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AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
SANTA ▇▇▇▇▇▇▇ BANCORP,
AND
PACIFIC CAPITAL BANCORP,
Dated as of July 20, 1998
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TABLE OF CONTENTS
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ARTICLE I. TERMS OF THE MERGER AND CLOSING...........................................................2
SECTION 1.01 Merger of Pacific with and into SBB.......................................................2
SECTION 1.02 Effective Date............................................................................2
SECTION 1.03 Effects of the Merger.....................................................................2
SECTION 1.04 Conversion of Pacific Common Stock........................................................3
SECTION 1.05 SBB Common Stock..........................................................................4
SECTION 1.06 Stock Options.............................................................................4
SECTION 1.07 Exchange Procedures; Surrender of Common Certificates.....................................5
SECTION 1.08 Articles of Incorporation.................................................................7
SECTION 1.09 Bylaws....................................................................................7
SECTION 1.10 Directors and Officers....................................................................7
SECTION 1.11 Headquarters of Surviving Corporation.....................................................7
SECTION 1.12 Tax Consequences..........................................................................7
SECTION 1.13 Employee Benefits.........................................................................7
SECTION 1.14 Severance Payments........................................................................8
SECTION 1.15 Mutual Stock Option Agreements............................................................8
ARTICLE II. THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE......................................8
SECTION 2.01 Time and Place of the Closing and Closing Date............................................8
SECTION 2.02 Actions to be Taken at the Closing by Pacific.............................................8
SECTION 2.03 Actions to be Taken at the Closing by SBB................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PACIFIC................................................12
SECTION 3.01 Organization and Qualification...........................................................12
SECTION 3.02 Execution and Delivery...................................................................13
SECTION 3.03 Capitalization...........................................................................14
SECTION 3.04 Compliance with Laws, Permits and Instruments............................................14
SECTION 3.05 Financial Statements.....................................................................15
SECTION 3.06 Undisclosed Liabilities..................................................................16
SECTION 3.07 Litigation...............................................................................16
SECTION 3.08 Consents and Approvals...................................................................16
SECTION 3.09 Title to Assets..........................................................................17
SECTION 3.10 Absence of Certain Changes or Events.....................................................17
SECTION 3.11 Leases, Contracts and Agreements.........................................................19
SECTION 3.12 Taxes....................................................................................20
SECTION 3.13 Insurance................................................................................20
SECTION 3.14 No Adverse Change........................................................................21
SECTION 3.15 Patents, Trademarks and Copyrights.......................................................21
SECTION 3.16 Transactions with Certain Persons and Entities...........................................21
SECTION 3.17 Evidences of Indebtedness................................................................22
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SECTION 3.18 Condition of Assets......................................................................22
SECTION 3.19 Environmental Compliance.................................................................22
SECTION 3.20 Regulatory Compliance....................................................................23
SECTION 3.21 Securities and Exchange Commission Reports...............................................23
SECTION 3.22 Absence of Certain Business Practices....................................................24
SECTION 3.23 Registration Statement; Joint Proxy Statement/Prospectus.................................24
SECTION 3.24 Dissenting Shareholders..................................................................24
SECTION 3.25 Pooling of Interests.....................................................................24
SECTION 3.26 Books and Records........................................................................25
SECTION 3.27 Forms of Instruments, Etc................................................................25
SECTION 3.28 Fiduciary Responsibilities...............................................................25
SECTION 3.29 Guaranties...............................................................................25
SECTION 3.30 Voting Trust or Buy-Sell Agreements......................................................25
SECTION 3.31 Employee Relationships...................................................................25
SECTION 3.32 Employee Benefit Plans...................................................................26
SECTION 3.33 Interest Rate Risk Management Instruments................................................27
SECTION 3.34 Year 2000................................................................................27
SECTION 3.35 Representations Not Misleading...........................................................28
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SBB...................................................28
SECTION 4.01 Organization and Qualification...........................................................29
SECTION 4.02 Execution and Delivery...................................................................30
SECTION 4.03 Capitalization...........................................................................30
SECTION 4.04 Compliance with Laws, Permits and Instruments............................................31
SECTION 4.05 Financial Statements.....................................................................31
SECTION 4.06 Undisclosed Liabilities..................................................................32
SECTION 4.07 Litigation...............................................................................32
SECTION 4.08 Consents and Approvals...................................................................33
SECTION 4.09 Title to Assets..........................................................................33
SECTION 4.10 Absence of Certain Changes or Events.....................................................33
SECTION 4.11 Leases, Contracts and Agreements.........................................................36
SECTION 4.12 Taxes ...................................................................................36
SECTION 4.13 Insurance ...............................................................................36
SECTION 4.14 No Adverse Change........................................................................37
SECTION 4.15 Patents, Trademarks and Copyrights.......................................................37
SECTION 4.16 Transactions with Certain Persons and Entities...........................................38
SECTION 4.17 Evidences of Indebtedness................................................................38
SECTION 4.18 Condition of Assets......................................................................38
SECTION 4.19 Environmental Compliance.................................................................38
SECTION 4.20 Regulatory Compliance....................................................................39
SECTION 4.21 Securities and Exchange Commission Reports...............................................40
SECTION 4.22 Absence of Certain Business Practices....................................................40
SECTION 4.23 Registration Statement; Joint Proxy Statement/Prospectus.................................40
SECTION 4.24 Pooling of Interests.....................................................................41
SECTION 4.25 Books and Records........................................................................41
SECTION 4.26 Forms of Instruments, Etc................................................................41
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SECTION 4.27 Fiduciary Responsibilities...............................................................41
SECTION 4.28 Guaranties...............................................................................41
SECTION 4.29 Voting Trust or Buy-Sell Agreements......................................................41
SECTION 4.30 Employee Relationships...................................................................41
SECTION 4.31 Employee Benefit Plans...................................................................42
SECTION 4.32 Interest Rate Risk Management Instruments................................................43
SECTION 4.33 Year 2000................................................................................43
SECTION 4.34 Representations Not Misleading...........................................................44
ARTICLE V. COVENANTS OF PACIFIC.....................................................................44
SECTION 5.01 Best Efforts.............................................................................44
SECTION 5.02 Merger Agreement.........................................................................45
SECTION 5.03 Submission of Merger to Shareholders.....................................................45
SECTION 5.04 Information for Applications and Statements..............................................45
SECTION 5.05 Required Acts of Pacific.................................................................46
SECTION 5.06 Prohibited Acts of Pacific...............................................................47
SECTION 5.07 Access; Pre-Closing Investigation........................................................49
SECTION 5.08 Director and Committee Meetings..........................................................49
SECTION 5.09 Additional Financial Statements..........................................................50
SECTION 5.10 Untrue Representations...................................................................50
SECTION 5.11 Litigation and Claims....................................................................50
SECTION 5.12 Adverse Changes..........................................................................50
SECTION 5.13 No Negotiation with Others...............................................................50
SECTION 5.14 Consents and Approvals...................................................................51
SECTION 5.15 Environmental Investigation; Right to Terminate Agreement................................51
SECTION 5.16 Restrictions on Resales..................................................................52
SECTION 5.17 Shareholder Lists........................................................................52
SECTION 5.18 Employee Pension Plans...................................................................52
SECTION 5.19 Employee Welfare Benefit Plans...........................................................52
SECTION 5.20 Director Voting..........................................................................53
SECTION 5.21 Dividends................................................................................53
SECTION 5.22 Non-Compete Agreements...................................................................53
SECTION 5.23 Pooling of Interests Accounting Treatment................................................53
SECTION 5.24 Disclosure Schedules.....................................................................53
ARTICLE VI. COVENANTS OF SBB.........................................................................53
SECTION 6.01 Best Efforts.............................................................................53
SECTION 6.02 Merger Agreement.........................................................................54
SECTION 6.03 Regulatory Approvals and Registration Statement..........................................54
SECTION 6.04 Submission of Merger and Related Matters to Shareholders.................................55
SECTION 6.05 Information for Applications and Statements..............................................55
SECTION 6.06 Required Acts of SBB.....................................................................56
SECTION 6.07 Prohibited Acts of SBB...................................................................56
SECTION 6.08 Access; Pre-Closing Investigation........................................................58
SECTION 6.09 Director and Committee Meeting...........................................................59
SECTION 6.10 Additional Financial Statements..........................................................59
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SECTION 6.11 Untrue Representations...................................................................59
SECTION 6.12 Litigation and Claims....................................................................59
SECTION 6.13 Adverse Change...........................................................................60
SECTION 6.14 No Negotiation with Others...............................................................60
SECTION 6.15 Consents and Approvals...................................................................60
SECTION 6.16 Environmental Investigation; Right to Terminate Agreement................................60
SECTION 6.17 Stock Options............................................................................61
SECTION 6.18 Director and Officer Liability Insurance.................................................62
SECTION 6.19 Dividends................................................................................62
SECTION 6.20 Conduct of Business in the Ordinary Course...............................................62
SECTION 6.21 Additions to SBB Board of Directors......................................................63
SECTION 6.22 Director Voting..........................................................................63
SECTION 6.23 Pooling of Interests Accounting Treatment................................................63
SECTION 6.24 Disclosure Schedules.....................................................................63
ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC.......................................63
SECTION 7.01 Compliance with Representations, Warranties and Agreements...............................63
SECTION 7.02 Shareholder Approvals....................................................................64
SECTION 7.03 Government and Other Approvals...........................................................64
SECTION 7.04 No Litigation............................................................................64
SECTION 7.05 Delivery of Closing Documents............................................................64
SECTION 7.06 Receipt of Fairness Opinion..............................................................64
SECTION 7.07 Receipt of Pooling Opinions..............................................................65
SECTION 7.08 Registration Statement...................................................................65
SECTION 7.09 Federal Tax Opinion......................................................................65
SECTION 7.10 Dissenting Shareholders..................................................................65
SECTION 7.11 Accounting Treatment.....................................................................65
SECTION 7.12 Bylaw Amendment..........................................................................66
SECTION 7.13 No Material Adverse Change...............................................................66
ARTICLE VIII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBB...........................................66
SECTION 8.01 Compliance with Representations, Warranties and Agreements...............................66
SECTION 8.02 Shareholder Approvals....................................................................66
SECTION 8.03 Government and Other Approvals...........................................................66
SECTION 8.04 No Litigation............................................................................67
SECTION 8.05 Delivery of Closing Documents............................................................67
SECTION 8.06 Receipt of Shareholder Letters...........................................................67
SECTION 8.07 Receipt of Fairness Opinion..............................................................67
SECTION 8.08 Dissenting Shareholders..................................................................67
SECTION 8.09 Receipt of Pooling Opinions..............................................................68
SECTION 8.10 Registration Statement...................................................................68
SECTION 8.11 Federal Tax Opinion......................................................................68
SECTION 8.12 Accounting Treatment.....................................................................68
SECTION 8.13 No Material Adverse Change...............................................................68
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ARTICLE IX. EXPENSES, TERMINATION AND ABANDONMENT....................................................69
SECTION 9.01 Expenses.................................................................................69
SECTION 9.02 Termination..............................................................................69
SECTION 9.03 Notice of Termination....................................................................71
SECTION 9.04 Effect of Termination....................................................................71
ARTICLE X. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES............................................71
SECTION 10.01 Nonsurvival of Representations and Warranties...................................71
ARTICLE XI. CONFIDENTIAL INFORMATION.................................................................72
SECTION 11.01 Definition of...........................................................................72
SECTION 11.02 Definition of...........................................................................72
SECTION 11.03 Confidentiality.........................................................................72
SECTION 11.04 Securities Law Concerns.................................................................73
SECTION 11.05 Return of Subject Information...........................................................73
SECTION 11.06 Specific Performance/Injunctive Relief..................................................73
ARTICLE XII. MISCELLANEOUS............................................................................73
SECTION 12.01 Brokerage Fees and Commissions..........................................................73
SECTION 12.02 Entire Agreement........................................................................74
SECTION 12.03 Further Cooperation.....................................................................74
SECTION 12.04 Severability............................................................................74
SECTION 12.05 Notices.................................................................................74
SECTION 12.06 GOVERNING LAW...........................................................................75
SECTION 12.07 Multiple Counterparts...................................................................76
SECTION 12.08 Certain Definitions.....................................................................76
SECTION 12.09 Specific Performance....................................................................77
SECTION 12.10 Attorneys' Fees and Costs...............................................................77
SECTION 12.11 Rules of Construction...................................................................77
SECTION 12.12 Binding Effect; Assignment..............................................................77
SECTION 12.13 Public Disclosure.......................................................................78
SECTION 12.14 Extension; Waiver.......................................................................78
SECTION 12.15 Amendments..............................................................................78
SECTION 12.16 Access; Due Diligence...................................................................79
EXHIBITS
Exhibit "A" - Agreement and Plan of Merger
Exhibit "B" - SBB Option Agreement
Exhibit "C" - Pacific Option Agreement
Exhibit "D" - Opinion Matters of Counsel to Pacific
Exhibit "E" - Opinion Matters of Counsel to SBB
Exhibit "F" - Form of Shareholder Letter
Exhibit "G" - Persons to Deliver Non-Compete Agreements
Exhibit "H" - Form of Non-Compete Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of the 20th day of July, 1998, by and between Santa ▇▇▇▇▇▇▇
Bancorp, a California corporation and registered bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA") with its principal
offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("SBB"), and
Pacific Capital Bancorp, a California corporation and registered bank holding
company under the BHCA with its principal offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Pacific").
W I T N E S S E T H:
WHEREAS, Pacific is a California corporation duly organized and
existing under the laws of the State of California; and
WHEREAS, SBB is a California corporation duly organized and existing
under the laws of the State of California; and
WHEREAS, SBB and Pacific desire to combine their respective businesses;
and
WHEREAS, in furtherance of the combination of their respective
businesses, SBB and Pacific desire that Pacific shall be merged (the "Merger")
with and into SBB, under the articles of incorporation of SBB and with the
resulting name "Pacific Capital Bancorp" (SBB as it will exist from and after
the Effective Date (defined herein) being referred to herein as the "Surviving
Corporation"), and that (i) all of the issued and outstanding shares of common
stock of Pacific (other than shares held by dissenting shareholders, fractional
share interests and as otherwise set forth herein) shall be converted into and
exchanged for shares of common stock of the Surviving Corporation, (ii) all
outstanding options to acquire common stock of Pacific shall be converted into
options to acquire common stock of the Surviving Corporation, and (iii) all of
the issued and outstanding shares of capital stock of SBB shall continue to be
issued and outstanding shares of capital stock of the Surviving Corporation, all
pursuant to an Agreement and Plan of Merger substantially in the form attached
hereto as Exhibit "A" (the "Merger Agreement"); and
WHEREAS, it is the intent of the respective Boards of Directors of SBB
and Pacific that the Merger be structured as a "merger of equals" of SBB and
Pacific and that the Surviving Corporation be governed and operated on this
basis; and
WHEREAS, as a condition to, and immediately after the execution of,
this Agreement, SBB and Pacific are entering into mutual stock option agreements
in substantially the forms attached hereto as Exhibit "B" and Exhibit "C".
