of the Merger with the FRB;
(ii) an application for approval of the Merger with the FDIC; (iii) an
application for approval of the Merger with the DFI; (iv) in conjunction with
PBC, the Registration Statement on Form S-4 and the Joint Proxy Statement and
Prospectus as it pertains to GBB; and (v) any other applications necessary to
consummate the transactions contemplated hereby. GBB shall afford PBC a
reasonable opportunity to review the Joint Proxy Statement and Prospectus and
all such applications and all amendments and supplements thereto before the
filing thereof. GBB covenants and agrees that the Registration Statement on
Form S-4 and the Joint Proxy Statement and Prospectus and all applications to
the appropriate regulatory agencies for approval or consent to the Merger, with
respect to information relating to GBB or its subsidiaries, will comply in all
material respects with the provisions of applicable law, and will not contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. GBB will use its commercially reasonable efforts to obtain all
regulatory approvals or consents necessary to effect the Merger.
7.6 Blue Sky. GBB agrees to use commercially reasonable efforts to
--------
have the shares of GBB Stock to be issued in connection with the Merger
qualified or registered for offer and sale, to the extent required, under the
securities laws of each jurisdiction in which shareholders of PBC reside.
41
7.7 GBB Shareholders' Meeting. Promptly after the execution of this
-------------------------
Agreement, GBB will take action necessary in accordance with applicable law and
its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby so as to permit the consummation of the transactions
contemplated hereby. The Board of Directors of GBB shall, subject to its
fiduciary duties, recommend that its shareholders approve this Agreement and the
transactions contemplated hereby, and the Board of Directors of GBB shall,
subject to its fiduciary duties, use its best efforts to obtain the affirmative
vote of the holders of the largest possible percentage of the outstanding GBB
Stock to approve this Agreement and the transactions contemplated hereby.
7.8 Notices; Reports. GBB will promptly notify PBC of any event of
----------------
which GBB obtains knowledge which has had or may have a material adverse affect
on the financial condition, operations, business or prospects of GBB on a
consolidated basis or in the event that GBB determines that it is unable to
fulfill any of the conditions to the performance of PBC's obligations hereunder,
as set forth in Articles IX or X herein, and GBB will furnish PBC (i) as soon as
available, and in any event within ten (10) days after it is prepared, any
report by GBB for submission to the Board of Directors of GBB or committees
thereof, (ii) as soon as available, all proxy statements, information
statements, financial statements, reports, letters and communications sent by
GBB to its shareholders or other security holders, and all reports filed by GBB
with the SEC, the FRB, the FDIC, the DFI, the O.C., and (iii) such other
existing reports as PBC may reasonably request relating to GBB.
7.9 Removal of Conditions. In the event of the imposition of a
---------------------
condition to any regulatory approvals which GBB deems to materially adversely
affect it or to be materially burdensome as provided in Section 11.4 hereof, GBB
shall use its commercially reasonable efforts for purposes of obtaining the
removal of such condition.
7.10 Stock Options.
-------------
(a) At and as of the Effective Time of the Merger, GBB shall
assume each and every outstanding option to purchase shares of PBC Stock ("PBC
Stock Option") and all obligations of PBC under the PBC Stock Option Plans. Each
and every PBC Stock Option so assumed by GBB under this Agreement shall continue
to have, and be subject to, the same terms and conditions set forth in the PBC
Stock Option Plans and in the other documents governing such PBC Stock Option
immediately prior to the Effective Time of the Merger, except that: (i) such PBC
Stock Option shall be exercisable for that number of whole shares of GBB Stock
equal to the product of (A) the number of shares of PBC Stock that were
purchasable under such PBC Stock Option immediately prior to the Effective Time
of the Merger multiplied by (B) the Conversion Ratio, rounded down to the
nearest whole number of shares of GBB Stock; and (ii) the per share exercise
price for the shares of GBB Stock issuable upon exercise of such PBC Stock
Option shall be equal to the quotient determined by dividing (A) the exercise
price per share of PBC Stock at which such PBC Stock Option was exercisable
immediately prior to the Effective Time of the Merger by (B) the Conversion
Ratio. Prior to the Effective Time of the Merger, GBB shall issue to each holder
of an outstanding PBC Stock Option a document evidencing the assumption of such
PBC Stock Option by GBB pursuant to this Section 7.10.
42
(b) GBB shall comply with the terms of the PBC Stock Option Plans
and insure, to the extent required by, and subject to the provisions of, such
Plans, that PBC Stock Options which qualify as incentive stock options prior to
the Effective Time of the Merger qualify as incentive stock options of GBB after
the Effective Time of the Merger.
(c) At or prior to the Effective Time of the Merger, GBB shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of GBB Stock for delivery upon exercise of GBB Stock Options assumed
by it in accordance with this Section 7.10.
ARTICLE VIII
ADDITIONAL COVENANTS
--------------------
The parties hereto hereby mutually covenant and agree with each other
as follows:
8.1 Best Efforts. Subject to the terms and conditions of this
------------
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement as promptly as practical.
8.2 Public Announcements. No press release or other public
--------------------
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby shall be made by GBB or PBC unless the other party shall
have provided its prior consent to the form and substance thereof; provided,
however, that nothing herein shall be deemed to prohibit any party hereto from
making any disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations imposed by law.
8.3 Appointment of Directors. GBB agrees to take all necessary
------------------------
action including, if necessary, increasing the authorized number of its
directors, to appoint ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the Board of Directors of GBB effective
at and after the Effective Time of the Merger.
PBC agrees to take all necessary action including, if necessary,
increasing the authorized number of its directors, to appoint ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ to the Board of Directors of PBC, effective at and after the
Effective Time of the Merger.
8.4 Environmental Assessment and Remediation. GBB may cause to be
----------------------------------------
prepared at GBB's sole cost and expense within 45 days of the date of this
Agreement one or more phase I environmental investigations with respect to the
Real Property set forth on the PBC Real Property List. In the event any such
phase I environmental investigation report, or any such report which PBC has
already obtained on any of the Real Property set forth on PBC's Real Property
List, discloses facts which, in the sole discretion of GBB, warrant further
investigation, GBB shall provide written notice to PBC, and PBC shall be
required to cause to be completed within 60 days of such written notice, at the
sole cost and expense of GBB, a phase II environmental investigation and report
with respect to such property. The consultant engaged by PBC to conduct such
investigation and provide such report shall be acceptable to GBB. GBB shall
have ten days from the receipt of such investigation report to object thereto,
which objection shall be by written notice. In the event of any such
43
objection, GBB shall engage an environmental consultant satisfactory to PBC who
shall provide an estimate of the cost of taking any remedial action recommended
or suggested in such phase II environmental investigation report, or which is
required by law, or which is determined to be prudent by GBB, in its sole
discretion, and, unless the estimated cost of such Remediation is in excess of
$100,000 or is not reasonably determinable by such consultant (and written
notice thereof provided by PBC to GBB) PBC shall immediately commence such
Remediation, all at the sole cost and expense of PBC. In the event such
environmental consultant determines that the estimated cost of such remediation
is in excess of $100,000 or is not reasonably determinable, GBB shall have the
right to terminate the Agreement pursuant to Section 13.1(i) hereof before the
expiration of 21 days from the date of such written notice.
GBB agrees to keep confidential and not to disclose any nonpublic
information obtained in the course of such environmental investigation relating
to environmental contamination or suspected contamination of any property on the
PBC Real Property List, except as required by law.
ARTICLE IX
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
The obligations of each of the parties hereto to consummate the
transactions contemplated herein are subject to the satisfaction, on or before
the Closing Date, of the following conditions:
9.1 Shareholder Approval. The Agreement and the transactions
--------------------
contemplated hereby shall have received all requisite approvals of the
shareholders of GBB and PBC.
9.2 No Judgments or Orders. No judgment, decree, injunction, order
----------------------
or proceeding shall be outstanding or threatened by any Governmental Entity
which prohibits or restricts the effectuation of, or threatens to invalidate or
set aside, the Merger substantially in the form contemplated by this Agreement,
unless counsel to the party against whom such action or proceeding was
instituted or threatened renders to the other parties hereto a favorable opinion
that such judgment, decree, injunction, order or proceeding is without merit.
9.3 Regulatory Approvals. To the extent required by applicable law
--------------------
or regulation, all approvals or consents of any Governmental Entity, including,
without limitation, those of the FDIC, the FRB and the DFI shall have been
obtained or granted for the Merger and the transactions contemplated hereby and
the applicable waiting period under all laws shall have expired. All other
statutory or regulatory requirements for the valid completion of the
transactions contemplated hereby shall have been satisfied.
9.4 Securities Laws. The Registration Statement on Form S-4 shall
---------------
have been declared effective by the SEC and shall not be the subject of any stop
order or proceedings seeking or threatening a stop order. GBB shall have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the GBB Stock to consummate the Merger.
44
9.5 Listing. The GBB Stock issuable in the Merger shall have been
-------
included for listing on the Nasdaq National Market System.
9.6 Tax Opinions. GBB and PBC shall have received from Manatt,
------------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP an opinion reasonably satisfactory to GBB and PBC to the
effect that the Merger shall not result in the recognition of gain or loss for
federal income tax purposes to GBB or PBC, nor shall the issuance of the GBB
Stock result in the recognition of gain or loss by the holders of PBC Stock who
receive such stock in connection with the Merger, dated prior to the date the
Joint Proxy Statement and Prospectus is first mailed to the shareholders of PBC
and GBB and such opinions shall not have been withdrawn or modified in any
material respect.
9.7 Pooling of Interests. Prior to the Effective Time of the
--------------------
Merger, C&L shall have delivered a written opinion to GBB that the Merger will
qualify for pooling-of-interests accounting treatment. In making its
determination that the Merger will qualify for such treatment, C&L shall be
entitled to assume that cash will be paid with respect to all shares held of
record by any holder of Dissenting Shares.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PBC
----------------------------------------------
All of the obligations of PBC to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by PBC:
10.1 Legal Opinion. PBC shall have received the opinion of Manatt,
-------------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, attorneys for GBB and Newco, dated as of the Closing
Date, and in form and substance satisfactory to the counsel of PBC, to the
effect that: (i) each of GBB and Newco is a corporation validly existing under
the laws of its jurisdiction of incorporation with full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby; (ii) all corporate proceedings on the part of GBB and Newco
necessary to be taken in connection with the Merger in order to make the same
effective have been duly and validly taken; (iv) this Agreement has been duly
and validly authorized, executed and delivered on behalf of GBB and Newco and
constitutes (subject to standard exceptions of enforceability arising from the
bankruptcy laws and rules of equity) a valid and binding agreement of each of
GBB and Newco; and (v) the shares of GBB Stock to be issued in the Merger will,
when issued, be duly authorized, validly issued, fully paid and nonassessable.
10.2 Representations and Warranties; Performance of Covenants. All
--------------------------------------------------------
the covenants, terms and conditions of this Agreement to be complied with and
performed by GBB and Newco on or before the Closing Date shall have been
complied with and performed in all material respects. Each of the
representations and warranties of GBB contained in Article V hereof shall have
been true and correct in all material respects (except that where any statement
in a representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all
45
respects) on and as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date or for changes
expressly contemplated by this Agreement) on and as of the Closing Date, with
the same effect as though such representations and warranties had been made on
and as of the Closing Date. It is understood and acknowledged that the
representations being made on and as of the Closing Date shall be made without
giving effect to any update with respect to the GBB Lists in accordance with
Section 7.2(e).
10.3 Authorization of Merger. All actions necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement by GBB and Newco and the
Agreement of Merger by Newco and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by the
respective Boards of Directors and shareholders of GBB and Newco, as required by
applicable law, and Newco shall have full power and right to merge pursuant to
the Agreement of Merger.