WHEREAS, SBB and Pacific believe that the Merger, as provided for, and
subject to the terms and conditions set forth in this Agreement and all
exhibits, schedules and supplements hereto, is in the best interests of SBB and
Pacific and their respective shareholders; and
WHEREAS, the respective Boards of Directors of SBB and Pacific have
approved this Agreement and the proposed transactions substantially on the terms
and conditions set forth in this Agreement and the schedules and exhibits hereto
and have authorized the execution thereof.
WHEREAS, this Agreement and the Merger Agreement will be submitted for
approval of the respective shareholders of SBB and Pacific at special meetings
of their respective shareholders; and
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, SBB and Pacific desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement and certain additional agreements
related to the transactions contemplated hereby.
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the conditions set
forth below, the parties hereto undertake, promise, covenant and agree with each
other as follows:
ARTICLE I.
TERMS OF THE MERGER AND CLOSING
SECTION 1.01 Merger of Pacific with and into SBB. Subject to the terms
and conditions of this Agreement and the Merger Agreement, in accordance with
the provisions of Section 1107 of the California General Corporation Law (the
"GCL"), on the Effective Date (as such term is defined in Section 1.02), Pacific
shall merge with and into SBB. SBB shall be the Surviving Corporation in the
Merger and shall continue its corporate existence under the laws of the State of
California. Upon consummation of the Merger, the separate corporate existence of
Pacific shall terminate.
SECTION 1.02 Effective Date. Subject to the terms and conditions of
this Agreement, upon the filing with the Secretary of State of the State of
California (the "California Secretary") of a duly executed Merger Agreement
substantially in the form attached hereto as Exhibit "A" for the merger of
Pacific with and into SBB and officers' certificates prescribed by Section 1103
of the GCL, the Merger shall become effective. The date on which the Merger is
effective as prescribed in the Merger Agreement shall be referred to herein as
the "Effective Date", which the parties shall use their best efforts to cause to
occur on the Closing Date (as defined in Section 2.01(a)).
SECTION 1.03 Effects of the Merger. The Merger shall have the effects
provided by this Agreement and as set forth in Section 1107 of the GCL. The
Surviving Corporation shall be the successor to each of SBB and Pacific; shall
be subject to all the liabilities, obligations, duties and relations of each
merging party; and shall without the necessity of any conveyance, assignment or
transfer, become the owner of all of the assets of every kind and character
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formerly belonging to SBB and Pacific. The name of the Surviving Corporation
shall be "Pacific Capital Bancorp", and Pacific shall provide SBB any consents
necessary to permit the Surviving Corporation to use such name as of the
Effective Date.
SECTION 1.04 Conversion of Pacific Common Stock.
(a) On the Effective Date, by virtue of the Merger and without any
action on the part of the holders of the following-described security, each
share of the common stock, no par value per share, of Pacific (the "Pacific
Common Stock") issued and outstanding immediately prior to the Effective Date
(other than shares of Pacific Common Stock (i) as to which dissenters' rights
have been perfected, or (ii) held directly or indirectly by Pacific or SBB
(except for Trust Account Shares or DPC Shares as defined in Section 1.04(d))
shall be converted into the right to receive 1.935 shares (the "Exchange Ratio")
of the fully-paid, nonassessable and registered common stock, no par value per
share, of SBB (the "SBB Common Stock") (together with any cash payment in lieu
of fractional shares, as provided below, the "Merger Consideration").
(b) No fractional shares of SBB Common Stock shall be issued and, in
lieu thereof, holders of shares of Pacific Common Stock who would otherwise be
entitled to a fractional share interest (after taking into account all shares of
Pacific Common Stock held by such holder) shall be paid an amount in cash equal
to the product of such fractional share interest and the average of the closing
bid and asked price of a share of SBB Common Stock on the Nasdaq National Market
("Nasdaq") on the business day immediately preceding the Effective Date.
(c) All of the shares of Pacific Common Stock converted into SBB Common
Stock pursuant to this Section 1.04 shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist as of the
Effective Date, and each certificate (each a "Certificate") previously
representing any such shares of Pacific Common Stock shall thereafter represent
the right to receive (i) a certificate representing the number of whole shares
of SBB Common Stock and (ii) cash in lieu of fractional shares into which the
shares of Pacific Common Stock represented by such Certificate have been
converted pursuant to this Section 1.04. Certificates previously representing
shares of Pacific Common Stock shall be exchanged for certificates representing
whole shares of SBB Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 1.07, without any interest thereon. Such certificates representing
whole shares of SBB Common Stock exchanged for certificates previously
representing shares of Pacific Common Stock shall bear the name of the Surviving
Corporation.
(d) On the Effective Date, all shares of Pacific Common Stock that are
owned, directly or indirectly, by Pacific or SBB or any of their respective
subsidiaries (other than (i) shares of Pacific Common Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Pacific Common Stock which are similarly held, whether
held directly or indirectly by Pacific or SBB, as the case may be, being
referred to herein as "Trust Account Shares") and (ii) shares of Pacific Common
Stock held by Pacific or any of its subsidiaries in respect of a debt previously
contracted (any such shares being referred to herein as "DPC Shares")) shall be
canceled and shall cease to exist and no stock of SBB or other consideration
shall be delivered in exchange therefor. All shares of SBB Common Stock
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that are owned by Pacific or any of its subsidiaries (other than Trust Account
Shares and DPC Shares with respect to SBB Common Stock) shall be retired.
(e) If, between the date hereof and the Effective Date, the outstanding
shares of SBB Common Stock or Pacific Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar change in
capitalization (a "Share Adjustment"), then the number of shares of SBB Common
Stock into which a share of Pacific Common Stock shall be converted pursuant to
subsection (a) above shall be appropriately and proportionately adjusted so that
each shareholder of Pacific shall be entitled to receive such number of shares
of SBB Common Stock as such shareholder would have received pursuant to such
Share Adjustment had the record date therefor been immediately following the
Effective Date.
(f) If any of the shares of Pacific Common Stock are "dissenting
shares" as defined under applicable provisions of Chapter 13 of the GCL, any
Certificate representing such shares shall not be converted as described in this
Section 1.04, but from and after the Effective Date shall represent only the
right to receive such value as may be determined pursuant to Chapter 13 of the
GCL; provided, however, that each dissenting share of Pacific Common Stock which
shall cease to be a dissenting share shall have only such rights as are provided
under the GCL.
(g) On the Effective Date, the stock transfer books of Pacific shall be
closed, and no transfer of Pacific Common Stock theretofore outstanding shall
thereafter be made.
SECTION 1.05 SBB Common Stock. On and after the Effective Date, each
share of SBB Common Stock issued and outstanding immediately prior to the
Closing Date shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger. References to SBB
Common Stock in this Agreement as of and after the Effective Date shall be
deemed to mean the common stock of the Surviving Corporation.
SECTION 1.06 Stock Options.
(a) Between the date of this Agreement and the Effective Date, each
person holding one or more options to purchase shares of Pacific Common Stock
pursuant to any Pacific Stock Option Plan (as defined in Section 6.17), shall
continue to have the right to exercise any vested Pacific Stock Option (as
defined in Section 6.17) prior to the Effective Date.
(b) On the Effective Date, each non-statutory Pacific Stock Option
which is outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Pacific Common Stock and shall be assumed
by the Surviving Corporation and converted automatically into an option to
purchase shares of SBB Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the Pacific
Stock Option Plans and the agreements evidencing grants thereunder):
(i) The number of shares of SBB Common Stock to be subject to
the converted option shall be equal to the product of the number of shares of
Pacific Common Stock
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subject to the original option and the Exchange Ratio (provided that such number
of shares shall be rounded to the nearest one one-hundredth of a share); and
(ii) The exercise price per share of SBB Common Stock under the
converted option shall be equal to the exercise price per share of Pacific
Common Stock under the original option divided by the Exchange Ratio (provided
that such exercise price shall be rounded to the nearest one one-hundredth of a
dollar).
(c) On the Effective Date, each Pacific Stock Option which is an
"incentive stock option" (as defined in Section 422 of the Code) and which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Pacific Common Stock and shall be assumed by the
Surviving Corporation and converted automatically into an option to purchase
shares of SBB Common Stock in an amount and at an exercise price determined in a
manner which is consistent with Section 424(a) of the Code. The duration and
other terms of the converted option shall be the same as the original option,
except that all references to Pacific shall be deemed to be references to the
Surviving Corporation.
SECTION 1.07 Exchange Procedures; Surrender of Common Certificates.
(a) Norwest Bank Minnesota (or any successor in interest) shall act as
the Exchange Agent in the Merger (the "Exchange Agent").
(b) As soon as practicable after the Effective Date, and in no event
later than three (3) business days thereafter, the Exchange Agent shall mail to
each holder of record of one or more Certificates (as indicated on the certified
shareholder list to be delivered to SBB in accordance with Section 2.02(I)
hereof, each a "Pacific Shareholder") 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 instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration into which the shares of Pacific Common
Stock represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement.
(i) Promptly after receipt of such Certificates and letters of
transmittal, the Exchange Agent shall review the executed letters of transmittal
in order to verify proper execution thereof.
(ii) Upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such properly completed letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor (A) a certificate representing that number of
whole shares of SBB Common Stock to which such holder of Pacific Common Stock
shall have become entitled pursuant to the provisions of Section 1.04, and (B) a
check representing the amount of any cash in lieu of fractional shares which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to this Section 1.07, and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each such outstanding Certificate
shall be deemed for all purposes, subject only to Chapter 13 of the GCL, to
evidence solely the right to receive such Merger Consideration from SBB as
described in
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Section 1.04. No interest will be paid or accrued on any cash in lieu of
fractional shares or on any unpaid dividends and distributions payable to
holders of Certificates.
(iii) Shareholders who do not provide properly completed letters
of transmittal and all appropriate Certificates to the Exchange Agent shall
receive their Merger Consideration promptly following receipt of those properly
completed documents and appropriate Certificates by the Exchange Agent. In the
event that a letter of transmittal contains an error, is incomplete or is not
accompanied by all appropriate Certificates, then the Exchange Agent will notify
such Pacific Shareholder promptly of the need for further information.
(c) If any certificate representing shares of SBB Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of SBB Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or required for
any other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Pacific
Shareholder claiming such Certificate to be lost, stolen or destroyed and, if
required by SBB in its sole discretion, the posting by such person of a bond in
such amount as SBB may determine is reasonably necessary as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(e) Neither the Exchange Agent nor any other party to this Agreement
shall be liable to any holder of any Certificates for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.
(f) Notwithstanding anything to the contrary contained herein, no
certificates representing shares of SBB Common Stock shall be delivered to a
Pacific Shareholder who is an "affiliate" (as such term is used in Section 5.16
and Section 8.06) of Pacific unless such "affiliate" shall have theretofore
executed and delivered to SBB the Shareholder Letter referred to in Section 5.16
and Section 8.06 hereof.
(g) No dividends or other distributions of any kind which are declared
payable to the shareholders of record of the Surviving Corporation after the
Effective Date shall be paid to persons entitled to receive such certificates
for SBB Common Stock until such persons surrender their Certificates. Upon
surrender of such Certificates, the holder thereof shall be paid, without
interest, any dividends or other distributions with respect to the SBB Common
Stock as to which the record date and payment date occurred on or after the
Effective Date and before the date of surrender.
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(h) Notwithstanding anything in this Agreement to the contrary, for a
period of ninety (90) days after the Closing Date, holders of Certificates
representing shares of Pacific Common Stock shall be entitled to vote as holders
of shares of SBB Common Stock notwithstanding that such Certificates
representing Pacific Common Stock have not been exchanged for shares of SBB
Common Stock as provided in this Section 1.07.
SECTION 1.08 Articles of Incorporation. Subject to the terms and
conditions of this Agreement, on the Effective Date, the Articles of
Incorporation of SBB shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law, except
that such Articles of Incorporation shall be amended to provide that the name of
the Surviving Corporation shall be "Pacific Capital Bancorp".
SECTION 1.09 Bylaws. Subject to the terms and conditions of this
Agreement, on the Effective Date, the Bylaws of SBB shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
SECTION 1.10 Directors and Officers.
(a) From and after the Effective Date, the Board of Directors of the
Surviving Corporation shall consist of the persons as set forth in the Merger
Agreement attached hereto as Exhibit "A".
(b) From and after the Effective Date, the officers of the Surviving
Corporation shall be as set forth in the Merger Agreement attached hereto as
Exhibit "A".
SECTION 1.11 Headquarters of Surviving Corporation. On the Effective
Date, the headquarters and principal executive offices of the Surviving
Corporation shall be located in Santa Barbara, California.
SECTION 1.12 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code, and that this Agreement shall constitute a "plan of reorganization" for
the purpose of Section 368 of the Code.
SECTION 1.13 Employee Benefits. SBB shall, with respect to each
employee of Pacific or its Subsidiaries at the Effective Date who continues in
employment with the Surviving Corporation or its Subsidiaries (each a "Continued
Employee"), provide the benefits described in this Section 1.13. Subject to the
right of subsequent amendment, modification or termination in the sole
discretion of the Surviving Corporation as provided in Section 5.18 and Section
5.19 hereof, each Continued Employee shall be entitled, as an employee of the
Surviving Corporation or its Subsidiaries, to participate in SBB Employee
Benefit Plans (as defined in Section 4.31(a)) in effect as of the date of this
Agreement, if such Continued Employee shall be eligible and, if required,
selected for participation therein under the terms thereof. Continued Employees
shall be eligible to participate on the same basis as similarly situated
employees of SBB and its Subsidiaries. All such participation shall be subject
to such terms of such plans as may be in effect from time to time and this
Section 1.13 is not intended to give any Continued Employee any rights or
privileges superior to those of other employees of SBB or its Subsidiaries. The
provisions of this Section 1.13 shall not be deemed or construed so as to
provide duplication of similar benefits but, subject to that qualification, the
Surviving Corporation shall, for purposes of
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vesting and any age or period of service requirements for commencement of
participation with respect to any SBB Employee Plans in which a Continued
Employee may participate, credit each Continued Employee with his or her term of
service with Pacific and its Subsidiaries. Notwithstanding the foregoing, no
such credit for term of service with Pacific and its Subsidiaries shall be given
to any Continued Employee with respect to participation in or benefits received
pursuant to the Santa ▇▇▇▇▇▇▇ Bank & Trust Key Employee Retiree Health Plan and
the Santa ▇▇▇▇▇▇▇ Bank & Trust Retiree Health Plan, but such credit shall begin
to accrue under such plan with respect to Continued Employees as of the
Effective Date.