10.4 Absence of Certain Changes. Between the date of this Agreement
--------------------------
and the Effective Time of the Merger, there shall not have occurred any event
that has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, results of operations or prospects of GBB
on a consolidated basis, whether or not such event, change or effect is
reflected in the GBB Lists as amended or supplemented after the date of this
Agreement.
10.5 Officers' Certificate. There shall have been delivered to PBC on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of GBB certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 10.2, 10.3 and 10.4.
10.6 Fairness Opinion. PBC shall have received a letter from ▇▇▇▇▇▇ &
----------------
▇▇▇▇▇▇ Incorporated dated as of a date within five (5) Business Days of the
mailing of the Joint Proxy Statement and Prospectus to the shareholders of PBC,
to the effect that the transactions contemplated by this Agreement are fair from
a financial point of view to the shareholders of PBC.
10.7 Appointment of Directors. All necessary action shall have been
------------------------
taken to have ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ elected or appointed to serve, from and after the
Effective Time of the Merger, as a director of GBB.
ARTICLE XI
CONDITIONS PRECEDENT TO
-----------------------
OBLIGATIONS OF GBB AND NEWCO
----------------------------
All of the obligations of GBB and Newco to effect the transactions
contemplated hereby shall be subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in writing
by GBB:
11.1 Legal Opinion. GBB shall have received the opinion of ▇▇▇▇▇▇▇▇▇,
-------------
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, attorneys for PBC, and in form and substance
satisfactory to the counsel of GBB, to the aggregate effect that: (i) PBC is a
corporation validly existing under the laws of its
46
jurisdiction of incorporation with full corporate power and authority to enter
into this Agreement and the Agreement of Merger and to consummate the
transactions contemplated hereby and thereby; (ii) all corporate proceedings on
the part of PBC necessary to be taken in connection with the Merger in order to
make the same effective have been duly and validly taken; (iii) this Agreement
has been duly and validly authorized, executed and delivered on behalf of PBC
and constitutes (subject to standard exceptions of enforceability arising from
the bankruptcy laws and rules of equity) a valid and binding agreement of PBC;
and (iv) the execution of the Agreement of Merger by PBC has been duly and
validly authorized.
11.2 Representations and Warranties; Performance of Covenants. All
--------------------------------------------------------
the covenants, terms and conditions of this Agreement to be complied with and
performed by PBC at or before the Closing Date shall have been complied with and
performed in all material respects. Each of the representations and warranties
of PBC contained in Article IV hereof shall have been true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects) on and as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date or for changes expressly contemplated by this Agreement) on and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of the Closing Date. It is understood and acknowledged
that the representations being made on and as of the Closing Date shall be made
without giving effect to any update with respect to the PBC Lists in accordance
with Section 6.2(k).
11.3 Authorization of Merger. All actions necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement and the Agreement of
Merger by PBC and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors and
shareholders of PBC, and PBC shall have full power and right to merge pursuant
to the Agreement of Merger.
11.4 Third Party Consents. PBC shall have obtained all consents of
--------------------
other parties to its respective material mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the Merger and
the transactions contemplated herein to be consummated without a material
default, acceleration, breach or loss of rights or benefits thereunder.
11.5 Absence of Certain Changes. Between the date of this Agreement
--------------------------
and the Effective Time of the Merger, there shall not have occurred any event
that has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, results of operations or prospects of PBC,
whether or not such event, change or effect is reflected in the PBC Lists as
amended or supplemented after the date of this Agreement.
11.6 Officers' Certificate. There shall have been delivered to GBB on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of PBC certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 11.2, 11.3, 11.4, 11.5 and
11.16.
11.7 Fairness Opinion. GBB shall have received a letter from ▇▇▇▇▇
----------------
Financial, Inc. dated as of a date within five (5) Business Days of the mailing
of the Joint Proxy Statement and
47
Prospectus to the shareholders of GBB, to the effect that the transactions
contemplated by this Agreement are fair from a financial point of view to the
shareholders of GBB.
11.8 Shareholder's Agreements. Concurrently with the execution of
------------------------
this Agreement, each director of PBC shall have executed and delivered to GBB
agreements substantially in the form of Exhibit D hereto.
---------
11.9 Agreements Not to Compete. Concurrently with the execution of
-------------------------
this Agreement, the directors of PBC shall have executed and delivered to GBB
agreements substantially in the form of Exhibit C hereto.
---------
11.10 Affiliates Agreements. Concurrently with the execution of this
---------------------
Agreement, GBB shall have received from each person named in the letter or
otherwise referred to in Section 6.10 an executed copy of an agreement
substantially in the form on Exhibit B hereto.
---------
11.11 Employee Benefit Plans. GBB shall have received satisfactory
----------------------
evidence that all of PBC's employee benefit plans, programs and arrangements,
including, without limitation, the PBC 401(k) Plan, have been treated as
provided in Article XII of this Agreement.
11.12 Dissenting Shares. Holders of five percent (5%) or more of the
-----------------
outstanding shares of PBC Stock shall not be PBC Perfected Dissenting Shares.
In addition, holders of five percent (5%) or more of the outstanding shares of
GBB Stock shall not be GBB Perfected Dissenting Shares have made demand for
payment of the fair market value thereof in accordance with Section 1301 of the
CGCL in connection with the Merger.
11.13 Remediation. All remediation of environmental contamination or
-----------
conditions on any PBC Property shall have been completed to the satisfaction of
GBB.
11.14 Execution of Stock Option Agreement. Concurrently with the
-----------------------------------
execution of this Agreement and as a condition thereto, PBC shall have executed
and delivered a stock option agreement (the "PBC Stock Option Agreement") which
grants to GBB an option to acquire up to 19.9% of the issued and outstanding
shares of PBC Stock upon the occurrence of certain circumstances, substantially
in the form of Exhibit E hereto.
---------
11.15 PBC Fully Diluted Book Value Per Share. At least five Business
--------------------------------------
Days prior to the Effective Time of the Merger, PBC shall provide GBB with PBC's
financial statements as of the close of business on the last day of the month
prior to the Effective Time of the Merger. Such financial statements shall have
been prepared in all material respects in accordance with generally accepted
accounting principles and other applicable legal and accounting requirements,
and reflect all period-end accruals and other adjustments. At the close of
business on the last day of the month preceding the Effective Time of the
Merger, after giving effect to any dividends paid pursuant to Section 6.1(b)
hereof, the PBC Fully Diluted Book Value Per Share, as determined in accordance
with such financial statements, shall be not less than $20.25.
48
11.16 Termination of PBC Stock Option Plans. GBB shall have received
-------------------------------------
satisfactory evidence that the PBC Stock Option Plans have been terminated prior
to the Effective Time of the Merger.
ARTICLE XII
EMPLOYEE BENEFITS
-----------------
12.1 Employee Benefits. GBB intends to merge the PBC 401(k) Plan with
-----------------
and into the GBB 401(k) Plan as soon as administratively feasible after the
Effective Time of the Merger. In no event shall the PBC 401(k) Plan be merged
with and into the GBB 401(k) Plan, however, unless GBB determines, in its sole
discretion, that: (i) the PBC 401(k) Plan is a qualified plan under Section
401(a) of the Code, both as to the form of the PBC 401(k) Plan and as to its
operation; and (ii) there are no facts in existence that would be reasonably
likely to adversely affect the qualified status of the PBC 401(k) Plan. This
analysis shall be made prior to the Effective Time of the Merger and, if the
above determinations are made, the PBC 401(k) Plan shall be merged with and into
the GBB 401(k) Plan as soon as administratively feasible after the Effective
Time of the Merger. If it is determined that the PBC 401(k) Plan is not a
qualified plan as described above, PBC agrees to use its best efforts to have
the PBC 401(k) Plan qualified prior to the Effective Time of the Merger.
As soon as practicable after the Effective Time of the Merger, all
other PBC employee benefit plans will be discontinued or merged into GBB plans,
in the discretion of GBB, and employees of PBC shall become eligible for the
employee benefit plans of GBB on the same terms as such plans and benefits are
generally offered from time to time to employees of GBB and its subsidiaries in
comparable positions with GBB or its subsidiaries. For purposes of determining
such employment eligibility and vesting under the employee benefit plans of GBB,
GBB shall recognize such employees years of service with PBC beginning on the
date such employees commenced employment with PBC through the Effective Time of
the Merger.
ARTICLE XIII
TERMINATION
-----------
13.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time of the Merger upon the occurrence of any of the following:
(a) By mutual agreement of the parties, in writing;
(b) By PBC or GBB immediately upon the failure of the
shareholders of PBC or GBB to give the requisite approval of this Agreement;
(c) By PBC immediately upon expiration of twenty (20) days from
delivery of written notice by PBC to GBB of GBB's breach of or failure to
satisfy any covenant or agreement contained herein resulting in a material
impairment of the benefit reasonably expected to be derived
49
by PBC from the performance or satisfaction of such covenant or agreement
(provided that such breach has not been waived by PBC or cured by GBB, as the
case may be, prior to expiration of such twenty (20) day period);
(d) By GBB immediately upon expiration of twenty (20) days from
delivery of written notice by GBB to PBC of PBC's breach of or failure to
satisfy any covenant or agreement contained herein resulting in a material
impairment of the benefit reasonably expected to be derived by GBB from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by GBB or cured by PBC, as the case may be, prior to
expiration of such twenty (20) day period);
(e) By PBC or GBB upon the expiration of thirty (30) days after
any Governmental Entity denies or refuses to grant any approval, consent or
authorization required to be obtained in order to consummate the transactions
contemplated by this Agreement unless, within said thirty (30) day period after
such denial or refusal, all parties hereto agree to submit the application to
the regulatory authority that has denied, or refused to grant the approval,
consent or qualification requested;
(f) By PBC or GBB if any conditions set forth in Article IX shall
not have been met by March 31, 1998;
(g) By PBC if any of the conditions set forth in Article X shall
not have been met, or by GBB if any of the conditions set forth in Article XI
shall not have been met, by March 31, 1998, or such earlier time as it becomes
apparent that such condition shall not be met;
(h) By GBB if PBC shall have failed to act or refrain from doing
any act pursuant to Section 6.1(n); or
(i) By GBB under the circumstances set forth in Section 8.4.
(j) By PBC if the Average Closing Price is less than $30.00 and
GBB has not, within two Business Days from the date of calculation of the
Average Closing Price, provided written notice to PBC of GBB's election to
exercise the Top Up Option.
13.2 Termination Date. This Agreement shall be terminated if the
----------------
Closing Date shall not have occurred by March 31, 1998 unless extended in
writing by the parties.
13.3 Effect of Termination. In the event of termination of this
---------------------
Agreement by either PBC or GBB as provided in Section 13.1 or pursuant to
Section 13.2, neither PBC, GBB nor Newco shall have any further obligation or
liability to the other party except (a) with respect to the last sentences of
each of Section 6.3(a), Section 7.3 and Section 8.4, (b) with respect to
Sections 14.1 and 14.2, and (c) to the extent such termination results from a
party's willful and material breach of the warranties and representations made
by it, or willful and material failure in performance of any of its covenants,
agreements or obligations hereunder.
50
13.4 Force Majeure. PBC, GBB and Newco agree that, notwithstanding
-------------
anything to the contrary in this Agreement, in the event this Agreement is
terminated as a result of a failure of a condition, which failure is due to a
natural disaster or other act of God, or an act of war, and provided neither
party has materially failed to observe the obligations of such party under this
Agreement, neither party shall be obligated to pay to the other party to this
Agreement any expenses or otherwise be liable hereunder.
ARTICLE XIV
MISCELLANEOUS
-------------
14.1 Expenses.
--------
(a) GBB hereby agrees that if this Agreement is terminated by PBC
pursuant to Section 13.1(b) with respect to the failure of GBB shareholders to
approve the Agreement and the transactions contemplated hereby, or pursuant to
Section 13.1(c), GBB shall promptly and in any event within 10 days after such
termination pay PBC all Expenses (as defined in Section 14.1(d) below) of PBC,
but not to exceed $150,000.
(b) PBC hereby agrees that if the Agreement is terminated by GBB
pursuant to Section 13.1(b) with respect to the failure of PBC shareholders to
approve the Agreement and the transactions contemplated hereby, or pursuant to
Section 13.1(d) or Section 13.1(h), PBC shall promptly and in any event within
10 days after such termination pay GBB all Expenses of GBB, but not to exceed
$200,000.
(c) Except as otherwise provided herein, all Expenses incurred by
GBB or PBC in connection with or related to the authorization, preparation and
execution of this Agreement, the solicitation of shareholder approvals and all
other matters related to the closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by either
such party or its affiliates, shall be borne solely and entirely by the party
which has incurred the same. Notwithstanding the foregoing, GBB and PBC shall
share the cost of printing the Joint Proxy Statement and Prospectus on a basis
proportionate to the number of shareholders of each corporation.
(d) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of attorneys,
accountants, investment bankers, experts and consultants to the party and its
affiliates) incurred by the party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
14.2 Competing Transaction Fee. As an inducement to PBC to enter into
-------------------------
this Agreement, in the event this Agreement is terminated by PBC because of a
failure by GBB to comply with its obligations under Section 7.1(a) because GBB
entered into an agreement to acquire, merge or consolidate with another entity,
which by its terms requires that the transactions contemplated by this Agreement
shall not be completed or shall be delayed until after March 31, 1998, or which
51
transaction any Governmental Entity advised GBB in writing would result in the
disapproval of the transactions contemplated in this Agreement or the delay
thereof until after March 31, 1998, if such transaction is consummated prior to
termination of this Agreement or during the twelve-month period following
termination of this Agreement, GBB shall pay or cause the third party to such a
transaction to pay to PBC the sum of $750,000 promptly upon the consummation of
a such a transaction, which sum represents (i) PBC's direct costs and expenses
(including, but not limited to, fees and expenses of financial or other
consultants, printing costs, accountants, and counsel) incurred in negotiating
and undertaking to carry out the transactions contemplated by this Agreement,
including PBC's management time devoted to negotiation and preparation for the
transactions contemplated by this Agreement; (ii) PBC's indirect costs and
expenses incurred in connection with the transactions contemplated by this
Agreement; and (iii) PBC's loss as a result of the transactions contemplated by
this Agreement not being consummated. Any payment previously made by GBB
pursuant to Section 14.1(a) hereof shall be credited against any amount due
under this Section.
14.3 Notices. Any notice, request, instruction or other document to
-------
be given hereunder by any party hereto to another shall be in writing and
delivered personally or by confirmed facsimile transmission or sent by
registered or certified mail, postage prepaid, with return receipt requested,
addressed as follows:
To GBB or Newco: Greater Bay Bancorp
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Manatt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: T. ▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
To PBC: Peninsula Bank of Commerce
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: McCutchen, Doyle, ▇▇▇▇▇ & Enersen, LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice, request, instruction or other document shall be
deemed received on the date delivered personally or delivered by confirmed
facsimile transmission, or on the third business
52
day after it was sent by registered or certified mail, postage prepaid. Any of
the persons shown above may change its address for purposes of this section by
giving notice in accordance herewith.
14.4 Successors and Assigns. All terms and conditions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns; provided,
however, that this Agreement and all rights, privileges, duties and obligations
of the parties hereto may not be assigned or delegated by any party hereto and
any such attempted assignment or delegation shall be null and void.
14.5 Counterparts. This Agreement and any exhibit hereto may be
------------
executed in one or more counterparts, all of which, taken together, shall
constitute one original document and shall become effective when one or more
counterparts have been signed by the appropriate parties and delivered to each
party hereto.
14.6 Effect of Representations and Warranties. The representations
----------------------------------------
and warranties contained in this Agreement or in any List shall terminate
immediately after the Effective Time of the Merger.
14.7 Third Parties. Each party hereto intends that this Agreement
-------------
shall not benefit or create any right or cause of action to any person other
than parties hereto. As used in this Agreement the term "parties" shall refer
only to GBB, Newco or PBC as the context may require.
14.8 Lists; Exhibits; Integration. Each List, exhibit and letter
----------------------------
delivered pursuant to this Agreement shall be in writing and shall constitute a
part of the Agreement, although Lists and letters need not be attached to each
copy of this Agreement. This Agreement, together with such Lists, exhibits and
letters, constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
14.9 Knowledge. Whenever any statement herein or in any list,
---------
certificate or other document delivered to any party pursuant to this Agreement
is made "to the knowledge" or "to the best knowledge" of any party or another
Person, such party or other Person shall make such statement only after
conducting an investigation reasonable under the circumstances of the subject
matter thereof, and each such statement shall constitute a representation that
such investigation has been conducted.
14.10 Governing Law. This Agreement is made and entered into in the
-------------
State of California, except to the extent that the provisions of federal law are
mandatorily applicable, and the laws of the State of California shall govern the
validity and interpretation hereof and the performance of the parties hereto of
their respective duties and obligations hereunder.
14.11 Captions. The captions contained in this Agreement are for
--------
convenience of reference only and do not form a part of this Agreement and shall
not affect the interpretation hereof.
14.12 Severability. If any portion of this Agreement shall be deemed
------------
by a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only
53
if, after excluding the portion deemed to be unenforceable, the remaining terms
hereof shall provide for the consummation of the transactions contemplated
herein in substantially the same manner as originally set forth at the date this
Agreement was executed.
14.13 Waiver and Modification; Amendment. No waiver of any term,
----------------------------------
provision or condition of this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
Except as otherwise required by law, this Agreement and the Agreement of Merger,
when executed and delivered, may be modified or amended by action of the Boards
of Directors of GBB, Newco or PBC without action by their respective
shareholders. This Agreement may be modified or amended only by an instrument
of equal formality signed by the parties or their duly authorized agents.
14.14 Attorneys' Fees. If any legal action or any arbitration upon
---------------
mutual agreement is brought for the enforcement of this Agreement or because of
an alleged dispute, controversy, breach, or default in connection with this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs and expenses incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
54
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
this Agreement as of the day and year first above written.
GREATER BAY BANCORP
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Assistant Secretary
GBB ACQUISITION CORP.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
President
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Assistant Secretary
PENINSULA BANK OF COMMERCE
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
ATTEST:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
Secretary
EXHIBIT LIST
------------
A AGREEMENT OF MERGER
B FORM OF AFFILIATE'S AGREEMENT (PBC)
C FORM OF NONCOMPETITION AGREEMENT
D FORM OF SHAREHOLDER'S AGREEMENT
E FORM OF PBC STOCK OPTION AGREEMENT
EXHIBIT A
---------
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement") is made and entered
into as of this ___ day of ______, 199_, by and between Peninsula Bank of
Commerce ("PBC"), and GBB Acquisition Corp., a California corporation ("GAC") in
connection with the transactions described in that Agreement and Plan of
Reorganization, dated as of September 5, 1997 (the "Reorganization Agreement")
by and among, Greater Bay Bancorp, a California corporation ("GBB"), GAC and
PBC. Terms not otherwise defined herein shall have the meaning given them in
the Reorganization Agreement.
RECITALS
--------
1. PBC is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, with authorized capital of
2,000,000 shares of common stock, no par value ("PBC Stock"), of which, on the
date hereof, there are 673,862 shares issued and outstanding, and 1,000,000
shares of preferred stock, of which, on the date hereof, no shares are issued
and outstanding.
2. GAC is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, with authorized capital of
10,000 shares of common stock, no par value ("GAC Stock"), of which, on the date
hereof, there are 100 shares issued and outstanding. GAC is a wholly-owned
subsidiary of GBB.
3. The respective Boards of Directors of PBC and GAC, each acting
pursuant to a duly authorized resolution, adopted by the vote of a majority of
its directors, deem it desirable and in the best interests of their respective
corporations and shareholders that GAC be merged with and into PBC (the
"Merger") as provided in this Merger Agreement pursuant to the laws of the State
of California, and that PBC be the surviving corporation (the "Surviving
Corporation").
4. GBB, GAC and PBC entered into the Reorganization Agreement, which
provides for the Merger of GAC with and into PBC in accordance with this Merger
Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth and for the purpose of prescribing the
terms and conditions of the Merger, the parties hereto agree as follows:
A-1
ARTICLE I
THE MERGER
----------
Upon consummation of the Merger at the Effective Time of the Merger
(as defined in Article VII hereof), GAC shall be merged with and into PBC which
shall thereupon be the Surviving Corporation, and the separate corporate
existence of GAC shall cease.
ARTICLE II
NAME
----
The name of the Surviving Corporation shall be "Peninsula Bank of
Commerce."
ARTICLE III
ARTICLES OF INCORPORATION
-------------------------
The Articles of Incorporation of PBC as in effect immediately prior to
the Effective Time of the Merger shall, at and after the Effective Time of the
Merger, continue to be the Articles of Incorporation of the Surviving
Corporation.
ARTICLE IV
BYLAWS
------
The Bylaws of PBC as in effect immediately prior to the Effective Time
of the Merger shall, at and after the Effective Time of the Merger, continue to
be the Bylaws of the Surviving Corporation.
ARTICLE V
DIRECTORS
---------
The Board of Directors of PBC immediately prior to the Effective Time
of the Merger, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, shall, at and after the Effective Time
of the Merger, serve as the Board of Directors of the Surviving Corporation
until its next annual meeting of shareholders and until such time as their
successors have been elected and qualified.
A-2
ARTICLE VI
RIGHTS AND DUTIES OF SURVIVING CORPORATION
------------------------------------------
At and after the Effective Time of the Merger, all rights, privileges,
powers and franchises and all property and assets of every kind and description
of GAC and PBC shall be vested in and be held and enjoyed by the Surviving
Corporation, without further act or deed, and all the estates and interests of
every kind of GAC and PBC, including all debts due to either of them, shall be
as effectively the property of the Surviving Corporation as they were of GAC and
PBC, and the title to any real estate vested by deed or otherwise in either GAC
or PBC shall not revert or be in any way impaired by reason of the Merger; and
all rights of creditors and liens upon any property of GAC and PBC shall be
preserved unimpaired and all debts, liabilities and duties of GAC and PBC shall
be debts, liabilities and duties of the Surviving Corporation and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
ARTICLE VII
CONVERSION OF SHARES
--------------------
In and by virtue of the Merger and at the Effective Time of the
Merger, pursuant to this Merger Agreement, the shares of PBC Stock and GAC Stock
outstanding immediately prior to the Effective Time of the Merger shall be
converted without any action on the part of the holders thereof as follows:
(a) Effect on GAC Stock. Each share of GAC Stock issued and
-------------------
outstanding immediately prior to the Effective Time of the Merger shall, on and
after the Effective Time of the Merger, be automatically converted into shares
of common stock, no par value, of the Surviving Corporation.
(b) Effect on the PBC Stock. Each share of PBC Stock issued and
-----------------------
outstanding immediately prior to the Effective Time of the Merger, other than
(i) shares owned of record by GBB or a wholly-owned subsidiary of GBB, or (ii)
shares of PBC Stock which are dissenting shares within the meaning of Section
1300(b) of the CGCL, shall, without any action on the part of the holder
thereof, cease to be outstanding and be converted into the right to receive on
and after the Effective Time of the Merger, a number of shares of common stock,
no par value, of GBB (the "GBB Stock"), as specified pursuant to the
Reorganization Agreement.