SECTION 1.14 Severance Payments. The severance benefits set forth in
Schedule 1.14 hereto shall be provided to employees of Pacific who may be
terminated (i) by Pacific on the Effective Date upon confirmation that such
employees would be entitled to the severance benefit, or (ii) by the Surviving
Corporation or any of its Subsidiaries without cause within one year following
the Effective Date.
SECTION 1.15 Mutual Stock Option Agreements. As a condition to the
execution of this Agreement, SBB and Pacific are executing and delivering each
to the other an Option Agreement in substantially the form attached hereto as
Exhibit "B" and Exhibit "C".
ARTICLE II.
THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE
SECTION 2.01 Time and Place of the Closing and Closing Date.
(a) On a date mutually agreeable to SBB and Pacific which is not less
than 10 business days nor more than 30 calendar days after the receipt of all
necessary regulatory, corporate, shareholder and other approvals and the
expiration of any mandatory waiting periods, or on such other date mutually
agreeable to SBB and Pacific (herein called the "Closing Date"), a meeting (the
"Closing") will take place at which the parties to this Agreement will exchange
certificates, opinions, letters and other documents in order to determine
whether all of the conditions set forth in Articles VII and VIII of this
Agreement have been satisfied or waived or whether any condition exists that
would permit a party to this Agreement to terminate this Agreement. If no such
condition then exists, or if no party elects to exercise any right it may have
to terminate this Agreement, then and thereupon the appropriate parties shall
execute such documents and instruments as may be necessary or appropriate in
order to effect the transactions contemplated by this Agreement.
(b) The Closing shall take place at the offices of Santa ▇▇▇▇▇▇▇ Bank &
Trust ("SBB&T"), ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on
the Closing Date, or at such other place to which the parties may mutually
agree.
SECTION 2.02 Actions to be Taken at the Closing by Pacific. At the
Closing, Pacific shall execute and acknowledge, or cause to be executed and
acknowledged (as appropriate), and deliver to SBB such documents and
certificates necessary or appropriate to carry out the terms and provisions of
this Agreement, including without limitation, the following (all of such actions
constituting conditions precedent to SBB's obligations to close hereunder):
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A. True, correct and complete copies of the Articles of Incorporation
of Pacific and all amendments thereto, duly certified as of a recent date by the
California Secretary.
B. True, correct and complete copies of the Articles of Association of
First National Bank of Central California and South Valley National Bank
(collectively, the "Subsidiary Banks") and all amendments thereto, duly
certified as of a recent date by the Office of the Comptroller of the Currency
(the "OCC").
C. True, correct and complete copies of the Articles of Incorporation
of the Pacific Subsidiaries (as defined in Section 3.01(a)), other than the
Subsidiary Banks, and all amendments thereto, duly certified as of a recent date
by the California Secretary.
D. A certificate of existence, dated as of a recent date, issued by the
California Secretary, duly certifying as to the existence of Pacific and the
Pacific Subsidiaries, other than the Subsidiary Banks, under the laws of the
State of California.
E. Certificates to do business, dated as of a recent date, issued by
the OCC, duly certifying as to the authority of each of the Subsidiary Banks to
transact the business of banking under the laws of the United States.
F. Certificates of good standing, dated as of a recent date, issued by
the California Franchise Tax Board, duly certifying as to the good standing of
Pacific and each of the Pacific Subsidiaries in the State of California.
G. Certificates, dated as of a recent date, issued by the Federal
Deposit Insurance Corporation (the "FDIC"), duly certifying that the deposits of
each of the Subsidiary Banks are insured by the FDIC pursuant to the Federal
Deposit Insurance Act.
H. A letter, dated as of a recent date, from the Federal Reserve Bank
of San Francisco, to the effect that Pacific is a registered bank holding
company under the BHCA.
I. A certificate, dated as of the Closing Date, executed by the
Secretary or other appropriate executive officer of Pacific, pursuant to which
such officer shall certify: (a) the due adoption by the Board of Directors of
Pacific of corporate resolutions attached to such certificate authorizing the
execution and delivery of this Agreement and the other agreements and documents
contemplated hereby, including, but not limited to, the Merger Agreement, and
the taking of all actions contemplated hereby and thereby; (b) the due adoption
by the shareholders of Pacific of resolutions authorizing the Merger and the
execution and delivery of this Agreement and the Merger Agreement and the other
agreements and documents contemplated hereby and thereby and the taking of all
actions contemplated hereby and thereby; (c) the incumbency and true signatures
of those officers of Pacific duly authorized to act on its behalf in connection
with the transactions contemplated by this Agreement and to execute and deliver
this Agreement and the Merger Agreement and other agreements and documents
contemplated hereby and thereby and the taking of all actions contemplated
hereby and thereby on behalf of Pacific; (d) that the copy of the Bylaws of
Pacific attached to such certificate is true and correct and such Bylaws have
not been amended except as reflected in such copy; and (e) a true and correct
copy of the list of Pacific Shareholders as of the Closing Date.
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J. A certificate, dated as of the Closing Date, executed by an
executive officer of Pacific, pursuant to which Pacific shall certify, to the
best knowledge of such executive officer, that (i) all of the representations
and warranties made in Article III of this Agreement are true and correct in all
material respects on and as of the date of such certificate as if made on such
date and that, except as expressly permitted by this Agreement, there shall have
been no Material Adverse Change (as defined in Section 12.08(C) hereof) with
respect to Pacific since December 31, 1997, and (ii) Pacific has performed and
complied in all material respects with all of its obligations and agreements
required to be performed on or prior to the Closing Date under this Agreement.
K. Any signed Non-Compete Agreements (as defined in Section 5.22) from
those persons identified on Exhibit "G" attached hereto as Pacific, consistent
with Pacific's obligations to use its best efforts as set forth in Section 5.22
hereof, has been able to obtain on or before the Closing Date.
L. All consents required to be obtained by Pacific from third parties
to consummate the transactions contemplated by this Agreement.
M. An opinion of counsel to Pacific substantially in the form of
Exhibit "D" attached hereto.
N. All other documents required to be delivered to SBB by Pacific under
the provisions of this Agreement, and all other documents, certificates and
instruments as are reasonably requested by SBB or its counsel.
SECTION 2.03 Actions to be Taken at the Closing by SBB. At the Closing,
SBB shall execute and acknowledge (as appropriate) and deliver to Pacific such
documents and certificates necessary or appropriate to carry out the terms and
provisions of this Agreement, including without limitation, the following (all
of such actions constituting conditions precedent to Pacific's obligations to
close hereunder):
A. True, correct and complete copies of SBB's Articles of Incorporation
and all amendments thereto, duly certified as of a recent date by the California
Secretary.
B. True, correct and complete copies of the Articles of Incorporation
of SBB&T, and all amendments thereto, duly certified as of a recent date by the
Commissioner of Financial Institutions of the State of California (the
"California Commissioner").
C. True, correct and complete copies of the Articles of Incorporation
of Sanbarco Mortgage Company ("Sanbarco") and all amendments thereto, duly
certified as of a recent date by the California Secretary.
D. Good standing and existence certificates for SBB and Sanbarco, dated
as of a recent date, issued by the appropriate state officials, duly certifying
as to the existence and good standing of each of SBB and Sanbarco in the State
of California.
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E. Certificate of Existence, dated as of a recent date, issued by the
California Commissioner, duly certifying as to the existence of SBB&T under the
laws of the State of California.
F. Certificates of good standing, dated as of a recent date, issued by
the California Franchise Tax Board, duly certifying as to the good standing of
SBB and each of the SBB Subsidiaries in the State of California.
G. Certificate, dated as of a recent date, issued by the FDIC, duly
certifying that the deposits of SBB&T are insured by the FDIC pursuant to the
Federal Deposit Insurance Act.
H. A letter, dated as of a recent date, from the Federal Reserve Bank
of San Francisco, to the effect that SBB is a registered bank holding company
under the BHCA.
I. A certificate, dated as of the Closing Date, executed by the
Secretary or an Assistant Secretary of SBB pursuant to which such officer shall
certify: (a) the due adoption by the Board of Directors of SBB of corporate
resolutions attached to such certificate authorizing the execution and delivery
of this Agreement and the other agreements and documents contemplated hereby and
the taking of all actions contemplated hereby and thereby; (b) the due adoption
by the shareholders of SBB of resolutions authorizing the Merger and the
execution and delivery of this Agreement and the Merger Agreement and the other
agreements and documents contemplated hereby and thereby and the taking of all
actions contemplated hereby and thereby; (c) the incumbency and true signatures
of those officers of SBB duly authorized to act on its behalf in connection with
the transactions contemplated by this Agreement and to execute and deliver this
Agreement and other agreements and documents contemplated hereby and the taking
of all actions contemplated hereby and thereby on behalf of SBB, and (d) that
the copy of the Bylaws of SBB attached to such certificate is true and correct
and such Bylaws have not been amended except as reflected in such copy.
J. A certificate, dated as of the Closing Date, executed by a duly
authorized officer of SBB, pursuant to which SBB shall certify, to the best
knowledge of such officer, that (i) all of the representations and warranties
made in Article IV of this Agreement are true and correct in all material
respects on and as of the date of such certificate as if made on such date and
that, except as expressly permitted by this Agreement, there shall have been no
Material Adverse Change (as defined in Section 12.08(C) hereof) with respect to
SBB since December 31, 1997, and (ii) SBB has performed and complied in all
material respects with all of its obligations and agreements required to be
performed on or prior to the Closing Date under this Agreement.
K. All consents required to be obtained by SBB from third parties to
consummate the transactions contemplated by this Agreement.
L. An opinion of counsel to SBB substantially in the form of Exhibit
"E" attached hereto.
M. All other documents required to be delivered to Pacific by SBB under
the provisions of this Agreement, and all other documents, certificates and
instruments as are reasonably requested by Pacific or its counsel.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PACIFIC
Pacific hereby makes the representations and warranties set forth in
this Article III to SBB.
SECTION 3.01 Organization and Qualification.
(a) Pacific is a California corporation duly organized, validly
existing under the laws of the State of California, and in good standing under
all laws, rules and regulations applicable to corporations located in the State
of California. Pacific is a bank holding company registered under the BHCA.
Pacific has all requisite corporate power and authority (including all licenses,
franchises, permits and other governmental authorizations as are legally
required) to carry on its business as now being conducted, to own, lease and
operate its properties and assets, including, but not limited to, as now owned,
leased or operated, and to enter into and carry out its obligations under this
Agreement and the Merger Agreement. Schedule 3.01(a) sets forth a complete list
of each Subsidiary (as defined in Section 12.08(B)) of Pacific (collectively,
the "Pacific Subsidiaries"). Except as set forth on Schedule 3.01(a), Pacific
does not own or control any Affiliate (as defined in Section 12.08(A) hereof)
other than the Pacific Subsidiaries. True and complete copies of the Articles of
Incorporation and Bylaws of Pacific and the Pacific Subsidiaries (other than the
Subsidiary Banks), as amended to date, certified by the Secretary of Pacific and
each Pacific Subsidiary, as applicable, have been delivered to SBB.
(b) Each of the Subsidiary Banks is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America, and in good standing under all laws, rules, and regulations
applicable to national banking associations located in the State of California.
Each of the Subsidiary Banks has all requisite corporate power and authority
(including all licenses, franchises, permits and other governmental
authorizations as are legally required) to carry on their respective businesses
as now being conducted, to own, lease and operate its properties and assets,
including, but not limited to, as now owned, leased or operated. True and
complete copies of the Articles of Association and Bylaws of each of the
Subsidiary Banks, as amended to date, certified by the Secretary of each
Subsidiary Bank, have been delivered to SBB. Each of the Subsidiary Banks is an
insured bank as defined in the Federal Deposit Insurance Act (the "FDIA").
Neither of the Subsidiary Banks own or control any Affiliate (as defined in
Section 12.08(A) hereof) or Subsidiary (as defined in Section 12.08(B) hereof).
Except for assessability under 12 U.S.C. ss.55, all of the issued and
outstanding shares of capital stock of the Subsidiary Banks are owned by Pacific
free and clear of all liens, encumbrances, rights of first refusal, options or
other restrictions of any nature whatsoever, and all such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights of any person. There are no options, warrants or rights
outstanding to acquire any capital stock of the Subsidiary Banks and no person
or entity has any other right to purchase or acquire any unissued shares of
stock of any of the Subsidiary Banks, nor does any such Subsidiary Bank have any
obligation of any nature with respect to its unissued shares of stock.
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(c) Each of Pacific Subsidiaries, other than the Subsidiary Banks, is a
California corporation duly organized, validly existing and in good standing
under the laws of the State of California, and in good standing under all laws,
rules, and regulations applicable to corporations located in the State of
California. Each such Pacific Subsidiary has all requisite corporate power and
authority (including all licenses, franchises, permits and other governmental
authorizations as are legally required) to carry on their respective businesses
as now being conducted, to own, lease and operate its properties and assets,
including, but not limited to, as now owned, leased or operated. All of the
issued and outstanding shares of capital stock of each such Pacific Subsidiary
is owned by Pacific free and clear of all liens, encumbrances, rights of first
refusal, options or other restrictions of any nature whatsoever, and all such
shares are duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights of any person. There are no options, warrants or
rights outstanding to acquire any capital stock of the Pacific Subsidiaries and
no person or entity has any other right to purchase or acquire any unissued
shares of stock of any of the Pacific Subsidiaries, nor does any such Pacific
Subsidiary have any obligation of any nature with respect to its unissued shares
of stock.
(d) Except as required by the National Bank Act, the nature of the
business of Pacific and the Pacific Subsidiaries does not require any of them to
be licensed or qualified to do business in any jurisdiction other than the State
of California. Except as disclosed on Schedule 3.01(d), neither Pacific nor the
Pacific Subsidiaries have any equity interest, direct or indirect, in any other
bank or corporation or in any partnership, joint venture or other business
enterprise or entity, except as acquired through settlement of indebtedness,
foreclosure, the exercise of creditors' remedies or in a fiduciary capacity, and
the business carried on by Pacific and the Pacific Subsidiaries has not been
conducted through any other direct or indirect Subsidiary or Affiliate of
Pacific or the Pacific Subsidiaries.
(e) Neither Pacific nor any of Pacific Subsidiaries that is neither a
bank, a bank operating subsidiary or a bank service corporation, directly or
indirectly, engages in any activity prohibited by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"). Without limiting the generality
of the foregoing, any equity investment of Pacific and each Pacific Subsidiary
that is not a bank, a bank operating subsidiary or a bank service corporation,
is not prohibited by the Federal Reserve.
(f) Neither of the Subsidiary Banks, directly or indirectly, engages in
any activity prohibited by the OCC.