(c) Fractional Shares. No fractional shares of GBB Stock shall be
-----------------
issued in the Merger. In lieu thereof, each holder of PBC 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 (i) the Average Closing Price times (ii) the fraction of the share
A-3
of GBB Stock to which such holder would otherwise be entitled. No such holder
shall be entitled to dividends or other rights in respect of any such fraction.
ARTICLE VIII
FURTHER ACTION
--------------
The parties hereto shall execute and deliver, or cause to be executed
and delivered, all such deeds and other instruments, and will take or cause to
be taken all further or other action as they may deem necessary or desirable, in
order to vest in and confirm to the Surviving Corporation title to and
possession of all of GAC's and PBC's property, rights, privileges, powers and
franchises hereunder, and otherwise to carry out the intent and purposes of this
Merger Agreement.
ARTICLE IV
EFFECTIVE TIME OF THE MERGER
----------------------------
The Merger shall be effective (the "Effective Time of the Merger")
upon the filing of this Merger Agreement and the appropriate certificates of its
approval and adoption with the Secretary of State of the State of California in
accordance with Section 1103 of the California General Corporation Law.
ARTICLE X
TERMINATION
-----------
This Merger Agreement may, by the mutual consent and action of the
Boards of Directors of GAC and PBC, be abandoned at any time before or after
approval thereof by the shareholders of GAC and PBC, but not later than the
Effective Time of the Merger. This Merger Agreement shall automatically be
terminated and of no further force and effect if, prior to the Effective Time of
the Merger, the Reorganization Agreement is terminated in accordance with the
terms thereof.
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ARTICLE XI
SATISFACTION OF CONDITION AND OBLIGATIONS
-----------------------------------------
(a) The obligations of GAC to proceed with the Closing are subject to
the satisfaction at or prior to the Closing of all of the conditions to the
obligations of GAC and GBB under the Reorganization Agreement, any one or more
of which, to the extent it is or they are waivable, may be waived, in whole or
in part, by GBB.
(b) The obligations of PBC to proceed with the Closing are subject to
the satisfaction at or prior to the Closing of all of the conditions to the
obligations of PBC under the Reorganization Agreement, any one or more of which,
to the extent it is or they are waivable, may be waived, in whole or in part, by
PBC.
ARTICLE XII
GOVERNING LAW
-------------
This Merger Agreement has been executed in the State of California,
and the laws of the State of California shall govern the validity and
interpretation hereof and the performance by the parties hereto.
A-5
IN WITNESS WHEREOF, PBC and GAC, pursuant to the approval and
authority duly given by resolution of their respective Board of Directors, have
caused this Merger Agreement to be signed by their respective Presidents and
Secretaries on the day and year first above written.
PENINSULA BANK OF COMMERCE
By:________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
By:________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
By:________________________________
___________, Secretary
GBB ACQUISITION CORP.
By:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President
By:____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Assistant Secretary
A-6
EXHIBIT B
---------
September 5, 1997
Greater Bay Bancorp
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Reorganization, dated
as of September 5, 1997 (the "Agreement"), by and among Greater Bay Bancorp, a
California corporation ("GBB"), GBB Acquisition Corp., a California corporation
and wholly-owned subsidiary of GBB ("Newco"), and Peninsula Bank of Commerce, a
California state chartered bank ("PBC"), which Agreement provides, among other
things, for the merger (the "Merger") of Newco with and into PBC in a
transaction in which shares of common stock of PBC ("PBC Stock") will be
automatically canceled and shall be converted into a number of shares of common
stock of GBB ("GBB Stock"), as more fully provided for in the Agreement.
The undersigned has been informed that the Merger constitutes a
transaction covered by Rule 145 under the Securities Act of 1933, as amended
(the "Securities Act"); that the undersigned may be deemed to be an "affiliate"
of PBC within the meaning of Rule 145; and that, accordingly, the shares of GBB
Stock which the undersigned may acquire in connection with the Merger may only
be disposed of in conformity with the provisions hereof.
The capitalized terms used and not defined herein shall have the
meaning set forth in the Agreement.
1. The undersigned, after inquiry of any agent with discretionary
power to transfer the undersigned's shares of PBC Stock, represents, warrants
and agrees as follows:
(a) The undersigned has full power to execute this Affiliate's
Agreement and to make the representations, warranties and agreements herein, and
to perform his or its obligations hereunder.
(b) The undersigned is currently the owner of that number of
shares of PBC Stock set forth in Schedule 1 hereto (the "PBC Shares") and has
held the PBC Shares at all times since ___________ unless otherwise set forth in
Schedule 1.
(c) The undersigned shall not purchase, sell, transfer or
otherwise dispose of, or reduce the undersigned's risk of ownership or
investment in any of the PBC Shares prior to the Merger. The undersigned agrees
to the placement of a restrictive legend on his or her certificates representing
PBC Shares which legend shall set forth these restrictions. Such legend shall be
placed
B-1
on the certificates concurrently with the execution of this Agreement or as soon
thereafter as practicable.
(d) The undersigned will not sell, transfer or dispose of any
shares of GBB Stock which the undersigned may acquire in connection with the
Merger or any securities which may be paid as a dividend or otherwise
distributed thereon or with respect thereto or issued or delivered in exchange
or substitution therefor (all such shares and other securities herein sometimes
collectively referred to as "Restricted Securities"), or any option, right or
other interest with respect to any Restricted Securities, unless such sale,
transfer or disposition is effected (i) pursuant to an exemption from the
registration requirements of the Securities Act as provided in Section 3 hereof
or (ii) pursuant to an effective registration statement under, and in compliance
with, the Securities Act (provided that the undersigned may make bona fide gifts
or distributions without consideration so long as the recipients thereof agree
not to sell, transfer or otherwise dispose of the GBB Stock except as provided
herein.)
(e) The undersigned has no present plan or intent to engage in a
sale, exchange, transfer, redemption or reduction in any way of the
undersigned's risk of ownership by short sale or otherwise, or other
disposition, directly or indirectly (such actions being collectively referred to
as a "Sale") of GBB Stock to be received by the undersigned pursuant to the
Merger.
(f) The undersigned has not engaged in a Sale of any shares of
PBC Stock at any time since ____________ unless otherwise set forth in
Schedule 1.
(g) The undersigned has no present plan or intent to (i) engage
in a Sale of the PBC Shares (other than in exchange for GBB Stock pursuant to
the Merger), or (ii) exercise dissenters' rights in connection with the Merger.
(h) The representations contained herein shall be true and
correct at all times from the date hereof through the Effective Time.
(i) The undersigned has consulted such legal and financial
counsel as the undersigned deems appropriate in connection with the execution of
this Affiliate's Agreement.
2. GBB agrees to use its best efforts to file all reports and data
with the Securities and Exchange Commission necessary to permit the undersigned
to sell Restricted Securities pursuant to and otherwise in conformity with Rule
145(d) under the Securities Act.
3. GBB acknowledges that the provision of Section 1(d) of this
Affiliate's Agreement will be satisfied as to any sale by the undersigned of
Restricted Securities pursuant to Rule 145(d) under the Securities Act, as
evidenced by a broker's letter stating that the requirements of Rule 145 have
been met; provided, however, that if counsel for GBB reasonably believes that
the provisions of Rule 145 have not been complied with, or if requested by GBB
in connection with a proposed disposition, the undersigned shall furnish to GBB
a copy of a "no action" letter or other
B-2
communication from the staff of the SEC or an opinion of counsel in form and
substance satisfactory to GBB and its counsel, to the effect that the applicable
provisions of paragraphs (c), (e), (f) and (g) of Rule 144 under the Securities
Act have been complied with or that the disposition may be otherwise effected in
the manner requested in compliance with the Securities Act. It is agreed and
understood that the undersigned may rely upon GBB's representation, warranty and
agreement in Section 2 above in complying with this Section 3.
4. The undersigned also understands that stop transfer instructions
will be given to GBB's transfer agent with respect to the Restricted Securities
and that there will be placed on the certificates evidencing the Restricted
Securities, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), APPLIES AND MAY ONLY BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND
GBB, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF GBB."
GBB agrees that such stop transfer instructions and legend will be
promptly removed if the provisions of Section 3 are complied with.
5. This Affiliate's Agreement shall be binding upon and enforceable
against administrators, executors, representatives, heirs, legatees and devisees
of the undersigned and any pledgee holding the Restricted Securities as
collateral.
6. In the event any of the parties to this Agreement brings an
action or suit against any other party by reason of any breach of any covenant,
agreement, representation, warranty or other provision hereof, or any breach of
any duty or obligation created hereunder by such other party, the prevailing
party, as determined by the court or other body having jurisdiction, shall be
entitled to have and recover of and from the losing party, as determined by the
court or other body having jurisdiction, all reasonable costs and expenses
incurred or sustained by such prevailing party in connection with such suit or
action, including, without limitation, legal fees and court costs (whether or
not taxable as such).
7. THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY MATTER ARISING OUT
OF THIS AGREEMENT OR RELATED TO THIS AGREEMENT OR IN CONNECTION WITH ANY
TRANSACTION OR MATTER CONTEMPLATED BY THIS AGREEMENT.
B-3
IN WITNESS WHEREOF, the undersigned has executed the foregoing
Affiliate's Agreement as of the date first above written.
Very truly yours,
Agreed to and Accepted:
GREATER BAY BANCORP
By:______________________________________________________________
Title:___________________________________________________________
B-4
EXHIBIT C
---------
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement"), dated as of
September 5 , 1997, is entered into by and between Greater Bay Bancorp, a
California corporation ("GBB"), and _______________ (the "Shareholder").
RECITALS
A. GBB, GBB Acquisition Corp., a California corporation and wholly-owned
subsidiary of GBB ("Newco"), and Peninsula Bank of Commerce, a California state
chartered bank ("PBC"), entered into that certain Agreement and Plan of
Reorganization, dated as of September 5, 1997 (the "Reorganization Agreement").
B. The Shareholder is a director of PBC.
C. As an inducement to GBB and Newco to enter into the Reorganization
Agreement, the Shareholder agrees to refrain from competing with PBC or GBB, or
using trade secrets or soliciting customers or employees of PBC or any of its
subsidiaries or successors.
D. Except as otherwise provided herein, each capitalized term shall have
the meaning given to such term in the Reorganization Agreement. As used in this
Agreement, the following terms shall have the meanings set forth:
"Customer" shall mean any Person with whom PBC has an existing
relationship for Financial Services (as defined below) from the date of the
Reorganization Agreement until immediately prior to the Effective Time of the
Merger.
"Enterprises" shall mean any of the businesses conducted by PBC or GBB
or their respective subsidiaries at any time from the date of the Reorganization
Agreement until immediately prior to the Effective Time of the Merger.
"Financial Institution" shall mean a "depository institution" as that
term is defined in 12 C.F.R. Section 348.2, and any parent, subsidiary or
affiliate thereof.
"Financial Services" shall mean the origination, purchasing, selling
and servicing of commercial, real estate, residential, construction and consumer
loans and the solicitation and provision of deposit services and services
related thereto and shall also mean acting as an executor, administrator,
guardian or conservator of estates for persons other than family members,
assignee, receiver, depositary, trustee, custodian, or any other fiduciary or
representative capacity for any purpose permitted by law, acting as transfer
agent or registrar for corporate stocks, buying and selling
C-1
securities for the account of customers, or accepting and executing any trust
business permitted by any law.
"Prospective Customer" shall mean any Person with whom PBC has
actively pursued a relationship for Financial Services at any time between the
date of the Reorganization Agreement and the Effective Time of the Merger.