SECTION 3.02 Execution and Delivery. Pacific has taken all corporate
action necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party, including, but not limited to, the Merger Agreement. This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not limited to, the Merger Agreement, have been or at Closing will be, duly
executed by Pacific and each constitutes and will constitute the legal, valid
and binding obligation of Pacific, enforceable in accordance with its respective
terms and conditions, except as enforceability may be limited by bankruptcy,
conservatorship, insolvency, moratorium, reorganization, receivership or similar
laws and judicial decisions affecting the
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rights of creditors generally and by general principles of equity (whether
applied in a proceeding at law or in equity).
SECTION 3.03 Capitalization. The entire authorized capital stock of
Pacific consists of (i) 20,000,000 shares of Pacific Common Stock, 4,503,945
shares of which are fully paid, validly issued, nonassessable and outstanding,
and 321,376 additional shares of which have been reserved for issuance to
holders of outstanding Pacific Stock Options (as defined in Section 6.17
hereto), and (ii) 20,000,000 shares of preferred stock, no par value per share
(the "Pacific Preferred Stock"), of which no shares of Pacific Preferred Stock
are issued or outstanding. Schedule 3.03 contains a list of each of the Pacific
Stock Option Plans, including (i) the number of outstanding options with respect
to each Pacific Stock Option Plan, (ii) the weighted average exercise price per
share with respect to each Pacific Stock Option Plan, (iii) a list of all option
holders with respect to each Pacific Stock Option Plan, and (iv) the number of
vested and unvested Pacific Stock Options with respect to each such option
holder in each Pacific Stock Option Plan. All Pacific Stock Options were issued
and, upon issuance in accordance with the terms of the outstanding option
agreements, the shares of Pacific Common Stock shall be issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.03, there
are no (i) other outstanding equity securities of any kind or character,
including but not limited to preferred stock, (ii) outstanding subscriptions,
options, convertible securities, rights, warrants, calls or other agreements or
commitments of any kind issued or granted by, or binding upon, Pacific to
purchase or otherwise acquire any security of or equity interest in Pacific or
(iii) outstanding subscriptions, options, rights, warrants, calls, convertible
securities, irrevocable proxies or other agreements or commitments obligating
Pacific to issue any shares of, restricting the transfer of or otherwise
relating to shares of its capital stock of any class. All of the issued and
outstanding shares of Pacific Common Stock have been duly authorized, validly
issued and are fully paid and nonassessable, and have not been issued in
violation of the preemptive rights of any person. Such shares of Pacific Common
Stock have been issued in full compliance with applicable law. There are no
restrictions applicable to the payment of dividends on the shares of Pacific
Common Stock, except pursuant to applicable laws and regulations, and all
dividends declared prior to the date of this Agreement have been paid.
SECTION 3.04 Compliance with Laws, Permits and Instruments.
(a) Except as set forth in Schedule 3.04, Pacific and the Pacific
Subsidiaries, as applicable, are in compliance with, and are not in default (or
with the giving of notice or the passage of time will be in default) under, or
in violation of, (i) any provision of the Articles of Incorporation or Bylaws of
Pacific or the Pacific Subsidiaries (other than the Subsidiary Banks), (ii) any
provision of the Articles of Association or Bylaws of the Subsidiary Banks (iii)
any material provision of any loan agreement, security or pledge agreement,
mortgage, indenture, lease, contract, agreement or other instrument applicable
to Pacific or the Pacific Subsidiaries or their respective assets, operations,
properties or businesses now conducted or heretofore conducted or (iv) any
permit, concession, grant, franchise, license, authorization, judgment, writ,
injunction, order, decree, award, statute, federal, state or local law,
ordinance, rule or regulation of any court, arbitrator or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality applicable to Pacific, the Pacific Subsidiaries or their
respective assets, operations, properties or businesses now conducted or
heretofore conducted, which noncompliance or violation would, individually or in
the aggregate,
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reasonably be anticipated to have a material adverse effect on the business
results of operations, financial condition or (insofar as they can reasonably be
foreseen) prospects of Pacific taken as a whole.
(b) The execution, delivery and (provided the required regulatory and
shareholder approvals are obtained) performance of this Agreement and the other
agreements contemplated hereby, including, but not limited to the Merger
Agreement, and the consummation of the transactions contemplated hereby and
thereby will not conflict with, or result, by itself or with the giving of
notice or the passage of time, in any violation of or default or loss of a
benefit under, (i) any provision of the Articles of Incorporation or Bylaws of
Pacific and the Pacific Subsidiaries (other than the Subsidiary Banks), (ii) any
provision of the Articles of Association or Bylaws of the Subsidiary Banks,
(iii) any material provision of any mortgage, indenture, lease, contract,
agreement or other instrument applicable to Pacific, the Pacific Subsidiaries or
their assets, operations, properties or businesses, or (iv) any permit,
concession, grant, franchise, license, authorization, judgment, writ,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to Pacific, the Pacific Subsidiaries or their assets, operations,
properties or businesses.
SECTION 3.05 Financial Statements.
(a) Pacific has furnished to SBB true and complete copies of (i) the
audited consolidated balance sheets of Pacific as of December 31, 1996 and 1997,
and the related audited consolidated statements of income, stockholders' equity
and cash flows for the years ended December 31, 1995, 1996 and 1997, (ii) an
unaudited consolidated balance sheet of Pacific as of March 31, 1998, and the
related unaudited consolidated statement of income for the three-month period
ended March 31, 1998 (such balance sheets and the related statements of income,
stockholders' equity and cash flows are collectively referred to herein as the
"Pacific Financial Statements"). Except as described in the notes to the Pacific
Financial Statements, the Pacific Financial Statements fairly present, in all
material respects, the consolidated financial position of Pacific as of the
respective dates thereof and the results of operations and changes in financial
position of Pacific for the periods then ended, in conformity with generally
accepted accounting principles ("GAAP"), applied on a basis consistent with
prior periods (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and the fact that they do not contain
all of the footnote disclosures required by GAAP), except as otherwise noted
therein, and the accounting records underlying the Pacific Financial Statements
accurately and fairly reflect in all material respects the transactions of
Pacific. The Pacific Financial Statements do not contain any items of
extraordinary or nonrecurring income or any other income not earned in the
ordinary course of business except as expressly specified therein.
(b) Pacific has furnished, or has caused the Subsidiary Banks to
furnish, to SBB with true and complete copies of the Report of Condition and
Income ("Call Reports") for each of the Subsidiary Banks for the periods ended
December 31, 1996, December 31, 1997 and March 31, 1998. Such Call Reports
fairly presents, in all material respects, the financial position of the
Subsidiary Banks and the results of their operations at the dates and for the
periods indicated in conformity with the Instructions for the Preparation of
Call Reports as promulgated by applicable regulatory authorities. The Call
Reports do not contain any items of special or nonrecurring income or any other
income not earned in the ordinary course of business except as
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expressly specified therein. Each of the Subsidiary Banks has calculated its
allowance for loan losses in accordance with GAAP, which includes regulatory
accounting principles ("RAP") where applicable, as applied to banking
institutions and in accordance with all applicable rules and regulations. To the
best knowledge of Pacific, the allowance for loan losses account for each of the
Subsidiary Banks is, and as of the Closing Date will be, adequate in all
material respects to provide for all losses, net of recoveries relating to loans
previously charged off, on all outstanding loans of each such Subsidiary Bank.
SECTION 3.06 Undisclosed Liabilities. Neither Pacific nor any of the
Pacific Subsidiaries has any material liability or obligation, accrued,
absolute, contingent or otherwise and whether due or to become due (including,
without limitation, unfunded obligations under any service recognition or
severance agreement, whether written or oral, or Pacific Employee Plans (as
defined in Section 3.32 hereof) or material liabilities for federal, state or
local taxes or assessments or material liabilities under any agreement that are
not reflected in or disclosed in the Pacific Financial Statements, except (i)
those liabilities and expenses incurred in the ordinary course of business and
consistent with prudent business practices since the date of the Pacific
Financial Statements or (ii) as disclosed on Schedule 3.06.
SECTION 3.07 Litigation. Except as set forth on Schedule 3.07, there
are no actions, claims, suits, investigations, reviews or other legal,
quasi-judicial or administrative proceedings of any kind or nature now pending
or, to the best knowledge of Pacific, threatened against or affecting Pacific,
any of the Pacific Subsidiaries or any of their respective current or former
officers and directors (while acting in such capacity) at law or in equity, or
by or before any federal, state or municipal court or other governmental or
administrative department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that in any manner involves Pacific, the Pacific
Subsidiaries or any of their current or former officers or directors (while
acting in such capacity) or any of their properties or capital stock that would
reasonably be anticipated to result in a Material Adverse Change with respect to
Pacific or materially and adversely affect the transactions contemplated by this
Agreement, and Pacific does not know or have any reason to be aware of any basis
for the same. No legal action, suit or proceeding or judicial, administrative or
governmental investigation is pending or, to the knowledge of Pacific,
threatened against Pacific or any of the Pacific Subsidiaries that questions the
validity of this Agreement or the agreements contemplated hereby, including, but
not limited to, the Merger Agreement, or any actions taken or to be taken by
Pacific pursuant hereto or thereto or seeks to enjoin or otherwise restrain the
transactions contemplated hereby or thereby.
SECTION 3.08 Consents and Approvals. Pacific's Board of Directors (at a
meeting called and duly held) has resolved, subject to its fiduciary duties to
the shareholders of Pacific, to recommend approval and adoption by Pacific's
shareholders of the Merger, this Agreement and the Merger Agreement. Except for
shareholder and regulatory approvals and except as disclosed in Schedule 3.08,
no approval, consent, order or authorization of, or registration, declaration or
filing with, any governmental authority or other third party is required on the
part of Pacific in connection with the execution, delivery or performance of
this Agreement or the agreements contemplated hereby, including, but not limited
to, the Merger Agreement, or the consummation by Pacific of the transactions
contemplated hereby or thereby.
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SECTION 3.09 Title to Assets. Pacific and each of the Pacific
Subsidiaries has good and indefeasible title to all of its assets and properties
including, without limitation, all personal and intangible properties reflected
in the Pacific Financial Statements or acquired subsequent thereto, subject to
no liens, mortgages, security interests, encumbrances or charges of any kind,
except (i) as described in Schedule 3.09, (ii) as noted in the Pacific Financial
Statements, or as set forth in the documents delivered to SBB pursuant to this
Section 3.09, (iii) statutory liens not yet delinquent, (iv) consensual landlord
liens, (v) minor defects and irregularities in title and encumbrances that do
not materially impair the use thereof for the purpose for which they are held,
(vi) pledges of assets in the ordinary course of business to secure public funds
deposits, and (vii) those assets and properties disposed of for fair value in
the ordinary course of business since the dates of the Pacific Financial
Statements. Schedule 3.09 includes a copy of the title policy of insurance with
respect to each parcel of real property owned by Pacific and the Pacific
Subsidiaries.
SECTION 3.10 Absence of Certain Changes or Events. Except as disclosed
on Schedule 3.10, since December 31, 1997, Pacific, including the Pacific
Subsidiaries, has conducted its business only in the ordinary course and has
not, other than in the ordinary course of business and consistent with past
practices and safe and sound banking practices:
A. Incurred any obligation or liability, absolute, accrued, contingent
or otherwise, whether due or to become due, which individually or in the
aggregate, has had a material adverse effect on the business, results of
operations, financial condition, or (insofar as they can reasonably be foreseen)
prospects of Pacific and the Pacific Subsidiaries taken as a whole, except for
deposits taken and federal funds purchased and current liabilities for trade or
business obligations;
B. Discharged or satisfied any lien, charge or encumbrance or paid any
obligation or liability, whether absolute or contingent, due or to become due;
C. Declared or made any payment of dividends or other distribution to
its shareholders, or purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its shares of capital stock or other
securities;
D. Issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any kind
relating to the issuance thereto;
E. Acquired any capital stock or other equity securities or acquired
any equity or ownership interest in any bank, corporation, partnership or other
entity (except (i) through settlement of indebtedness, foreclosure, or the
exercise of creditors' remedies or (ii) in a fiduciary capacity, the ownership
of which does not expose it to any liability from the business, operations or
liabilities of such person);
F. Mortgaged, pledged or subjected to lien, charge, security interest
or any other encumbrance or restriction any of its property, business or assets,
tangible or intangible except (i) as described in Schedule 3.09, (ii) statutory
liens not yet delinquent, (iii) consensual landlord liens, (iv) minor defects
and irregularities in title and encumbrances that do not materially impair
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the use thereof for the purpose for which they are held, (v) pledges of assets
to secure public funds deposits, and (vi) for those assets and properties
disposed of for fair value since the dates of the Pacific Financial Statements.
G. Sold, transferred, leased to others or otherwise disposed of any of
its assets or canceled or compromised any debt or claim, or waived or released
any right or claim of material value;
H. Terminated, canceled or surrendered, or received any notice of or
threat of termination or cancellation of any contract, lease or other agreement
or suffered any damage, destruction or loss (whether or not covered by
insurance), which, in any case or in the aggregate, would have a material
adverse effect on the business, results of operations, financial condition, or
(insofar as they can reasonably be foreseen) prospects of Pacific and the
Pacific Subsidiaries taken as a whole;
I. Disposed of, permitted to lapse, transferred or granted any rights
under, or entered into any settlement regarding the breach or infringement of,
any United States or foreign license or Pacific Proprietary Right (as defined in
Section 3.15 hereof) or modified any existing rights with respect thereto;
J. Made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to or for the benefit of any of its
shareholders, directors, officers, employees or agents, or entered into any
employment or consulting contract or other agreement with any director, officer
or employee or adopted, amended in any material respect or terminated any
pension, employee welfare, retirement, stock purchase, stock option, stock
appreciation rights, termination, severance, income protection, golden
parachute, savings or profit-sharing plan (including trust agreements and
insurance contracts embodying such plans), any deferred compensation, or
collective bargaining agreement, any group insurance contract or any other
incentive, welfare or employee benefit plan or agreement maintained by it for
the benefit of its directors, employees or former employees, except (i)
compensation adjustments contemplated within Pacific's 1998 budget and approved
in advance by SBB (which approval shall not be unreasonably withheld), (ii)
employee severance benefits contemplated by Section 12.16 of this Agreement, and
(iii) periodic increases consistent with past practices;
K. Except for improvements or betterments relating to Pacific
Properties (as defined in Section 3.19 hereof), made any capital expenditures or
capital additions or betterments in excess of an aggregate of $1,000,000;
L. Instituted, had instituted against it, settled or agreed to settle
any litigation, action or proceeding before any court or governmental body,
other than routine collection suits instituted by it to collect amounts owed or
suits in which the amount in controversy is less than $100,000;
M. Permitted any change, event or condition that, in any case or in the
aggregate, has caused or may result in a Material Adverse Change, or any
Material Adverse Change in earnings
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or costs or relations with its employees, agents, depositors, loan customers,
correspondent banks or suppliers;
N. Except for the transactions contemplated by this Agreement or as
otherwise permitted hereunder, entered into any transaction, or entered into,
modified or amended any contract or commitment;
O. Entered into or given any promise, assurance or guarantee of the
payment, discharge or fulfillment of any undertaking or promise made by any
person, firm or corporation other than letters of credit issued in the ordinary
course of business;
P. Sold, or knowingly disposed of, or otherwise divested itself of the
ownership, possession, custody or control, of any corporate books or records of
any nature that, in accordance with sound business practice, normally are
retained for a period of time after their use, creation or receipt, except at
the end of the normal retention period;
Q. Made any, or acquiesced with any, change in any accounting methods,
principles or material practices, except as required by GAAP or RAP;
R. Sold (provided, however, that payment at maturity is not deemed a
sale) any investment securities in a single transaction involving a book gain or
loss of more than $100,000 on such sale or purchased any investment securities,
other than purchases of U.S. Treasury securities with a maturity of two years or
less;
S. Made, renewed, extended the maturity of, or altered any of the
material terms of any criticized loan to any single borrower and his related
interests without regard to whether such transaction was in the ordinary course
of business or whether it was consistent with past or safe and sound banking
practices; or
T. Entered into any agreement or made any commitment whether in writing
or otherwise to take any of the types of action described in subsections A.
through S. above.