"Trade Secrets" shall mean:
(a) All secrets and other confidential information, ideas, knowledge,
know-how, techniques, secret processes, improvements, discoveries, methods,
inventions, sales, financial information, Customers, lists of Customers and
Prospective Customers, plans, concepts, strategies or products, as well as all
documents, reports, drawings, designs, plans and proposals otherwise pertaining
to same or relating to the business and properties of PBC of which the
Shareholder has acquired, or may hereafter acquire, knowledge and possession as
a shareholder, director, officer or employee or as a result of the transactions
contemplated by the Reorganization Agreement.
(b) Notwithstanding any other provisions of this Agreement to the
contrary, "Trade Secrets" shall not include any (i) information which is or has
become available from a third party who learned the information independently
and is not or was not bound by a confidentiality agreement with respect to such
information; or (ii) information readily ascertainable from public, trade or
other nonconfidential sources (other than as a result, directly or indirectly,
of a disclosure or other dissemination in contravention of a confidentiality
agreement).
NOW, THEREFORE, in consideration of the premises and respective
representations, warranties and covenants, agreements and conditions contained
herein and in the Reorganization Agreement, and intending to be legally bound
hereby, the Shareholder and GBB agree as follows:
ARTICLE I
ACKNOWLEDGMENTS BY THE SHAREHOLDER
The Shareholder acknowledges that:
(a) GBB and Newco would not enter into the Reorganization
Agreement unless Shareholder agrees not to enter into an activity that is
competitive with or similar to the Enterprises and that, accordingly, this
Agreement is a material inducement for GBB to enter into and to carry out the
terms of the Reorganization Agreement. Accordingly, Shareholder expressly
acknowledges that he is entering into this Agreement to induce GBB and Newco to
enter into and carry out the terms of the Reorganization Agreement and to cause
Newco to enter into the Agreement of Merger pursuant thereto.
(b) By virtue of his position with PBC, Shareholder has developed
considerable expertise in the business operations of PBC and has access to Trade
Secrets.
C-2
Shareholder recognizes that GBB would be irreparably damaged, and its
substantial investment in PBC materially impaired, if the Shareholder were to
enter into an activity that is competitive with or similar to the Enterprises in
violation of the terms of this Agreement, if the Shareholder were to disclose or
make unauthorized use of any Trade Secrets or if the Shareholder were to solicit
Customers, Prospective Customers or employees of PBC. Accordingly, the
Shareholder expressly acknowledges that he is voluntarily entering into this
Agreement and that the terms and conditions of this Agreement are fair and
reasonable to the Shareholder in all respects.
ARTICLE II
NONCOMPETITION AND NONSOLICITATION
2.1. Noncompetition. For a period of two years after the Effective
--------------
Time of the Merger, the Shareholder shall not, directly or indirectly, without
the prior written consent of GBB or the Surviving Corporation (i) own, manage,
operate, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise
with, any business or enterprise engaged in any business which is competitive
with or similar to the Enterprises within the Counties of Santa ▇▇▇▇▇ and San
Mateo, State of California (the "Territory") or (ii) engage in any other manner,
within the Territory, in any business that is competitive with or similar to the
Enterprises. Notwithstanding the above, the Shareholder shall not be deemed to
be engaged directly or indirectly in any business in contravention of paragraphs
(i) or (ii) above, if (y) the Shareholder participates in any such business
solely (A) as an officer or director of the Surviving Corporation or (B) as a
passive investor in up to 5% of the equity securities or 10% of the debt
securities of a company or partnership, provided such securities are publicly
traded or (z) the Shareholder is employed by a business or enterprise that is
engaged primarily in a business other than that which is competitive with or
similar to the Enterprises and the Shareholder does not apply his expertise at
such business or enterprise to that part of such business or enterprise that is
competitive with or similar to the Business or the Enterprises.
2.3 Nonsolicitation. For a period of two years after the Effective
----------------
Time of the Merger, the Shareholder shall not, directly or indirectly, without
the prior written consent of GBB or the Surviving Corporation on behalf of any
Financial Institution, solicit or aid in the solicitation of Customers or
Prospective Customers for Financial Services or induce or attempt to induce
immediately any Person who is a Customer, Prospective Customer, supplier,
distributor, officer or employee of PBC immediately prior to the Effective Time
of the Merger to terminate such person's relationships with, or to take any
action that would be disadvantageous to GBB or the Surviving Corporation.
2.4 Trade Secrets. Without limiting the generality of the foregoing
-------------
and at all times after the date hereof, other than for the benefit of PBC and,
after the Effective Time of the Merger, other than for the benefit of the
Surviving Corporation, the Shareholder (i) shall make no use of the Trade
Secrets, or any other part thereof, (ii) shall not disclose the Trade Secrets,
or any part thereof, to any other Person, and (iii) shall deliver, on and after
the Effective Time of the Merger, all
C-3
documents, reports, drawings, designs, plans, proposals and other tangible
evidence of Trade Secrets, now possessed or hereafter acquired by the
Shareholder, to the Surviving Corporation.
2.5 Exceptions. Notwithstanding any provision of this Agreement to
----------
the contrary, the Shareholder may disclose or reveal any information, whether
including in whole or in part any Trade Secrets, that:
(a) The Shareholder is required to disclose or reveal under any
applicable Rule, provided the Shareholder makes a good faith request that the
confidentiality of the Trade Secrets be preserved and, to the extent not
prohibited by applicable Rules, gives GBB prompt notice of such requirement in
advance of such disclosure.
(b) The Shareholder is otherwise required to disclose or reveal
by any Governmental Entity, provided the Shareholder makes a good faith request
that the confidentiality of the Trade Secrets be preserved and, to the extent
not prohibited by applicable Rules, gives GBB prompt notice of such requirement
in advance of such disclosure; or
(c) In the opinion of the Shareholders' counsel, the Shareholder
is compelled to disclose or else stand liable for contempt or suffer other
censure or penalty imposed by any Governmental Entity, provided the Shareholder
makes a good faith request that the confidentiality of the Trade Secrets be
preserved and, to the extent not prohibited by applicable Rules, gives GBB
prompt notice of such requirement in advance of such disclosure.
ARTICLE III
INDEPENDENCE OF OBLIGATIONS
The covenants of the Shareholder set forth in this Agreement shall be
construed as independent of any other agreement or arrangement between the
Shareholder, on the one hand, and GBB on the other, and the existence of any
claim or cause of action by the Shareholder against PBC or GBB shall not
constitute a defense to the enforcement of such covenants against the
Shareholder.
ARTICLE IV
GENERAL
4.1 Amendments. To the fullest extent permitted by law, this
----------
Agreement may be amended by agreement in writing of the parties hereto at any
time.
4.2 Integration. This Agreement constitutes the entire agreement
-----------
between the parties pertaining to the subject matter hereof and (except for
other documents to be executed pursuant to the Reorganization Agreement)
supersedes all prior agreements and understanding of the parties in connection
therewith.
C-4
4.3 Termination.
-----------
(a) This Agreement shall terminate automatically without further
action in the event that the Reorganization Agreement is terminated prior to the
Effective Time of the Merger in accordance with its terms.
(b) Unless sooner terminated pursuant to subsection (a) of this
Section 4.3, the obligations of Shareholder under Section 2.1 shall terminate on
the earlier of (i) the second anniversary of the Effective Time of the Merger,
or (ii) a change of control of GBB whereby GBB is acquired by an entity with
assets of $20 billion or more.
(c) Unless sooner terminated under subsection (a) of this Section
4.3, and except as provided in subsection (b) of this Section 4.3, the
obligations of the Shareholder under this Agreement shall terminate only on the
mutual agreement of the Shareholder and GBB or the Surviving Corporation.
4.4 Specific Performance. The Shareholder and GBB each expressly
--------------------
acknowledge that, in view of the uniqueness of the obligations of the
Shareholder contemplated hereby, GBB would not have an adequate remedy at law
for money damages in the event that this Agreement has not been performed by the
Shareholder in accordance with its terms, and therefore the Shareholder and GBB
agree that GBB shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which they may be entitled at law or in equity.
4.5 Severability and the Like. If any provision of this Agreement
--------------------------
shall be held by a court of competent jurisdiction to be unreasonable as to
duration, activity or subject, it shall be deemed to extend only over the
maximum duration, range of activities or subjects as to which such provision
shall be valid and enforceable under applicable law. If any provisions shall,
for any reason, be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
4.6 Notices Any notice or communication required or permitted
-------
hereunder, shall be deemed to have been given if in writing and (a) delivered in
person, (b) delivered by confirmed facsimile transmission, (c) sent by overnight
carrier, postage prepaid with return receipt requested or (d) mailed by
certified or registered mail, postage prepaid with return receipt requested,
addressed as follows:
C-5
If to GBB, addressed to:
Greater Bay Bancorp
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy addressed to:
Manatt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: T. ▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
If to Shareholder, addressed to:
____________________________
____________________________
____________________________
____________________________
With a copy addressed to:
____________________________
____________________________
____________________________
____________________________
or at such other address and to the attention of such other person as a party
may notice to the others in accordance with this Section 4.6. Any such notice
or communication shall be deemed received on the date delivered personally or
delivered by confirmed facsimile transmission or on the next Business Day after
it was sent by overnight carrier, postage prepaid with return receipt requested
or on the third Business Day after it was sent by certified or registered mail,
postage prepaid with return receipt requested.
4.7 Waiver of Breach. Any failure or delay by GBB in enforcing any
----------------
provision of this Agreement shall not operate as a waiver thereof. The waiver by
GBB of a breach of any provision of this Agreement by Shareholder shall not
operate or be construed as a waiver of any
C-6
subsequent breach or violation thereof. All waivers shall be in writing and
signed by the party to be bound.
4.8 Assignment. This Agreement may be assignable by GBB only in
----------
connection with a sale of all or substantially all of their assets or a merger
or reorganization in which they are not the surviving corporations. Any
attempted assignment in violation of this prohibition shall be null and void.
4.9 Binding Effect; Benefit to Successors. This Agreement shall be
-------------------------------------
binding upon the Shareholder and upon the Shareholder's successor and
representatives and shall inure to the benefit of GBB and its successors,
representatives and assigns.
4.10 Governing Law. This Agreement and the legal relations between
-------------
the parties shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts between California parties made
and performed in this State.
4.11 Headings. The descriptive headings of the several Articles and
--------
Sections of this Agreement are inserted for convenience only and do not
constitute a part of the this Agreement.
4.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to each party hereto.
C-7
IN WITNESS WHEREOF, the parties to this Agreement have caused and duly
executed this Agreement as of the day and year first above written.
GREATER BAY BANCORP
By:______________________________________
Title:___________________________________
SHAREHOLDER
-----------------------------------------
(Signature)
-----------------------------------------
(Type or Print Shareholder's Name)
C-8
EXHIBIT D
---------
SHAREHOLDER'S AGREEMENT
This SHAREHOLDER'S AGREEMENT (this "Agreement"), dated as of September
5, 1997, is entered into by and among Peninsula Bank of Commerce, a California
state chartered bank ("PBC"), and ___________________________ (the
"Shareholder").
R E C I T A L S
A. Greater Bay Bancorp, a California corporation ("GBB"), GBB Acquisition
Corp., a California corporation and wholly-owned subsidiary of GBB ("Newco"),
and PBC entered into that certain Agreement and Plan of Reorganization dated as
of September 5, 1997 (the "Reorganization Agreement").
B. The Shareholder is a beneficial shareholder of shares of common stock,
no par value, of PBC (the "PBC Stock").
C. The Shareholder is a director of PBC.
D. As an inducement to GBB and Newco to enter into the Reorganization
Agreement, and in order to ensure pooling-of-interests accounting treatment for
the Merger contemplated by the Reorganization Agreement, the Shareholder desires
to enter into this Agreement.
E. Unless otherwise provided in this Agreement, capitalized terms shall
have the meanings ascribed to such terms in the Reorganization Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties and covenants, agreements and conditions contained
herein and in the Reorganization Agreement, and intending to be legally bound
hereby, PBC and Shareholder agree as follows:
ARTICLE I
SHAREHOLDER'S AGREEMENT
1.1 Agreement to Vote. Shareholder shall vote or cause to be voted at any
-----------------
meeting of shareholders of PBC to approve the principal terms of the
Reorganization Agreement, the Merger and the transactions contemplated thereby
(the "Shareholders' Meeting"), all of the shares of PBC Stock as to which
Shareholder has sole or shared voting power (the "Shares") as of the record date
established to determine shareholders who have the right to vote at any such
Shareholders' Meeting (the "Record Date").
D-1
1.2 Legend. The Shareholder agrees to stamp, print or type on the face of
------
his certificates of PBC Stock evidencing the Shares the following legend:
"THE VOTING, SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR
OTHER ENCUMBRANCE OR DISPOSITION OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO A SHAREHOLDER'S AGREEMENT DATED AS OF THE
5TH DAY OF SEPTEMBER, 1997 BY AND BETWEEN PENINSULA BANK OF COMMERCE
AND THE RECORD OWNER HEREOF, COPIES OF WHICH ARE ON FILE AT THE
OFFICES OF PENINSULA BANK OF COMMERCE."
In the event that the Shares of PBC Stock are held in "street name,"
the Shareholder agrees that PBC shall use its commercially reasonable efforts to
ensure that stop transfer instructions are provided to the appropriate
securities broker or dealer or other entity which holds the Shares for the
benefit of the Shareholder.
1.3 Restrictions on Dispositions. The Shareholder agrees that, from and
----------------------------
after the date of this Agreement and during the term of this Agreement, the
Shareholder will not take any action that will alter or affect in any way the
right to vote the Shares, except (i) with the prior written consent of PBC or
(ii) to change such right from that of a shared right of the Shareholder to vote
the Shares to a sole right of the Shareholder to vote the Shares.
1.4 Shareholder Approval. The Shareholder shall, in his capacity as a
--------------------
director, (i) recommend shareholder approval of the Reorganization Agreement,
the Agreement of Merger and the transactions contemplated thereby at the PBC
Shareholders' Meeting and (ii) advise the PBC shareholders to reject any
subsequent proposal or offer received by PBC relating to any Competing
Transaction or purchase, sale, acquisition, merger or other form of business
combination involving PBC or any of its assets, equity securities or debt
securities and to proceed with the transactions contemplated by the
Reorganization Agreement; provided, however, that the Shareholder shall not be
-------- -------
obligated to take any action specified in clause (ii) if the Board of Directors
of PBC is advised in writing by outside legal counsel (McCutchen, Doyle, ▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP, or such other counsel that is reasonably acceptable to GBB) that,
in the exercise of his fiduciary duties, a director of PBC should not take such
action.
1.5 Restrictions on Disposition of GBB Stock Received Pursuant to the
-----------------------------------------------------------------
Merger. Notwithstanding any other provisions of this Agreement to the contrary,
--------
none of the shares of GBB Stock to be received by the undersigned pursuant to
the Merger will be sold, transferred or otherwise disposed of and the
undersigned will not in any other way reduce the undersigned's risk of ownership
or investment in any of the shares of GBB Stock so received by the undersigned
until financial results covering a period of at least thirty (30) days of
combined operations of GBB and PBC following the Effective Time of the Merger
have been published by GBB (provided that the undersigned may make
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bona fide gifts or distributions without consideration so long as the recipients
thereof agree not to sell, transfer or otherwise dispose of the GBB Stock except
as provided herein).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to PBC that the statements set
forth below are true and correct as of the date of this Agreement, except those
that are specifically as of a different date:
2.1 Ownership and Related Matters.
-----------------------------
(a) Schedule 2.1(a) hereto correctly sets forth the number of Shares
beneficially owned by Shareholder and the nature of Shareholder's voting power
with respect thereto. Within five Business Days after the Record Date, the
Shareholder shall amend said Schedule 2.1(a) to correctly reflect the number of
Shares and the nature of Shareholder's voting power with respect thereto as of
the Record Date.
(b) There are no proxies, voting trusts or other agreements or
understandings to or by which the Shareholder or the Shareholder's spouse is a
party or bound or that expressly requires that any of the Shares be voted in any
specific manner other than as provided in this Agreement.
2.2 Authorization and Binding Agreement. The Shareholder has the legal
-----------------------------------
right, power, capacity and authority to execute, deliver and perform this
Agreement, and this Agreement is the valid and binding obligation of the
Shareholder enforceable in accordance with its terms, except as the enforcement
thereof may be limited by general principles of equity.
2.3 Non-contravention. The execution, delivery and performance of this
-----------------
Agreement by the Shareholder will not (a) conflict with or result in the breach
of, or default or actual or potential loss of any benefit under, any provision
of any agreement, instrument or obligation to which the Shareholder or the
Shareholder's spouse is a party or by which any of Shareholder's properties or
the Shareholder's spouse's properties are bound, or give any other party to any
such agreement, instrument or obligation a right to terminate or modify any term
thereof; (b) require the consent or approval of any third party; (c) result in
the creation or imposition of any lien, mortgage or encumbrance on any of the
Shares or any other assets of the Shareholder or the Shareholder's spouse; or
(d) violate any law, rule or regulation to which the Shareholder or the
Shareholder's spouse is subject.
D-3
ARTICLE III
GENERAL
3.1 Amendments. To the fullest extent permitted by law, this Agreement
----------
and any schedule or exhibit attached hereto may be amended by agreement in
writing of the parties hereto at any time.
3.2 Integration. This Agreement constitutes the entire agreement between
-----------
the parties pertaining to the subject matter hereof and (except for other
documents to be executed pursuant to the Reorganization Agreement) supersedes
all prior agreements and understandings of the parties in connection therewith.
3.3 Specific Performance. The Shareholder and PBC each expressly
--------------------
acknowledge that, in view of the uniqueness of the obligations of the
Shareholder contemplated hereby, PBC would not have an adequate remedy at law
for money damages in the event that this Agreement has not been performed by the
Shareholder in accordance with its terms, and therefore the Shareholder and PBC
agree that PBC shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled at law or in equity.
3.4 Termination. This Agreement shall terminate automatically without
-----------
further action at the earlier of the Effective Time of the Merger or the
termination of the Reorganization Agreement in accordance with its terms. Upon
such termination of this Agreement, the respective obligations of the parties
hereto shall immediately become void and have no further force and effect.
3.5 No Assignment. Neither this Agreement nor any rights, duties or
-------------
obligations hereunder shall be assignable by PBC or the Shareholder, in whole or
in part. Any attempted assignment in violation of this prohibition shall be
null and void. Subject to the foregoing, all of the terms and provisions hereof
shall be binding upon, and inure to the benefit of, the successors of the
parties hereto.
3.6 Headings. The descriptive headings of the several Articles and
--------
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
3.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to each party hereto.
3.8 Notices. Any notice or communication required or permitted hereunder,
-------
shall be deemed to have been given if in writing and (a) delivered in person,
(b) delivered by confirmed facsimile transmission (c) sent by overnight carrier,
postage prepaid with return receipt requested or (d) mailed by certified or
registered mail, postage prepaid with return receipt requested, addressed as
follows:
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If to PBC, addressed to:
Peninsula Bank of Commerce
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy addressed to:
McCutchen, Doyle, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Shareholder, addressed to:
____________________________
____________________________
____________________________
____________________________
With a copy addressed to:
____________________________
____________________________
____________________________
____________________________
or at such other address and to the attention of such other person as a party
may notice to the others in accordance with this Section 3.8. Any such notice
or communication shall be deemed received on the date delivered personally or
delivered by confirmed facsimile transmission, on the first Business Day after
it was sent by overnight carrier, postage prepaid with return receipt requested
or on the third Business Day after it was sent by certified or registered mail,
postage prepaid with return receipt requested.
3.9 Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the laws of the
State of California applicable to contracts between California parties made and
performed in such State.
3.10 Severability and the Like If any provision of this Agreement shall be
-------------------------
held by a court of competent jurisdiction to be unreasonable as to duration,
activity or subject, it shall be deemed to
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extend only over the maximum duration, range of activities or subjects as to
which such provision shall be valid and enforceable under applicable law. If any
provisions shall, for any reason, be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
3.11 Waiver of Breach. Any failure or delay by PBC in enforcing any
----------------
provision of this Agreement shall not operate as a waiver thereof. The waiver
by PBC of a breach of any provision of this Agreement by the Shareholder shall
not operate or be construed as a waiver of any subsequent breach or violation
thereof. All waivers shall be in writing and signed by the party to be bound.
[The remainder of this page is intentionally left blank.]
D-6
IN WITNESS WHEREOF, the parties to this Agreement have caused and duly
executed this Agreement as of the day and year first above written.
PENINSULA BANK OF COMMERCE
By:_______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
SHAREHOLDER
------------------------------------------
(Shareholder's Name)
D-7
SPOUSAL CONSENT
I am the spouse of __________________, the Shareholder in the above
Agreement. I understand that I may consult independent legal counsel as to the
effect of this Agreement and the consequences of my execution of this Agreement
and, to the extent I felt it necessary, I have discussed it with legal counsel.
I hereby confirm this Agreement and agree that it shall bind my interest in the
Shares, if any.
-------------------------------------
(Shareholder's Spouse's Name)
EXHIBIT E
---------
STOCK OPTION AGREEMENT
----------------------
This AGREEMENT is dated as of September 5, 1997, between Greater Bay
Bancorp ("GBB"), a California corporation, and Peninsula Bank of Commerce, a
California corporation ("PBC").
W I T N E S S E T H:
-------------------
WHEREAS, the Boards of Directors of GBB and PBC have approved an
Agreement and Plan of Reorganization (the "Reorganization Agreement") dated as
of the date hereof which contemplates the acquisition by GBB of PBC by means of
the merger of GBB Acquisition Corp., a California corporation and wholly-owned
subsidiary of GBB ("GAC"), with and into PBC, with PBC as the entity surviving
the merger;
WHEREAS, as a condition to GBB 's entry into the Reorganization
Agreement and to induce such entry, PBC has agreed to grant to GBB the option
set forth herein to purchase shares of PBC's authorized but unissued common
stock, no par value per share ("Common Stock");
Unless otherwise provided in this Agreement, capitalized terms shall
have the meanings ascribed to such terms in the Reorganization Agreement.
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
---------------
herein, PBC hereby grants to GBB an option (the "Option") to purchase up to
134,099 shares of Common Stock (the "Option Shares"), at a price of $32.00 per
share (the "Exercise Price"); provided, however, that in the event PBC issues or
-------- -------
agrees to issue any shares of Common Stock to an Acquiring Person (as that term
is defined in Section 6 herein) at a price less than $32.00 per share, the
Exercise Price shall be equal to such lesser price.
2. Exercise of Option.
------------------
(a) GBB may exercise the Option, in whole or in part, in
accordance with and to the extent permitted by applicable law at any time or
from time to time but only upon or after the occurrence of a Purchase Event (as
that term is defined in Paragraph (b) below of this section); provided, that to
--------
the extent the Option shall not have been exercised, it shall terminate and be
of no further force and effect upon the earliest to occur (such earliest date,
the "Expiration Date") of (i) the termination of the Reorganization Agreement
pursuant to Section 13.1 (a) or (j) thereof; (ii) the date of termination
pursuant to Section 13.1 (b), (c), (e), (f) or (i) thereof if such date is prior
to a
E-1
Purchase Event; (iii) the effective time of the acquisition of PBC by GBB
pursuant to the Reorganization Agreement, or (iv) twelve months following the
occurrence of the earliest to occur of (A) the date of any termination of the
Reorganization Agreement other than as described in (i) or (ii) above or (B) the
date of first occurrence of a Purchase Event. Notwithstanding the foregoing, PBC
shall not be obligated to issue the Option Shares upon exercise of the Option
(i) in the absence of any required governmental or regulatory waiver, consent or
approval necessary for PBC to issue such Option Shares or for GBB or any
transferee to exercise the Option or prior to the expiration or termination of
any waiting period required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Option
Shares.