SECTION 3.11 Leases, Contracts and Agreements. Schedule 3.11 sets forth
a complete listing of all leases, subleases, licenses, contracts and agreements
to which Pacific, including any of the Pacific Subsidiaries, is a party (the
"Pacific Contracts"), and which (i) relate to real property used by Pacific in
its operation, (ii) involve payments to or by Pacific in excess of $100,000
during the term of such Pacific Contracts (exclusive of unfunded loan
commitments and letters of credit issued by Pacific), or (iii) involve any
unfunded loan commitments and letters of credit issued by Pacific where the
borrower's total direct and indirect indebtedness to Pacific is in excess of
$2,000,000. True and correct copies of all such Pacific Contracts (other than
unfunded loan commitments and letters of credit issued by Pacific) are included
with Schedule 3.11. For the purposes of this Agreement, the Pacific Contracts
shall be deemed not to include loans made by, Federal funds sold or purchased
by, repurchase agreements made by, spot foreign exchange transactions of,
bankers acceptances of or deposits by Pacific. Except as set forth in Schedule
3.11, no participations or loans have been sold which have buy back, recourse or
guaranty provisions which create contingent or direct liabilities of Pacific. To
the knowledge of Pacific, all of the Pacific Contracts are legal, valid and
binding obligations of the parties to the Pacific Contracts enforceable in
accordance with their terms, subject to the effects of bankruptcy,
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insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally and to general equitable principles, and are in full
force and effect. Except as described in Schedule 3.11, all rent and other
payments by Pacific and any Pacific Subsidiary under the Pacific Contracts are
current, there are no existing defaults by Pacific or any Pacific Subsidiary
under the Pacific Contracts and no termination, condition or other event has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default. Pacific and each
Pacific Subsidiary has a good and indefeasible leasehold interest in each parcel
of real property leased by it free and clear of all mortgages, pledges, liens,
encumbrances and security interests.
SECTION 3.12 Taxes. Pacific has duly and timely filed with the
appropriate Federal, state and local governmental agencies all tax returns and
reports required to be filed, including, without limitation, income, excise,
property, sales, use, franchise, value added, unemployment, employees' income
withholding and social security taxes, imposed by the United States or by any
foreign country or by any state, municipality, subdivision or instrumentality of
the United States or of any foreign country, or by any other taxing authority,
and has paid, or has established adequate reserves for the payment of, all taxes
and assessments that are or are claimed to be due, payable or owed by Pacific,
or for which Pacific may have liability, whether as a result of its own
activities or by virtue of its affiliation with other entities and all interest
and penalties thereon, whether disputed or not. All such tax returns and reports
are accurately prepared and all deposits required by law to be made by Pacific
with respect to employees' withholding taxes have been duly made. Pacific is not
and has not been delinquent in the payment of any foreign or domestic tax,
assessment or governmental charge or deposit and has no tax deficiency or claim
outstanding, proposed or assessed against it, and, to Pacific's knowledge, there
is no basis for any such deficiency or claim. Except as set forth in Schedule
3.12, within the last six (6) years, Pacific's Federal income tax return has not
been audited or examined and no such audit is currently pending or, to Pacific's
knowledge, threatened. Pacific has not been granted any extension of time with
respect to the date on which any tax return not yet filed was or is due to be
filed by or with respect to Pacific or any waiver or agreement by Pacific for
the extension of time for the assessment or collection of any tax. Except as set
forth in Schedule 3.12, Pacific (i) within the past six (6) years, has not
committed any violation of any applicable Federal, state, local or foreign tax
laws, and (ii) with respect to all prior years, has not committed any violation
of any applicable Federal, state, local or foreign tax laws that is likely to
result in a Material Adverse Change with respect to Pacific.
The amounts set up as provisions for current or deferred taxes on the
Pacific Financial Statements are sufficient in all material respects for the
payment of all unpaid Federal, state, county, local, foreign or other taxes
(including any interest or penalties) of or on behalf of Pacific applicable to
the periods covered by the Pacific Financial Statements, and all years and
periods prior thereto. True and complete copies of the Federal income tax
returns of Pacific as filed with the Internal Revenue Service (the "IRS") for
the years ended December 31, 1995, 1996, and 1997, have been delivered to SBB.
SECTION 3.13 Insurance. Schedule 3.13 contains an accurate and complete
list and brief description of all policies of insurance, including fidelity and
bond insurance, of Pacific, including the Pacific Subsidiaries. All such
policies (a) are valid, outstanding and enforceable except as enforceability may
be limited by bankruptcy, conservatorship, insolvency,
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moratorium, reorganization, receivership, or similar laws and judicial decisions
affecting the rights of creditors generally and by general principles of equity
(whether applied in a proceeding at law or equity), (b) will not in any
significant respect be affected by, and will not terminate or lapse by reason
of, the transactions contemplated by this Agreement, and (c) are presently in
full force and effect, no notice has been received of the cancellation, or
threatened or proposed cancellation, of any such policy and there are no unpaid
premiums due thereon. Pacific, including the Pacific Subsidiaries, is not in
default with respect to the provisions of any such policy and has not failed to
give any notice or present any claim thereunder in a due and timely fashion.
Except as set forth on Schedule 3.13, neither Pacific nor any of the Pacific
Subsidiaries has been refused any insurance with respect to its assets or
operations, nor has its insurance been limited by any insurance carrier to which
Pacific and the Pacific Subsidiaries has applied for any such insurance within
the last two (2) years. Each property of Pacific, including the Pacific
Subsidiaries, is insured for the benefit of Pacific in amounts deemed adequate
by Pacific's management against risks customarily insured against. There have
been no claims under any fidelity bonds of Pacific or any of the Pacific
Subsidiaries within the last three (3) years, and Pacific is not aware of any
facts that would form the basis of a claim under such bonds.
SECTION 3.14 No Adverse Change. Except as disclosed in the Schedules to
this Agreement or in the representations and warranties made in this Article
III, there has not been any Material Adverse Change since December 31, 1997, nor
has any event or condition occurred that has resulted in, or has a reasonable
possibility of resulting in the future, in a Material Adverse Change with
respect to Pacific.
SECTION 3.15 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 3.15, Pacific and the Pacific Subsidiaries do not own or require the
use of any patent, patent application, patent right, invention, process,
trademark (whether registered or unregistered), trademark application, trademark
right, trade name, service name, service ▇▇▇▇, copyright or any trade secret
("Pacific Proprietary Rights") for their respective businesses or operations,
except for licensed computer software. To the knowledge of Pacific, neither
Pacific nor any of the Pacific Subsidiaries are infringing upon or otherwise
acting adversely to any Pacific Proprietary Right owned by any other person or
persons. There is no claim or action by any such person pending, or, to the
knowledge of Pacific, threatened, with respect thereto.
SECTION 3.16 Transactions with Certain Persons and Entities. Except as
disclosed in Schedule 3.16, neither Pacific nor any of the Pacific Subsidiaries
owe any amount to (excluding deposit liabilities), or have any loan (excluding
loans to participants from the Pacific Capital 401(k) Plan), contract, lease,
commitment or other obligation from or to any of the respective present or
former directors or executive officers (other than compensation for current
services not yet due and payable and reimbursement of expenses arising in the
ordinary course of business) of Pacific and the Pacific Subsidiaries, and none
of such persons owes any amount to Pacific or the Pacific Subsidiaries. Except
as set forth in Schedule 3.16, there are no understandings, agreements (whether
written or oral), instruments, commitments, perquisites, extensions of credit,
tax sharing or allocation agreements or other contractual agreements of any kind
between or among Pacific and the Pacific Subsidiaries, whether on its own behalf
or in its capacity as trustee or custodian for the funds of any employee benefit
plan (as defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), and any present or
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former officers or directors of Pacific or the Pacific Subsidiaries. True and
correct copies of any such written understandings, agreements, instruments,
etc., are included with Schedule 3.16.
SECTION 3.17 Evidences of Indebtedness. All evidences of indebtedness
and leases that are reflected as assets of Pacific and the Pacific Subsidiaries
are, to Pacific's best knowledge, legal, valid and binding obligations of the
respective obligors thereof, enforceable in accordance with their respective
terms (except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors generally and the availability
of injunctive relief, specific performance and other equitable remedies) and are
not subject to any known or threatened defenses, offsets or counterclaims that
may be asserted against Pacific, the Pacific Subsidiaries or the present holder
thereof, except as disclosed in Schedule 3.17. The credit files of Pacific,
including the Pacific Subsidiaries, contain all material information (excluding
general, local or national industry, economic or similar conditions) known to
Pacific that is reasonably required to evaluate in accordance with generally
prevailing practices in the banking industry the collectibility of the loan
portfolio of Pacific (including loans that will be outstanding if any of them
advances funds they are obligated to advance). Pacific has disclosed all of the
substandard, doubtful, loss, nonperforming or loans identified as problem loans
on the internal watch list of each of the Subsidiary Banks, a copy of which as
of May 31, 1998, has been provided to SBB. Except as disclosed in Schedule 3.17,
Pacific is not aware of, nor has Pacific received notice of, any past or present
conditions, events, activities, practices or incidents that may result in a
violation of any Environmental Law (as defined in Section 12.08(D) hereof) with
respect to any real property securing any indebtedness reflected as an asset of
Pacific or any Pacific Subsidiary.
SECTION 3.18 Condition of Assets. All tangible assets used by Pacific,
including the Pacific Subsidiaries, are in good operating condition, ordinary
wear and tear excepted, and conform with all applicable ordinances, regulations,
zoning and other laws, whether Federal, state or local. None of Pacific's or the
Pacific Subsidiaries' premises or equipment are in need of maintenance or
repairs other than ordinary routine maintenance and repairs that are not
material in nature or cost.
SECTION 3.19 Environmental Compliance.
(a) Pacific is not aware of, nor has Pacific received notice of, any
past or present conditions, events, activities, practices or incidents that are
in violation of Environmental Laws (as defined in Section 12.08(D) hereof) or
that may interfere with or prevent Pacific's continued compliance in all
respects with all Environmental Laws.
(b) Pacific and the Pacific Subsidiaries have obtained all permits,
licenses and authorizations that are required under any Environmental Laws.
(c) To Pacific's knowledge, no Hazardous Materials (as defined in
Section 12.08(E) hereof) exist on, about, or within any of the Pacific
Properties (as defined in this Section 3.19), nor, to Pacific's knowledge, have
any Hazardous Materials previously existed on, about or within or been used,
generated, stored, transported, disposed of, on or released from any of the
Pacific Properties in violation of any Environmental Law. The use that Pacific,
including the Pacific Subsidiaries, makes and intends to make of the Pacific
Properties will not result in the
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use, generation, storage, transportation, accumulation, disposal or release of
any Hazardous Material on, in or from any of the Pacific Properties in violation
of any Environmental Law.
(d) There is no action, suit, proceeding, investigation or inquiry
before any court, administrative agency or other governmental authority pending
or, to Pacific's knowledge, threatened against Pacific or any Pacific Subsidiary
relating in any way to any Environmental Law. To the best of Pacific's
knowledge, neither Pacific nor any Pacific Subsidiary has any liability for
remedial action under any Environmental Law. Pacific has not received any
request for information by any governmental authority with respect to the
condition, use or operation of any of the Pacific Properties nor has Pacific
received any notice of any kind from any governmental authority or other person
with respect to any violation of or claimed or potential liability of any kind
under any Environmental Law (including, without limitation, any letter, notice
or inquiry from any person or governmental entity informing Pacific that it is
or may be liable in any way under any Environmental Law, or requesting
information to enable such a determination to be made).
(e) As used in this Section 3.19, the term "Pacific Property" or
"Pacific Properties" shall include all real property currently owned or leased
by Pacific or any of the Pacific Subsidiaries, including, but not limited to,
properties that Pacific or any Pacific Subsidiary has foreclosed on as well as
the Subsidiary Banks' respective banking premises and all improvements and
fixtures thereon. The phrase "to Pacific's knowledge" or similar phrases as used
in this Section 3.19 shall mean the current actual knowledge of executive
management of Pacific.
SECTION 3.20 Regulatory Compliance. All reports, records,
registrations, statements, notices and other documents or information required
to be filed by Pacific and the Pacific Subsidiaries during the last two (2)
years with any federal or state regulatory authority including, without
limitation, the Federal Reserve, the OCC, the FDIC and the IRS have been duly
and timely filed and all information and data contained in such reports, records
or other documents are true, accurate, correct and complete. Except as disclosed
on Schedule 3.20, Pacific and the Pacific Subsidiaries are not now nor have
been, within the past six (6) years subject to any memorandum of understanding,
cease and desist order, written agreement or other formal administrative action
with any such regulatory bodies. Pacific does not believe any such regulatory
bodies have any present intent to place Pacific or the Pacific Subsidiaries
under any new administrative action. Except as set forth on Schedule 3.20, there
are no actions or proceedings pending or threatened against Pacific or any
Pacific Subsidiary by or before any such regulatory bodies or any other nation,
state or subdivision thereof, or any other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
SECTION 3.21 Securities and Exchange Commission Reports. Pacific has
previously made available to SBB an accurate and complete copy of each (a) final
registration statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1995 by Pacific with the Securities and
Exchange Commission (the "S.E.C.") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and prior to the date hereof (the "Pacific
Reports"), and (b) communication mailed by Pacific to its shareholders since
January 1, 1995 and prior to the
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date hereof, and no such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, except that information as of a later
date shall be deemed to modify information as of an earlier date. Since January
1, 1995, Pacific has timely filed all Pacific Reports and other documents
required to be filed by it under the Securities Act and the Exchange Act, and,
as of their respective dates, all Pacific Reports complied in all material
respects with the published rules and regulations of the S.E.C. with respect
thereto.
SECTION 3.22 Absence of Certain Business Practices. Except as set forth
on Schedule 3.22, neither Pacific, any of the Pacific Subsidiaries nor any
officer, employee or agent of Pacific or the Pacific Subsidiaries, nor any other
person acting on their behalf, has, directly or indirectly, within the past ten
(10) years, given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other person who is or may be in a position
to help or hinder the business of Pacific as a whole (or assist Pacific in
connection with any actual or proposed transaction) that (i) would subject
Pacific or any of the Pacific Subsidiaries to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, would have resulted in a Material Adverse Change with respect to
Pacific, or (iii) if not continued in the future would result in a Material
Adverse Change with respect to Pacific or would subject Pacific to suit or
penalty in any private or governmental litigation or proceeding.
SECTION 3.23 Registration Statement; Joint Proxy Statement/Prospectus.
None of the information supplied or to be supplied by Pacific or any of its
directors, officers, employees or agents for inclusion in the Registration
Statement (as defined in Section 5.03(c)) or the Joint Proxy
Statement/Prospectus (as defined in Section 5.03(c)), or any amendment thereof
or supplement thereto, will be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or at the time of the Pacific Shareholders' Meeting and the SBB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Pacific Shareholders' Meeting and the SBB Shareholders' Meeting. All documents
that Pacific is responsible for filing with any regulatory or governmental
agency in connection with the Merger will comply in all material respects with
the provisions of applicable law.
SECTION 3.24 Dissenting Shareholders. Except as set forth on Schedule
3.24, Pacific has no knowledge of any plan or intention on the part of any of
the shareholders of Pacific to make written demand for payment of the fair value
of their shares of Pacific Common Stock in the manner provided by applicable
law.
SECTION 3.25 Pooling of Interests. As of the date of this Agreement,
Pacific has no reason to believe that the Merger will not qualify as a "pooling
of interests" for accounting purposes.
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SECTION 3.26 Books and Records. The minute books, stock certificate
books and stock transfer ledgers of Pacific and the Pacific Subsidiaries (i)
have been kept accurately in the ordinary course of business, (ii) are complete
and correct in all material respects, (iii) reflect transactions representing
bona fide transactions, and (iv) do not fail to reflect transactions involving
the business of Pacific or the Pacific Subsidiaries that were required to have
been set forth therein and that have not been accurately so set forth.
SECTION 3.27 Forms of Instruments, Etc. Pacific will make available to
SBB upon written request copies of all standard forms of notes, mortgages, deeds
of trust and other routine documents of a like nature used on a regular and
recurring basis by Pacific and the Pacific Subsidiaries in the ordinary course
of their businesses.
SECTION 3.28 Fiduciary Responsibilities. Except as disclosed in
Schedule 3.28, Pacific and the Subsidiary Banks have performed in all material
respects all of their duties as a trustee, custodian, guardian or as an escrow
agent in a manner that complies in all material respects with all applicable
laws, regulations, orders, agreements, instruments and common law standards.
SECTION 3.29 Guaranties. None of the obligations or liabilities of
Pacific or the Pacific Subsidiaries are guaranteed by any other person, firm or
corporation, nor is any outstanding obligation or liability of any other person,
firm or corporation guaranteed by Pacific or the Pacific Subsidiaries, except in
the ordinary course of business, according to prudent business practices and in
compliance with applicable law.
SECTION 3.30 Voting Trust or Buy-Sell Agreements. Pacific is not aware
of any agreement between or among any of its shareholders relating to a right of
first refusal with respect to the purchase or sale by any such shareholder of
capital stock of Pacific or any voting agreement or voting trust with respect to
shares of capital stock of Pacific (other than that contemplated by Section
5.20).
SECTION 3.31 Employee Relationships. Pacific and the Pacific
Subsidiaries (including their respective officers and directors while acting in
such capacities) have complied in all material respects with all applicable laws
relating to its relationships with its employees, and Pacific believes that the
relationships between Pacific, including the Pacific Subsidiaries (including
their respective officers and directors while acting in such capacities), and
its employees are good. To the knowledge of Pacific, no key executive officer or
manager of any of the operations operated by Pacific and the Pacific
Subsidiaries or any group of employees of Pacific and the Pacific Subsidiaries
have any present plans to terminate their employment with Pacific or any Pacific
Subsidiary. Neither Pacific nor any of the Pacific Subsidiaries is a party to
any oral or written contracts or agreements granting benefits or rights to
employees or any collective bargaining agreement or to any conciliation
agreement with the Department of Labor, the Equal Employment Opportunity
Commission or any federal, state or local agency that requires equal employment
opportunities or affirmative action in employment. There are no unfair labor
practice complaints pending against Pacific, including any of the Pacific
Subsidiaries, before the National Labor Relations Board and no similar claims
pending before any similar state, local or foreign agency. There is no activity
or proceeding of any labor organization (or representative thereof) or employee
group to organize any employees of Pacific,
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including any Pacific Subsidiary, nor of any strikes, slowdowns, work stoppages,
lockouts or threats thereof, by or with respect to any such employees. Pacific
and the Pacific Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and neither Pacific nor any of the
Pacific Subsidiaries are engaged in any unfair labor practice.
SECTION 3.32 Employee Benefit Plans.
(a) Set forth on Schedule 3.32(a) is a complete and correct list of all
"employee benefit plans" (as defined in ERISA), all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus, incentive,
compensation, deferred compensation, profit sharing, stock option, stock
appreciation right, stock bonus, stock purchase, employee stock ownership,
savings, severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan or any other
similar plan, agreement, policy or understanding (whether written or oral,
qualified or nonqualified, currently effective or terminated), and any trust,
escrow or other agreement related thereto, which (a) is maintained or
contributed to by Pacific or any Pacific Subsidiary, or with respect to which
Pacific and the Pacific Subsidiaries has any liability, and (b) provides
benefits, or describes policies or procedures applicable to any officer,
employee, service provider, former officer or former employee of Pacific or any
Pacific Subsidiary, or the dependents of any such person, regardless of whether
funded (the "Pacific Employee Plans").
(b) No Pacific Employee Plan is a defined benefit plan within the
meaning of section 3(35) of ERISA. Pacific has delivered or made available to
SBB true, accurate and complete copies of the documents comprising each Pacific
Employee Plan, and such other documents, records or other materials related
thereto reasonably requested by SBB. To the best knowledge of Pacific, there
have been no prohibited transactions, breaches of fiduciary duty or any other
breaches or violations of any law applicable to the Pacific Employee Plans that
would subject SBB or Pacific to any liabilities. Each Pacific Employee Plan
intended to be qualified under section 401(a) of the Code has a current
favorable determination letter and, to the best knowledge of Pacific, has been
operated in compliance with applicable law and in accordance with its terms.
However, Pacific has a ruling request pending with the Internal Revenue Service
that compensation elected to be deferred by employees pursuant to the "Executive
Compensation Deferral Plan" and the transfer and retention of those sums
deferred to the "Executive Compensation Deferral Trust" will result in no
current inclusion of the income to those employees or their beneficiaries
pursuant to Sections 83, 451 or 402(b) of the Code. There are no pending claims,
lawsuits or actions relating to any Pacific Employee Plan (other than ordinary
course claims for benefits) and, to the best knowledge of Pacific, none are
threatened. No written or oral representations have been made to any employee or
former employee of Pacific or the Pacific Subsidiaries promising or guaranteeing
any employer payment or funding for the continuation of medical, dental, life or
disability coverage for any period of time beyond the end of the current plan
year (except to the extent of coverage required under section 4980B of the
Code). Compliance with FAS 106 will not create any material change to the
Pacific Financial Statements. Except as required in connection with qualified
plan amendments required by tax law changes and except for those plans
identified on Schedule 3.32(b), the consummation of the transactions
contemplated by this Agreement will not accelerate the time of payment or
vesting,
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or increase the amount, of compensation due to any employee, officer, former
employee or former officer of Pacific or any Pacific Subsidiary.
(c) With respect to each "employee benefit plan" (as defined in ERISA)
maintained or contributed to or required to be contributed to, currently or in
the past, by any trade or business with which Pacific is required by any of the
rules contained in the Code or ERISA to be treated as a single employer (the
"Controlled Group Plans"):
(i) To the knowledge of Pacific, all Controlled Group Plans
that are "group health plans" (as defined in the Code and ERISA) have been
operated up to the Closing in a manner so as to not subject Pacific to any
material liability under Section 4980B of the Code; and
(ii) There is no Controlled Group Plan that is a defined
benefit plan (as defined in Section 3(35) of ERISA), nor has there been in the
last five (5) calendar years.
(iii) There is no Controlled Group Plan that is a "multiple
employer plan" or "multiemployer plan" (as either such term is defined in
ERISA), nor has there been in the last five (5) calendar years.
SECTION 3.33 Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of Pacific or any
Pacific Subsidiary or for the account of a customer of Pacific or any Pacific
Subsidiary, were entered into in the ordinary course of business and, to
Pacific's knowledge, in accordance with prudent banking practice and applicable
rules, regulations and policies of any regulatory authority and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations of Pacific or a Pacific Subsidiary enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in full force and
effect. Pacific and each Pacific Subsidiary have duly performed in all material
respects all of their material obligations thereunder to the extent that such
obligations to perform have accrued; and, to Pacific's knowledge, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party thereunder.
SECTION 3.34 Year 2000.
(a) To the best of Pacific's knowledge, Pacific and the Subsidiary
Banks are in compliance with those certain guidances and statements issued by
the Federal Financial Institutions Examination Council (the "FFIEC") in
connection with the century date change that will take place on January 1, 2000,
which guidances are dated as of June 1996, May 5, 1997, December 17, 1997, March
17, 1998, April 10, 1998, and May 13, 1998 (together with any subsequent FFIEC
issuances on the Year 2000, the "Interagency Statements"). Pacific and the
Subsidiary Banks have:
(i) Inventoried and assessed the technologies it uses,
particularly its computer hardware and software, to identify potential problems
areas related to the Year 2000;
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(ii) Developed and implemented a Year 2000 Plan, including
comprehensive testing plans, to prepare its "mission critical" information
technology to: (a) process date/time data accurately and without interruption
(including, but not limited to, calculating, comparing, and sequencing) from,
into, and between the years 1999 and 2000, and leap year calculations; (b)
respond to two-digit year-date input in a way that resolves the ambiguity as to
century in a disclosed, defined, and predetermined manner; and (c) store and
provide output of date information in ways that are unambiguous as to century;
and
(iii) Commenced the development of, and by September 30, 1998
will have completed the development of, contingency plans to ensure continuity
of business in the event of: (a) failure to complete any tasks required by the
Year 2000 Plan, such as remediation or validation; or (b) any externally caused
business interruption related to the century date change.
(iv) Taken commercially reasonable steps to investigate and
test the ability of its "mission critical" information technology to share and
exchange date/time data accurately and without interruption or material delay
with its key vendors and suppliers.
(b) If Pacific and the Subsidiary Banks have been examined by federal
or state regulators for Year 2000 readiness, they have not received a rating
that would cause delay or denial of any regulatory approval of this Agreement
and the transactions contemplated hereby.
(c) Pacific's estimate of the out-of-pocket expenses payable to third
parties necessary to complete its consolidated Year 2000 Compliance efforts is
not in excess of $500,000.
SECTION 3.35 Representations Not Misleading. To Pacific's knowledge,
all material facts relating to the business operations, properties, assets,
liabilities (contingent or otherwise) and financial condition of Pacific and the
Pacific Subsidiaries have been disclosed to SBB in or in connection with this
Agreement. No representation or warranty by Pacific contained in this Agreement,
nor any statement, exhibit or schedule furnished to SBB by Pacific under and
pursuant to, or in anticipation of or in connection with, this Agreement,
contains or will contain on the Closing Date any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which it was or will be made, not misleading and such representations and
warranties would continue to be true and correct following disclosure to any
governmental authority having jurisdiction over Pacific or its properties of the
facts and circumstances upon which they were based. Except as disclosed herein,
there is no matter that materially adversely affects Pacific or Pacific's
ability to perform the transactions contemplated by this Agreement or the other
agreements contemplated hereby, or to the knowledge of Pacific, will in the
future result in a Material Adverse Change with respect to Pacific, other than
general economic conditions. No information material to the Merger and that is
necessary to make the representations and warranties herein contained not
misleading, has been withheld by Pacific.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SBB
SBB hereby makes the representations and warranties set forth in this
Article IV to Pacific.
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SECTION 4.01 Organization and Qualification.
(a) SBB is a corporation, duly organized, validly existing under the
laws of the State of California, and in good standing under all laws, rules, and
regulations applicable to corporations located in the State of California. SBB
is a bank holding company registered under the BHCA. SBB has all requisite
corporate power and authority (including all licenses, franchises, permits and
other governmental authorizations as are legally required) to carry on its
business as now being conducted, to own, lease and operate its properties and
assets, including, but not limited to, as now owned, leased or operated and to
enter into and carry out its obligations under this Agreement and the Merger
Agreement. Schedule 4.01(a) sets forth a complete list of each Subsidiary (as
defined in Section 12.08(B)) of SBB (collectively, the "SBB Subsidiaries").
Except as set forth on Schedule 4.01(a), SBB does not own or control any
Affiliate (as defined in Section 12.08(A) hereof) other than the SBB
Subsidiaries, and neither of the SBB Subsidiaries owns or controls any Affiliate
or Subsidiary. True and complete copies of the Articles of Incorporation and
Bylaws of SBB and the SBB Subsidiaries, as amended to date, certified by the
Secretary of SBB and each SBB Subsidiary, as applicable, have been delivered to
Pacific.
(b) SBB&T is a California banking corporation duly organized, validly
existing and in good standing under the laws of the State of California. SBB&T
has all requisite corporate power and authority (including all licenses,
franchises, permits and other governmental authorizations as are legally
required) to carry on its business as now being conducted, to own, lease and
operate its properties and assets, including, but not limited to, as now owned,
leased or operated. SBB&T is an insured bank as defined in the FDIA. All of the
issued and outstanding shares of capital stock of SBB&T are owned by SBB free
and clear of all liens, encumbrances, rights of first refusal, options or other
restrictions of any nature whatsoever, and all such shares are duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights of any person. There are no options, warrants or rights outstanding to
acquire any capital stock of the SBB&T, and no person or entity has any other
right to purchase or acquire any unissued shares of stock of SBB&T, nor does
SBB&T have any obligation of any nature with respect to its unissued shares of
stock.
(c) Each of the SBB Subsidiaries, other than SBB&T, is a California
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and in good standing under all laws, rules, and
regulations applicable to corporations located in the State of California. Each
such SBB Subsidiary has all requisite corporate power and authority (including
all licenses, franchises, permits and other governmental authorizations as are
legally required) to carry on their respective businesses as now being
conducted, to own, lease and operate its properties and assets, including, but
not limited to, as now owned, leased or operated. All of the issued and
outstanding shares of capital stock of each such SBB Subsidiary is owned by SBB
free and clear of all liens, encumbrances, rights of first refusal, options or
other restrictions of any nature whatsoever, and all such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights of any person. There are no options, warrants or rights
outstanding to acquire any capital stock of the SBB Subsidiaries and no person
or entity has any other right to purchase or acquire any unissued shares of
stock of any of the SBB Subsidiaries, nor does any such SBB Subsidiary have any
obligation of any nature with respect to its unissued shares of stock.