(b) As used herein, a "Purchase Event" shall have occurred when:
(i) PBC or any subsidiary of PBC, (without the prior written consent of GBB)
enters into an agreement with any person (other than GBB or any of its
subsidiaries) pursuant to which such person would: (x) merge or consolidate
with, or enter into any similar transaction with PBC or any subsidiary of PBC,
(y) purchase, lease or otherwise acquire all or substantially all of the assets
of PBC or (z) purchase or otherwise acquire (by merger, consolidation, share
exchange or any similar transaction) securities representing 10 percent or more
of the voting shares of PBC (the transactions referred to in subparagraph (x),
(y) and (z) are referred to as an "Acquisition Transaction"); (ii) any person or
group of persons acting in concert (other than GBB or any of its subsidiaries)
acquires the beneficial ownership or the right to acquire beneficial ownership
of securities representing 24.99 percent or more of the voting shares of PBC
(the term "beneficial ownership" for purposes of this Agreement shall have the
meaning set forth in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the regulations promulgated thereunder); (iii)
the shareholders of PBC fail to approve the business combination between PBC and
GBB contemplated by the Reorganization Agreement at any meeting of such
shareholders which has been held for that purpose or any adjournment or
postponement thereof, the failure of such a shareholder meeting to occur prior
to termination of the Reorganization Agreement, or the withdrawal or
modification (in a manner adverse to GBB) of the recommendation of PBC's Board
of Directors of the Merger and Reorganization Agreement that the shareholders of
PBC approve the Merger and the Reorganization Agreement, in each case, after
there shall have been a public announcement that any person (other than GBB or
any of its subsidiaries), shall have (A) made, or publicly disclosed an
intention to make, a proposal to engage in an Acquisition Transaction, (B)
commenced a tender offer, as defined herein, or filed a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to an exchange offer, as defined herein, or (C) filed an application (or
given a notice), whether in draft or final form, with the Department of
Financial Institutions of the State of California or other federal or state bank
regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction; (iv) any
person (other than GBB or other than in connection with a transaction which GBB
has given its prior written consent), shall have filed an application or notice
with the Department of Financial Institutions of the State of California or
other federal or state bank regulatory authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction, exchange offer or tender offer; (v) PBC shall have willfully
breached any covenant or obligation contained in the
E-2
Reorganization Agreement in anticipation of engaging in a Purchase Event, and
following such breach GBB would be entitled to terminate the Reorganization
Agreement (whether immediately or after the giving of notice or passage of time
or both); or (vi) a public announcement by PBC of the authorization,
recommendation or endorsement by PBC of an Acquisition Transaction, exchange
offer or tender offer or a public announcement by PBC of an intention to
authorize, recommend or announce an Acquisition Transaction, exchange offer or
tender offer. If a Purchase Event has occurred, the Option shall continue to be
exercisable until its termination in accordance with Section 2(a) hereof. PBC
shall notify GBB promptly in writing upon learning of the occurrence of a
Purchase Event, it being understood that the giving of such notice by PBC shall
not be a condition to the right of GBB to transfer or exercise the Option. As
used in this Agreement, "person" shall have the same meaning set forth in the
Reorganization Agreement. As used in this paragraph "tender offer" or "exchange
offer" shall mean, respectively, the commencement (as such term is defined in
Rule 14d-2 promulgated under the Exchange Act) by any person (other than GBB or
any subsidiary of GBB) of, or the filing by any person (other than GBB or any
subsidiary of GBB) of a registration statement under the Securities Act with
respect to, a tender offer or exchange offer, respectively, to purchase shares
of PBC Stock such that, upon consummation of such offer, such person would own
or control 10 percent or more of the then-outstanding shares of PBC Stock.
(c) In the event a Purchase Event occurs, GBB may elect to
exercise the Option. If GBB wishes to exercise the Option, it shall send to PBC
a written notice (the date of which shall be referred to herein as the "Notice
Date") which specifies (i) the total number of Option Shares to be purchased,
and (ii) a place and date not earlier than two business days nor later than ten
business days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"); provided, however, that if prior notification to
-----------------
or approval of the Department of Financial Institutions of the State of
California or any other regulatory agency is required in connection with such
purchase, the Holder, as defined below, shall promptly file the required notice
or application for approval, shall promptly notify PBC of such filing, and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
3. Payment and Delivery of Certificates; GBB Representation.
--------------------------------------------------------
(a) If GBB elects to exercise the Option, then at the Closing,
GBB shall pay to PBC the aggregate purchase price for the Option Shares
purchased pursuant to the exercise of the Option in immediately available funds
by a wire transfer to a bank designated by PBC.
(b) At such Closing, simultaneously with the delivery of the
purchase price for the Option Shares as provided in Paragraph (a) hereof, PBC
shall deliver to GBB a certificate or certificates, registered in the name of
GBB or its designee, representing the number of Option Shares purchased by GBB.
Such certificates may be endorsed with any legend required pursuant to any
E-3
permit or exemption granted by the Department of Financial Institutions of the
State of California or any other regulatory agency, as well as the following
legend:
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND
THE ISSUER, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
ISSUER. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A REQUEST THEREFOR.
Any such legend shall be removed by delivery of a substitute certificate without
such legend if GBB shall have delivered to PBC an opinion of counsel, in form
and substance satisfactory to PBC, that such legend is not required for purposes
of assuring compliance with applicable securities or other law or with this
Agreement.
(c) Except as otherwise provided herein, GBB hereby represents
and warrants to PBC that the Option is being, and any Option Shares issued upon
exercise of the Option will be, acquired by GBB for its own account and not with
a view to any distribution thereof, and GBB will not sell any Option Shares
purchased pursuant to exercise of the Option except in compliance with
applicable securities and other laws.
4. Representations. PBC hereby represents and warrants to GBB as
---------------
follows:
(a) PBC has all requisite corporate power and authority to enter
into and perform all of its obligations under this Agreement. The execution,
delivery and performance of this Agreement and all of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of PBC. This Agreement has been duly executed and delivered by PBC
and constitutes a valid and binding agreement of PBC, enforceable against PBC in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally or by equitable principles, whether such enforcement is
sought in law or equity.
(b) The execution and delivery by PBC of this Agreement and the
consummation of the transactions herein contemplated do not and will not violate
or conflict with PBC's Articles of Incorporation or Bylaws, any statute,
regulation, judgment, order, writ, decree or injunction applicable to PBC (other
than as may be effected by GBB's ownership of PBC Common Stock exceeding certain
limits set forth by statute or regulation) or its properties or assets and do
not and will not violate, conflict with, result in a breach of, constitute a
default (or an event which with due notice and/or lapse of time would constitute
a default) under, result in a termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of PBC under
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, or loan agreement or other
E-4
agreement, instrument or obligation to which PBC is a party, or by which PBC or
any of its properties or assets may be bound or affected.
(c) PBC has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms, will have
reserved for issuance upon the exercise of the Option a number of shares of
Common Stock sufficient to satisfy the exercise of the Option in full, all of
which Common Stock, upon issuance pursuant hereto, shall be duly authorized,
validly issued, fully paid and nonassessable (except for assessments that may be
ordered by the Commissioner under the authority of Section 662 of the CFC), and
shall be delivered free and clear of all claims, liens, encumbrances, security
interests and preemptive rights.
5. Adjustment Upon Changes in Capitalization.
-----------------------------------------
(a) In the event of any dividend, stock split, split-up,
recapitalization, reclassification, combination, exchange of shares or similar
transaction or event with respect to Common Stock, the type and number of shares
or securities subject to the Option and the Exercise Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that GBB shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that GBB
would have received in respect of Common Stock if the Option had been exercised
immediately prior to such event, or the record date thereof, as applicable. If
any shares of Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this Section 5(a)),
the number of shares of Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of Common Stock
previously issued to GBB pursuant hereto, equals 19.9 percent of the number of
shares of Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to this Option.
(b) In the event that PBC, shall, prior to the Expiration Date,
enter in an agreement: (i) to consolidate with or merge into any person, other
than GBB or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than GBB or one of its subsidiaries, to merge into PBC and PBC
shall be the continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of PBC or any other person or cash or
any other property or the outstanding shares of Common Stock immediately prior
to such merger shall after such merger represent less than 50 percent of the
outstanding shares and share equivalents of the merged company; or (iii) to sell
or otherwise transfer all or substantially all of its assets to any person,
other than GBB or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of GBB, of either (x) the Succeeding
Corporation (as defined below), (y) any person that controls
E-5
the Succeeding Corporation, or (z) in the case of a merger described in clause
(ii), PBC (in each case, such person being referred to as the "Substitute Option
Issuer.")
(c) The Substitute Option shall have the same terms as the
Option, provided, that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to GBB. The Substitute Option Issuer shall
also enter into an agreement with the then-holder or holders of the Substitute
Option in substantially the form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of the Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Exercise Price multiplied by a fraction in which the
numerator is the number of shares of the Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Succeeding Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or merger with PBC (if
other than PBC), (y) PBC in a merger in which PBC is the continuing or surviving
person, and (z) the transferee of all or any substantial part of PBC assets (or
the assets of its subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made by any person (other than GBB or its subsidiaries) (y)
the price per share of Common Stock to be paid by any person (other than GBB or
any of its subsidiaries) pursuant to an agreement with PBC, and (z) the highest
closing sales price per share of Common Stock as quoted on the Nasdaq National
Market (or if Common Stock is not quoted on the Nasdaq National Market, the
highest bid price per share on any day as quoted on the principal trading market
or securities exchange on which such shares are traded as reported by a
recognized source chosen by GBB) within the six-month period immediately
preceding the agreement referred to in (y); provided, that in the event of a
sale of less than all of PBC's assets, the Assigned Value shall be the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of PBC as determined by a nationally recognized investment
banking firm selected by GBB and reasonably acceptable to PBC, divided by the
number of shares of Common Stock outstanding at the time of such sale. In the
event that an exchange offer is made for Common Stock or an agreement is entered
into for a merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
E-6
exchange for the Common Stock shall be determined by a nationally recognized
investment banking firm mutually selected by GBB and PBC (or if applicable, the
Succeeding Corporation), provided that if a mutual selection cannot be made as
to such investment banking firm, it shall be selected by GBB.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day preceding
such consolidation, merger or sale, provided that if PBC is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by PBC, the person merging into PBC or by any company
which controls or is controlled by such merging person, as GBB may elect.
(f) In no event pursuant to any of foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9 percent of the aggregate of
the shares of the Substitute Common Stock outstanding immediately prior to
exercise of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than 19.9 percent of the aggregate of the shares
of Substitute Common Stock but for this clause (f), the Substitute Option Issuer
shall make a cash payment to GBB equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (f)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (f). This difference in value shall be determined by
a nationally recognized investment banking firm selected by GBB and the
Substitute Option Issuer.
(g) PBC shall not enter into any transaction described in subsection
(b) of this Section 5 unless the Succeeding Corporation and any person that
controls the Succeeding Corporation assume in writing all the obligations of PBC
hereunder and take all other actions that may be necessary so that the
provisions of this Agreement, including but not limited to this Section 5, are
given full force and effect (including, without limitation, any action that may
be necessary so that the shares of Substitute Common Stock are in no way
distinguishable from or have lesser economic value than other shares of common
stock issued by the Substitute Option Issuer).