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(d) The nature of the business of SBB and the SBB Subsidiaries do not
require any of them to be licensed or qualified to do business in any
jurisdiction other than the State of California. Except as disclosed on Schedule
4.01(d), neither SBB nor any of the SBB Subsidiaries has any equity interest,
direct or indirect, in any other bank or corporation or in any partnership,
joint venture or other business enterprise or entity, except as acquired through
settlement of indebtedness, foreclosure, the exercise of creditors' remedies or
in a fiduciary capacity, and the business carried on by SBB and the SBB
Subsidiaries has not been conducted through any other direct or indirect
Subsidiary or Affiliate of SBB or the SBB Subsidiaries.
(e) Neither SBB nor any of the SBB Subsidiaries that is neither a bank,
a bank operating subsidiary or a bank service corporation, directly or
indirectly, engages in any activity prohibited by the Federal Reserve. Without
limiting the generality of the foregoing, any equity investment of SBB and each
subsidiary that is not a bank, a bank operating subsidiary or a bank service
corporation, is not prohibited by the Federal Reserve.
(f) SBB&T does not, directly or indirectly, engage in any activity
prohibited by the Federal Reserve or the California Commissioner.
SECTION 4.02 Execution and Delivery. SBB has taken all corporate action
necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party, including, but not limited to, the Merger Agreement. This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not limited to, the Merger Agreement, have been or at Closing will be, duly
executed by SBB and each constitutes the valid and binding obligation of SBB,
enforceable in accordance with its respective terms and conditions, except as
enforceability may be limited by bankruptcy, conservatorship, insolvency,
moratorium, reorganization, receivership or similar laws and judicial decisions
affecting the rights of creditors generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
SECTION 4.03 Capitalization. The entire authorized capital stock of SBB
consists of 40,000,000 shares of SBB Common Stock, 15,397,463 shares of which
are fully paid, validly issued, nonassessable and outstanding, and 1,128,680
additional shares of which have been reserved for issuance to holders of
outstanding stock options to purchase shares of SBB Common Stock. Schedule 4.03
contains a list of each plan administered by SBB or any SBB Subsidiary pursuant
to which options to purchase shares of SBB Common Stock ("SBB Stock Options")
have been or may be granted (the "SBB Stock Option Plans"), including (i) the
number of outstanding options with respect to each SBB Stock Option Plan, (ii)
the weighted average exercise price per share with respect to each SBB Stock
Option Plan, (iii) a list of all option holders with respect to each SBB Stock
Option Plan, and (iv) the number of vested and unvested SBB Stock Options with
respect to each such option holder in each SBB Stock Option Plan. All SBB Stock
Options were issued and, upon issuance in accordance with the terms of the
outstanding option agreements, the shares of SBB Common Stock shall be issued in
compliance with all applicable securities laws. Except as disclosed in Schedule
4.03, there are no (i) other outstanding equity securities of any kind or
character, (ii) outstanding subscriptions, options, convertible securities,
rights, warrants, calls or other agreements or commitments of any kind issued or
granted by, or binding upon, SBB to purchase or otherwise acquire any security
of or
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equity interest in SBB or (iii) outstanding subscriptions, options, rights,
warrants, calls, convertible securities, irrevocable proxies or other agreements
or commitments obligating SBB to issue any shares of, restricting the transfer
of or otherwise relating to shares of its capital stock of any class. All of the
issued and outstanding shares of SBB Common Stock have been duly authorized,
validly issued and are fully paid and nonassessable, and have not been issued in
violation of the preemptive rights of any person. Such shares of SBB Common
Stock have been issued in full compliance with applicable law. There are no
restrictions applicable to the payment of dividends on the shares of SBB Common
Stock, except pursuant to applicable laws and regulations, and all dividends
declared prior to the date of this Agreement have been paid.
SECTION 4.04 Compliance with Laws, Permits and Instruments.
(a) Except as set forth in Schedule 4.04, SBB and the SBB Subsidiaries,
as applicable, are in compliance with, and are not in default (or with the
giving of notice or the passage of time will be in default) under, or in
violation of, (i) any provision of the Articles of Incorporation or Bylaws of
SBB or any SBB Subsidiary, (ii) any material provision of any loan agreement,
security or pledge agreement, mortgage, indenture, lease, contract, agreement or
other instrument applicable to SBB or any SBB Subsidiary or their respective
assets, operations, properties or businesses now conducted or heretofore
conducted or (iii) any permit, concession, grant, franchise, license,
authorization, judgment, writ, injunction, order, decree, award, statute,
federal, state or local law, ordinance, rule or regulation of any court,
arbitrator or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality applicable to SBB, the SBB
Subsidiaries or their respective assets, operations, properties or businesses
now conducted or heretofore conducted, which noncompliance or violation would,
individually or in the aggregate, reasonably be anticipated to have a material
adverse effect on the business, results of operations, financial condition, or
(insofar as they can reasonably be foreseen) prospects of SBB taken as a whole.
(b) The execution, delivery and (provided the required regulatory and
shareholder approvals are obtained) performance of this Agreement and the other
agreements contemplated hereby, including but not limited to the Merger
Agreement, and the consummation of the transactions contemplated hereby and
thereby, will not conflict with, or result, by itself or with the giving of
notice or the passage of time, in any violation of or default or loss of a
benefit under, (i) any provision of the Articles of Incorporation or Bylaws of
SBB or any SBB Subsidiary, (ii) any material provision of any mortgage,
indenture, lease, contract, agreement or other instrument applicable to SBB, the
SBB Subsidiaries or their assets, operations, properties or businesses, or (iii)
any permit, concession, grant, franchise, license, authorization, judgment,
writ, injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to SBB, the SBB Subsidiaries or their assets, operations, properties
or businesses.
SECTION 4.05 Financial Statements.
(a) SBB has furnished to Pacific true and complete copies of (i) the
audited consolidated balance sheets of SBB as of December 31, 1996 and 1997, and
the related audited consolidated statements of income, stockholders' equity and
cash flows for the years ended December 31, 1995, 1996 and 1997, (ii) an
unaudited consolidated balance sheet of SBB as of March 31, 1998, and the
related unaudited consolidated statement of income for the three-month
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period ended March 31, 1998 (such balance sheets and the related statements of
income, stockholders' equity and cash flows are collectively referred to herein
as the "SBB Financial Statements"). Except as described in the notes to the SBB
Financial Statements, the SBB Financial Statements fairly present, in all
material respects, the consolidated financial position of SBB as of the
respective dates thereof and the results of operations and changes in financial
position of SBB for the periods then ended, in conformity with GAAP, applied on
a basis consistent with prior periods (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and the fact that
they do not contain all of the footnote disclosures required by GAAP), except as
otherwise noted therein, and the accounting records underlying the SBB Financial
Statements accurately and fairly reflect in all material respects the
transactions of SBB. The SBB Financial Statements do not contain any items of
extraordinary or nonrecurring income or any other income not earned in the
ordinary course of business except as expressly specified therein.
(b) SBB has furnished, or has caused SBB&T to furnish, to Pacific with
true and complete copies of the Call Reports of SBB&T for the periods ended
December 31, 1996, December 31, 1997 and March 31, 1998. Such Call Reports
fairly presents, in all material respects, the financial position of SBB&T and
the results of its operations at the dates and for the periods indicated in
conformity with the Instructions for the Preparation of Call Reports as
promulgated by applicable regulatory authorities. The Call Reports do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business except as expressly specified therein.
SBB&T has calculated its allowance for loan losses in accordance with GAAP,
which includes RAP where applicable, as applied to banking institutions and in
accordance with all applicable rules and regulations. To the best knowledge of
SBB, the allowance for loan losses account for SBB&T is, and as of the Closing
Date will be, adequate in all material respects to provide for all losses, net
of recoveries relating to loans previously charged off, on all outstanding loans
of SBB&T.
SECTION 4.06 Undisclosed Liabilities. Neither SBB nor any of the SBB
Subsidiaries has any material liability or obligation, accrued, absolute,
contingent or otherwise and whether due or to become due (including, without
limitation, unfunded obligations under any service recognition or severance
agreement, whether written or oral, or SBB Employee Plans (as defined in Section
4.31 hereof) or material liabilities for federal, state or local taxes or
assessments or material liabilities under any agreement that are not reflected
in or disclosed in the SBB Financial Statements, except (i) those liabilities
and expenses incurred in the ordinary course of business and consistent with
prudent business practices since the date of the SBB Financial Statements or
(ii) as disclosed on Schedule 4.06.
SECTION 4.07 Litigation. Except as set forth on Schedule 4.07, there
are no actions, claims, suits, investigations, reviews or other legal,
quasi-judicial or administrative proceedings of any kind or nature now pending
or, to the best knowledge of SBB, threatened against or affecting SBB, any of
the SBB Subsidiaries or any of their respective current or former officers and
directors (while acting in such capacity) at law or in equity, or by or before
any federal, state or municipal court or other governmental or administrative
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that in any manner involves SBB, the SBB Subsidiaries or any of their
current or former officers or directors (while acting in such capacity) or any
of their properties or capital stock that would reasonably be
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anticipated to result in a Material Adverse Change with respect to SBB, or
materially and adversely affect the transactions contemplated by this Agreement,
and SBB does not know or have any reason to be aware of any basis for the same.
No legal action, suit or proceeding or judicial, administrative or governmental
investigation is pending or, to the knowledge of SBB, threatened against SBB or
any of the SBB Subsidiaries that questions the validity of this Agreement or the
agreements contemplated hereby, including, but not limited to, the Merger
Agreement, or any actions taken or to be taken by SBB pursuant hereto or thereto
or seeks to enjoin or otherwise restrain the transactions contemplated hereby or
thereby.
SECTION 4.08 Consents and Approvals. SBB's Board of Directors (at a
meeting called and duly held) has resolved, subject to its fiduciary duties to
the shareholders of SBB, to recommend approval and adoption by SBB's
shareholders of the Merger, this Agreement and the Merger Agreement. Except for
shareholder and regulatory approvals and except as disclosed in Schedule 4.08,
no approval, consent, order or authorization of, or registration, declaration or
filing with, any governmental authority or other third party is required on the
part of SBB in connection with the execution, delivery or performance of this
Agreement or the agreements contemplated hereby, including, but not limited to,
the Merger Agreement, or the consummation by SBB of the transactions
contemplated hereby or thereby.
SECTION 4.09 Title to Assets. SBB and each of the SBB Subsidiaries has
good and indefeasible title to all of its assets and properties including,
without limitation, all personal and intangible properties reflected in the SBB
Financial Statements or acquired subsequent thereto, subject to no liens,
mortgages, security interests, encumbrances or charges of any kind, except (i)
as described in Schedule 4.09, (ii) as noted in the SBB Financial Statements,
(iii) statutory liens not yet delinquent, (iv) consensual landlord liens, (v)
minor defects and irregularities in title and encumbrances that do not
materially impair the use thereof for the purpose for which they are held, (vi)
pledges of assets in the ordinary course of business to secure public funds
deposits, and (vii) those assets and properties disposed of for fair value in
the ordinary course of business since the dates of the SBB Financial Statements.
Schedule 4.09 includes a copy of the title policy of insurance with respect to
each parcel of real property owned by SBB and the SBB Subsidiaries.
SECTION 4.10 Absence of Certain Changes or Events. Except as disclosed
on Schedule 4.10, since December 31, 1997, SBB, including the SBB Subsidiaries,
has conducted its business only in the ordinary course and has not, other than
in the ordinary course of business and consistent with past practices and safe
and sound banking practices:
A. Incurred any obligation or liability, absolute, accrued, contingent
or otherwise, whether due or to become due, which individually or in the
aggregate, has had a material adverse effect on the business, results of
operations, financial condition, or (insofar as they can reasonably be foreseen)
prospects of SBB and the SBB Subsidiaries taken as a whole, except for deposits
taken and federal funds purchased and current liabilities for trade or business
obligations;
B. Discharged or satisfied any lien, charge or encumbrance or paid any
obligation or liability, whether absolute or contingent, due or to become due;
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C. Declared or made any payment of dividends or other distribution to
its shareholders, or purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its shares of capital stock or other
securities;
D. Issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any kind
relating to the issuance thereto;
E. Acquired any capital stock or other equity securities or acquired
any equity or ownership interest in any bank, corporation, partnership or other
entity (except (i) through settlement of indebtedness, foreclosure, or the
exercise of creditors' remedies or (ii) in a fiduciary capacity, the ownership
of which does not expose it to any liability from the business, operations or
liabilities of such person);
F. Mortgaged, pledged or subjected to lien, charge, security interest
or any other encumbrance or restriction any of its property, business or assets,
tangible or intangible except (i) as described in Schedule 4.09, (ii) statutory
liens not yet delinquent, (iii) consensual landlord liens, (iv) minor defects
and irregularities in title and encumbrances that do not materially impair the
use thereof for the purpose for which they are held, (v) pledges of assets to
secure public funds deposits, and (vi) for those assets and properties disposed
of for fair value since the dates of the SBB Financial Statements.