6. Purchase of Option Shares and Options by PBC.
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(a) From and after the first date a transaction specified in
Section 5(b) herein is consummated (the "Repurchase Event"), and subject to
applicable regulatory restrictions, GBB or a holder or former holder of any
Options (a "Holder") who has exercised the Options in whole or in part shall
have the right to require PBC to purchase some or all of the Option Shares at a
purchase price per share (the "Purchase Price") equal to the highest of (i) 100
percent of the Exercise Price, (ii) the highest price paid or agreed to be paid
for shares of Common Stock by an Acquiring Person (as defined in Paragraph (b)
of this Section) in any tender offer, exchange offer or other transaction or
series of related transactions involving the acquisition of 10 percent or more
of the outstanding shares of Common Stock during the one-year period immediately
preceding the Purchase Date (as defined in Paragraph (d) of this Section) and
(iii) in the event of a sale of all or substantially all of PBC's assets, (x)
the sum of the price paid in such sale for such assets and the
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current market value of the remaining assets of PBC as determined by a
recognized investment banking firm jointly selected by such Holder and PBC, each
acting in good faith, divided by (y) the number of shares of Common Stock then
outstanding, provided, however, that the amount calculated pursuant to clauses
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(ii) and (iii) of this Section 6(a) shall not exceed $1.5 million. In the event
that any of the consideration paid or agreed to be paid by an Acquiring Person
for any shares of Common Stock or for any of PBC's assets consists in whole or
in part of securities, the value of such securities for purposes of determining
the Purchase Price shall be determined (i) if there is an existing public
trading market therefor, by the average of the last sales prices for such
securities on the ten trading days ending three trading days prior to the
payment of such consideration (if such consideration has been paid) or prior to
the date of determination (if such consideration has not yet been paid) and (ii)
if there is no existing public trading market for such securities, by a
recognized investment banking firm jointly selected by the Holder and PBC, each
acting in good faith. The Holder's right to require PBC to purchase some or all
of the Option Shares under this Section shall expire on the day which is one
year following the Repurchase Event; provided, that if PBC is prohibited under
--------
applicable regulations from purchasing Common Stock as to which a Holder has
given notice hereunder, then the Holder's right to require PBC to purchase such
shares shall expire on the date which is one year following the date on which
PBC no longer is prohibited from purchasing such shares: provided further, that
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PBC shall use its best efforts to obtain any consent or approval and make any
filing required for PBC to consummate as quickly as possible the purchase of the
Common Stock contemplated hereunder.
(b) For purposes of this Agreement, "Acquiring Person" shall mean
a person or group (as such terms are defined in the Exchange Act and the rules
and regulations thereunder) other than GBB or a subsidiary of GBB who on or
after the date of this Agreement engages in a transaction which gives rise to a
Purchase Event.
(c) Subject to applicable regulatory restrictions, from and after
a Repurchase Event or after GBB receives official notice that an approval of the
Department of Financial Institutions of the State of California, or any other
regulatory authority, required for the exercise of the Option and purchase of
the Option Shares will not be issued or granted, a Holder shall have the right
to require PBC to purchase some or all of the Options held by such Holder at a
price equal to the Purchase Price minus the Exercise Price on the Purchase Date
(as defined in Paragraph (d) of this Section) multiplied by the number of shares
of Common Stock that may be purchased on the Purchase Date upon the exercise of
the Options elected to be purchased, provided, however, that the amount
calculated pursuant to this Section 6(c) shall not exceed $1.5 million.
Notwithstanding the termination date of the Options, the Holder's right to
require PBC to purchase some or all of the Options under this Section shall
expire on the day which is one year following the Repurchase Event; provided,
--------
that if PBC is prohibited under applicable regulations from purchasing the
Options as to which an Holder has given notice hereunder, then the Holder's
right to require PBC to purchase such Options shall expire on the day which is
one year following the date on which PBC no longer is prohibited from purchasing
such Options; provided further, that PBC shall use its best efforts to obtain
----------------
any consent or approval and make any filing required for PBC to consummate as
quickly as possible the purchase of the Options contemplated hereunder.
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(d) A Holder may exercise its right to require PBC to purchase
the Common Stock or Options (collectively, "Securities") pursuant to this
Section by surrendering for such purpose to PBC, at its principal office or at
such other office or agency maintained by PBC for that purpose, within the
period specified above, the certificates or other instruments representing the
Securities to be purchased accompanied by a written notice stating that it
elects to require PBC to purchase all or a specified number of such Securities.
Within five business days after the surrender of such certificates or
instruments and the receipt of such notice relating thereto, to the extent it is
legally permitted to do so, PBC shall deliver or cause to be delivered to the
Securities Holder (i) a bank cashier's or certified check payable to the
Securities Holder in an amount equal to the applicable purchase price therefor,
and (ii) if less than the full number of Securities evidenced by the surrendered
instruments are being purchased, a new certificate or instrument, for the number
of Securities evidenced by such surrendered certificates or other instruments
less the number of Securities purchased. Such purchases shall be deemed to have
been made at the close of business on the date (the "Purchase Date") of the
receipt of such notice and of such surrender of the certificates or other
instruments representing the Securities to be purchased and the rights of the
Securities Holder, except for the right to receive the applicable purchase price
therefor in accordance herewith, shall cease on the Purchase Date.
7. Demand Registration Rights. As promptly as practicable upon
--------------------------
GBB's request after a Purchase Event, PBC agrees to prepare and file not more
than two registration statements, prospectuses or permit or exemption
applications ("Registration Event") as appropriate, under federal and any
applicable state securities laws, with respect to any proposed sale of any
warrants, options or other securities representing any of GBB's rights under
this Agreement or proposed dispositions by GBB of any or all of the Option
Shares, if such registrations or filings are required by law or regulation, and
to use its best efforts to cause any such registration statements or
prospectuses to become effective, or to have any permit or exemption granted, as
expeditiously as possible and to keep such registration statement, prospectus,
permit or exemption effective for a period of not less than 180 days unless, in
the written opinion of counsel to PBC, addressed to GBB and satisfactory in form
and substance to GBB and its counsel, registration (or filing of a prospectus,
or grant of a permit or exemption) is not required for such proposed
transactions. All fees, expenses and charges of any kind or nature whatsoever
incurred in connection with any registration of, or the preparation of any
registration statement, prospectus or permit or exemption application relating
to, the Options or the Option Shares pursuant to this Section 7 shall be borne
and paid by PBC; provided, however, that in no event shall this Section 7 be
construed to require PBC to bear the expense of any change of control notice or
similar regulatory filing made by any purchaser or acquiror of Option Shares
issued to GBB pursuant to this Agreement. In the event GBB exercises its
registration rights under this Section 7, PBC shall provide GBB, its affiliates,
each of their respective officers and directors and any underwriters used by
GBB, with indemnifications, representations and warranties and shall cause its
attorneys and accountants to deliver to GBB and any such underwriters attorneys'
opinions and "comfort letters", all of a type customarily provided or delivered
in connection with public underwritten offerings of securities. In the event
PBC effects a registration of Common Stock for its own account or for any other
shareholder of PBC, it shall allow GBB to participate in such registration.
Notwithstanding the foregoing, PBC shall have the right to delay (a "Delay
Right") a
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Registration Event for a period of up to thirty (30) days, in the event it
receives a request from GBB to effect a Registration Event, if PBC (i) is
involved in a material transaction, or (ii) determines, in the good faith
exercise of its reasonable business judgment, that such registration and
offering could adversely effect or interfere with bona fide material financing
plans of PBC or would require disclosure of information, the premature
disclosure of which could materially adversely affect PBC or any transaction
under active consideration by PBC. For purposes of this Agreement, the term
"material transaction" shall mean a transaction which, if PBC were subject to
the reporting requirements under the Exchange Act, would require PBC to file a
current report on Form 8-K with the Securities Exchange Commission. PBC shall
have the right to exercise two Delay Rights in any eighteen (18) month period.
8. Listing
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If Common Stock or any other securities to be acquired upon exercise
of the Option are then authorized for quotation or trading or listing on the
Nasdaq National Market or any other securities exchange or automated quotation
system, PBC, or any successor thereto, upon the request of the holder of the
Option, will promptly file an application, if required, to authorize for listing
or trading or quotation the shares of Common Stock or other securities to be
acquired upon exercise of the Option on the Nasdaq National Market or any other
securities exchange or automated quotation system and will use its best efforts
to obtain approval, if required, of such listing or quotation as soon as
possible.
9. Total Profit
------------
Notwithstanding any other provision of this Agreement to the contrary,
in no event shall GBB purchase under the terms of this Agreement that number of
Option Shares which have a Spread Value, as defined below, in excess of $1.5
million. In the event the Spread Value exceeds $1.5 million, the number of
Option Shares which GBB is entitled to purchase at the Closing Date shall be
reduced to the extent required such that the Spread Value following such
reduction is equal to or less than $1.5 million. "Spread Value" shall mean the
difference between (i) the product of (1) the sum of the total number of Option
Shares GBB (x) intends to purchase at a Closing pursuant to the exercise of the
Option and (y) previously purchased pursuant to the prior exercise of the
Option, and (2) the closing price of PBC Common Stock as quoted on the Nasdaq
National Market on the last trading day immediately preceding the Closing Date,
and (ii) the product of (1) the total number of Option Shares GBB (x) intends to
purchase at the Closing Date pursuant to the exercise of the Option and (y)
previously purchased pursuant to the prior exercise of the Option and (2) the
applicable Option Price of such Option Shares.
10. Miscellaneous.
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(a) Expenses. Each of the parties hereto shall bear and pay all
--------
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder,
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including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided
----------------
herein, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Nothing in
this Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
(c) Assignment. At any time after a Purchase Event occurs, GBB
----------
may sell, assign or otherwise transfer its rights and obligations hereunder, in
whole or in part, by issuing Options or otherwise, to any person or group of
persons, subject to applicable law, rule or regulation. In order to effectuate
the foregoing, GBB (or any direct or indirect assignee or transferee of GBB)
shall be entitled to surrender this Agreement to PBC in exchange for two or more
Agreements entitling the holders thereof to purchase in the aggregate the same
number of shares of Common Stock as may be purchasable hereunder.
(d) Notices. All notices or other communications which are
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required or permitted hereunder shall be in writing and sufficient if delivered
personally or by confirmed facsimile transmission or sent by registered or
certified mail or overnight courier, postage prepaid, with return receipt
requested, addressed as follows:
If to GBB:
Greater Bay Bancorp
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Manatt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: T. ▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
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If to PBC:
Peninsula Bank of Commerce
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
McCutchen, Doyle, ▇▇▇▇▇ & Enersen, LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
A party may change its address for notice purposes by written notice to the
other party hereto.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties hereto agree that
--------------------
irreparable harm would occur in the event that any of the provisions of this
Agreement were not performed by them in accordance with their specific terms or
conditions or were otherwise breached and that money damages are an inadequate
remedy for breach of this Agreement because of the difficulty of ascertaining
the amount of damage that will be suffered by the parties in the event that this
Agreement is not performed in accordance with its terms or conditions or
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement by the
parties 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 it is entitled at law or in equity.
(g) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
(h) Best Efforts. Each of GBB and PBC will use its best efforts
------------
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Department of Financial Institutions of the State of California for approval to
acquire or issue the shares issuable hereunder.
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(i) Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement,
as of the day and year first written above.
GREATER BAY BANCORP
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President
and Chief Executive Officer
PENINSULA BANK OF COMMERCE
By:______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman of the Board
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President and
Chief Executive Officer
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