G. Sold, transferred, leased to others or otherwise disposed of any of
its assets or canceled or compromised any debt or claim, or waived or released
any right or claim of material value;
H. Terminated, canceled or surrendered, or received any notice of or
threat of termination or cancellation of any contract, lease or other agreement
or suffered any damage, destruction or loss (whether or not covered by
insurance), which, in any case or in the aggregate, would have a material
adverse effect on the business, results of operations, financial condition, or
(insofar as they can reasonably be foreseen) prospects of SBB and the SBB
Subsidiaries taken as a whole;
I. Disposed of, permitted to lapse, transferred or granted any rights
under, or entered into any settlement regarding the breach or infringement of,
any United States or foreign license or SBB Proprietary Right (as defined in
Section 4.15 hereof) or modified any existing rights with respect thereto;
J. Made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to or for the benefit of any of its
shareholders, directors, officers, employees or agents, or entered into any
employment or consulting contract or other agreement with any director, officer
or employee or adopted, amended in any material respect or terminated any
pension, employee welfare, retirement, stock purchase, stock option, stock
appreciation rights, termination, severance, income protection, golden
parachute, savings or profit-sharing plan (including trust agreements and
insurance contracts embodying such plans), any deferred compensation, or
collective
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bargaining agreement, any group insurance contract or any other incentive,
welfare or employee benefit plan or agreement maintained by it for the benefit
of its directors, employees or former employees, except (i) compensation
adjustments contemplated within SBB's 1998 budget and approved in advance by
Pacific (which approval shall not be unreasonably withheld), and (ii) periodic
increases consistent with past practices;
K. Except for improvements or betterments relating to SBB Properties
(as defined in Section 4.19(e) hereof), made any capital expenditures or capital
additions or betterments in excess of an aggregate of $4,000,000;
L. Instituted, had instituted against it, settled or agreed to settle
any litigation, action or proceeding before any court or governmental body,
other than routine collection suits instituted by it to collect amounts owed or
suits in which the amount in controversy is less than $200,000;
M. Permitted any change, event or condition that, in any case or in the
aggregate, has caused or may result in a Material Adverse Change, or any
Material Adverse Change in earnings or costs or relations with its employees,
agents, depositors, loan customers, correspondent banks or suppliers;
N. Except for the transactions contemplated by this Agreement or as
otherwise permitted hereunder, entered into any transaction, or entered into,
modified or amended any contract or commitment;
O. Entered into or given any promise, assurance or guarantee of the
payment, discharge or fulfillment of any undertaking or promise made by any
person, firm or corporation other than letters of credit issued in the ordinary
course of business;
P. Sold, or knowingly disposed of, or otherwise divested itself of the
ownership, possession, custody or control, of any corporate books or records of
any nature that, in accordance with sound business practice, normally are
retained for a period of time after their use, creation or receipt, except at
the end of the normal retention period;
Q. Made any, or acquiesced with any, change in any accounting methods,
principles or material practices, except as required by GAAP or RAP;
R. Sold (provided, however, that payment at maturity is not deemed a
sale) any investment securities in a single transaction involving a book gain or
loss of more than $200,000 on such sale or purchased any investment securities,
other than purchases of U.S. Treasury securities with a maturity of two years or
less;
S. Made, renewed, extended the maturity of, or altered any of the
material terms of any criticized loan to any single borrower and his related
interests without regard to whether such transaction was in the ordinary course
of business or whether it was consistent with past or safe and sound banking
practices; or
T. Entered into any agreement or made any commitment whether in writing
or otherwise to take any of the types of action described in subsections A.
through S. above.
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SECTION 4.11 Leases, Contracts and Agreements. Schedule 4.11 sets forth
a complete listing of all leases, subleases, licenses, contracts and agreements
to which SBB, including any of the SBB Subsidiaries, is a party (the "SBB
Contracts"), and which (i) relate to real property used by SBB in its operation,
(ii) involve payments to or by SBB in excess of $200,000 during the term of such
SBB Contracts (exclusive of unfunded loan commitments and letters of credit
issued by SBB), or (iii) involve any unfunded loan commitments and letters of
credit issued by SBB where the borrower's total direct and indirect indebtedness
to SBB is in excess of $4,000,000. True and correct copies of all such SBB
Contracts (other than unfunded loan commitments and letters of credit issued by
SBB) are included with Schedule 4.11. For the purposes of this Agreement, the
SBB Contracts shall be deemed not to include loans made by, Federal funds sold
or purchased by, repurchase agreements made by, spot foreign exchange
transactions of, bankers acceptances of or deposits by SBB. Except as set forth
in Schedule 4.11, no participations or loans have been sold which have buy back,
recourse or guaranty provisions which create contingent or direct liabilities of
SBB. To the knowledge of SBB, all of the leases, subleases, licenses, contracts
and agreements to which SBB or any SBB Subsidiary is a party are legal, valid
and binding obligations of the parties to such contracts enforceable in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and to general equitable principles, and are in full force and effect.
Except as described in Schedule 4.11, all rent and other payments by SBB and any
SBB Subsidiary under such contracts are current, there are no existing defaults
by SBB or any SBB Subsidiary under such contracts, and no termination, condition
or other event has occurred which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute a default.
SBB and each SBB Subsidiary has a good and indefeasible leasehold interest in
each parcel of real property leased by it free and clear of all mortgages,
pledges, liens, encumbrances and security interests.
SECTION 4.12 Taxes. SBB has duly and timely filed with the appropriate
Federal, state and local governmental agencies all tax returns and reports
required to be filed, including, without limitation, income, excise, property,
sales, use, franchise, value added, unemployment, employees' income withholding
and social security taxes, imposed by the United States or by any foreign
country or by any state, municipality, subdivision or instrumentality of the
United States or of any foreign country, or by any other taxing authority, and
has paid, or has established adequate reserves for the payment of, all taxes and
assessments that are or are claimed to be due, payable or owed by SBB, or for
which SBB may have liability, whether as a result of its own activities or by
virtue of its affiliation with other entities and all interest and penalties
thereon, whether disputed or not. All such tax returns and reports are
accurately prepared and all deposits required by law to be made by SBB with
respect to employees' withholding taxes have been duly made. SBB is not and has
not been delinquent in the payment of any foreign or domestic tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and, to SBB's knowledge, there is no basis for
any such deficiency or claim. Except as set forth in Schedule 4.12, within the
last six (6) years, SBB's Federal income tax return has not been audited or
examined and no such audit is currently pending or, to SBB's knowledge,
threatened. SBB has not been granted any extension of time with respect to the
date on which any tax return not yet filed was or is due to be filed by or with
respect to SBB or any waiver or agreement by SBB for the extension of time for
the assessment or collection of any tax. Except as set forth in Schedule 4.12,
SBB (i) within the past six (6) years, has not committed any violation of any
applicable Federal, state, local or
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foreign tax laws, and (ii) with respect to all prior years, has not committed
any violation of any applicable Federal, state, local or foreign tax laws that
is likely to result in a Material Adverse Change with respect to SBB.
The amounts set up as provisions for current or deferred taxes on the
SBB Financial Statements are sufficient in all material respects for the payment
of all unpaid Federal, state, county, local, foreign or other taxes (including
any interest or penalties) of or on behalf of SBB applicable to the periods
covered by the SBB Financial Statements, and all years and periods prior
thereto. True and complete copies of the Federal income tax returns of SBB as
filed with the IRS for the years ended December 31, 1995, 1996, and 1997, have
been delivered to Pacific.
SECTION 4.13 Insurance. Schedule 4.13 contains an accurate and complete
list and brief description of all policies of insurance, including fidelity and
bond insurance, of SBB, including the SBB Subsidiaries. All such policies (a)
are valid, outstanding and enforceable except as enforceability may be limited
by bankruptcy, conservatorship, insolvency, moratorium, reorganization,
receivership, or similar laws and judicial decisions affecting the rights of
creditors generally and by general principles of equity (whether applied in a
proceeding at law or equity), (b) will not in any significant respect be
affected by, and will not terminate or lapse by reason of, the transactions
contemplated by this Agreement, and (c) are presently in full force and effect,
no notice has been received of the cancellation, or threatened or proposed
cancellation, of any such policy and there are no unpaid premiums due thereon.
SBB, including the SBB Subsidiaries, is not in default with respect to the
provisions of any such policy and has not failed to give any notice or present
any claim thereunder in a due and timely fashion. Except as set forth on
Schedule 4.13, neither SBB nor any SBB Subsidiary has been refused any insurance
with respect to its assets or operations, nor has its insurance been limited by
any insurance carrier to which SBB and the SBB Subsidiaries has applied for any
such insurance within the last two (2) years. Each property of SBB, including
the SBB Subsidiaries, is insured for the benefit of SBB in amounts deemed
adequate by SBB's management against risks customarily insured against. There
have been no claims under any fidelity bonds of SBB or any of the SBB
Subsidiaries within the last three (3) years, and SBB is not aware of any facts
that would form the basis of a claim under such bonds.
SECTION 4.14 No Adverse Change. Except as disclosed in the Schedules to
this Agreement or in the representations and warranties made in this Article IV,
there has not been any Material Adverse Change since December 31, 1997, nor has
any event or condition occurred that has resulted in, or has a reasonable
possibility of resulting in the future, in a Material Adverse Change with
respect to SBB.
SECTION 4.15 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 4.15, SBB and the SBB Subsidiaries do not own or require the use of any
patent, patent application, patent right, invention, process, trademark (whether
registered or unregistered), trademark application, trademark right, trade name,
service name, service ▇▇▇▇, copyright or any trade secret ("SBB Proprietary
Rights") for their respective businesses or operations, except for licensed
computer software. To the knowledge of SBB, neither SBB nor any of the SBB
Subsidiaries are infringing upon or otherwise acting adversely to any SBB
Proprietary Right owned by any other person or persons. There is no claim or
action by any such person pending, or, to the knowledge of SBB, threatened, with
respect thereto.
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SECTION 4.16 Transactions with Certain Persons and Entities. Except as
disclosed in Schedule 4.16, neither SBB nor any of the SBB Subsidiaries owe any
amount to (excluding deposit liabilities), or have any loan (excluding loans to
participants from the Santa ▇▇▇▇▇▇▇ Bank & Trust 401(k) Plan), contract, lease,
commitment or other obligation from or to any of the present or former directors
or executive officers (other than compensation for current services not yet due
and payable and reimbursement of expenses arising in the ordinary course of
business) of SBB and the SBB Subsidiaries, and none of such persons owes any
amount to SBB or the SBB Subsidiaries. Except as set forth in Schedule 4.16,
there are no understandings, agreements (whether written or oral), instruments,
commitments, perquisites, extensions of credit, tax sharing or allocation
agreements or other contractual agreements of any kind between or among SBB and
the SBB Subsidiaries, whether on its own behalf or in its capacity as trustee or
custodian for the funds of any employee benefit plan (as defined in ERISA) and
any present or former officers or directors of SBB or the SBB Subsidiaries. True
and correct copies of any such written understandings, agreements, instruments,
etc., are included with Schedule 4.16.
SECTION 4.17 Evidences of Indebtedness. All evidences of indebtedness
and leases that are reflected as assets of SBB and the SBB Subsidiaries are, to
SBB's best knowledge, legal, valid and binding obligations of the respective
obligors thereof, enforceable in accordance with their respective terms (except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors generally and the availability of injunctive
relief, specific performance and other equitable remedies) and are not subject
to any known or threatened defenses, offsets or counterclaims that may be
asserted against SBB, the SBB Subsidiaries or the present holder thereof, except
as disclosed in Schedule 4.17. The credit files of SBB, including the SBB
Subsidiaries, contain all material information (excluding general, local or
national industry, economic or similar conditions) known to SBB that is
reasonably required to evaluate in accordance with generally prevailing
practices in the banking industry the collectibility of the loan portfolio of
SBB (including loans that will be outstanding if any of them advances funds they
are obligated to advance). SBB has disclosed all of the substandard, doubtful,
loss, nonperforming or loans identified as problem loans on the internal watch
list of SBB&T, a copy of which as of May 31, 1998, has been provided to Pacific.
Except as disclosed in Schedule 4.17, SBB is not aware of, nor has SBB received
notice of, any past or present conditions, events, activities, practices or
incidents that may result in a violation of any Environmental Law (as defined in
Section 12.08(D) hereof) with respect to any real property securing any
indebtedness reflected as an asset of SBB or any SBB Subsidiary.
SECTION 4.18 Condition of Assets. All tangible assets used by SBB,
including the SBB Subsidiaries, are in good operating condition, ordinary wear
and tear excepted, and conform with all applicable ordinances, regulations,
zoning and other laws, whether Federal, state or local. Except as set forth on
Schedule 4.18, none of SBB's or the SBB Subsidiaries' premises or equipment are
in need of maintenance or repairs other than ordinary routine maintenance and
repairs that are not material in nature or cost.
SECTION 4.19 Environmental Compliance.
(a) Except as set forth on Schedule 4.19(a), SBB is not aware of, nor
has SBB received notice of, any past or present conditions, events, activities,
practices or incidents that are
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in violation of Environmental Laws (as defined in Section 12.08(D) or that may
interfere with or prevent SBB's continued compliance in all respects with all
Environmental Laws.
(b) SBB and the SBB Subsidiaries have obtained all permits, licenses
and authorizations that are required under any Environmental Laws.
(c) Except as set forth on Schedule 4.19(c), to SBB's knowledge, no
Hazardous Materials (as defined in Section 12.08(E) hereof) exist on, about, or
within any of the SBB Properties (as defined in this Section 4.19), nor, to
SBB's knowledge, have any Hazardous Materials previously existed on, about or
within or been used, generated, stored, transported, disposed of, on or released
from any of the SBB Properties in violation of any Environmental Law. The use
that SBB, including the SBB Subsidiaries, makes and intends to make of the SBB
Properties will not result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Material on, in or from any
of the SBB Properties in violation of any Environmental Law.
(d) There is no action, suit, proceeding, investigation or inquiry
before any court, administrative agency or other governmental authority pending
or, to SBB's knowledge, threatened against SBB or any SBB Subsidiary relating in
any way to any Environmental Law. To the best of SBB's knowledge, neither SBB
nor any SBB Subsidiary has any liability for remedial action under any
Environmental Law. SBB has not received any request for information by any
governmental authority with respect to the condition, use or operation of any of
the SBB Properties nor has SBB received any notice of any kind from any
governmental authority or other person with respect to any violation of or
claimed or potential liability of any kind under any Environmental Law
(including, without limitation, any letter, notice or inquiry from any person or
governmental entity informing SBB that it is or may be liable in any way under
any Environmental Law, or requesting information to enable such a determination
to be made).
(e) As used in this Section 4.19, the term "SBB Property" or "SBB
Properties" shall include all real property currently owned or leased by SBB or
any of the SBB Subsidiaries, including, but not limited to, properties that SBB
or any SBB Subsidiary has foreclosed on as well as SBB&T's respective banking
premises and all improvements and fixtures thereon. The phrase "to SBB's
knowledge" or similar phrases as used in this Section 4.19 shall mean the
current actual knowledge of executive management of SBB.
SECTION 4.20 Regulatory Compliance. All reports, records,
registrations, statements, notices and other documents or information required
to be filed by SBB and the SBB Subsidiaries during the last two (2) years with
any federal or state regulatory authority including, without limitation, the
Federal Reserve, the FDIC, the California Commissioner and the IRS have been
duly and timely filed and all information and data contained in such reports,
records or other documents are true, accurate, correct and complete. Except as
disclosed on Schedule 4.20, SBB and the SBB Subsidiaries are not now nor have
been, within the past six (6) years subject to any memorandum of understanding,
cease and desist order, written agreement or other formal administrative action
with any such regulatory bodies. SBB does not believe any such regulatory bodies
have any present intent to place SBB or the SBB Subsidiaries under any new
administrative action. Except as set forth on Schedule 4.20, there are no
actions or proceedings
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pending or threatened against SBB or any SBB Subsidiary by or before any such
regulatory bodies or any other nation, state or subdivision thereof, or any
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
SECTION 4.21 Securities and Exchange Commission Reports. SBB has
previously made available to Pacific an accurate and complete copy of each (a)
final registration statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1995 by SBB with the S.E.C. pursuant to the
Securities Act or the Exchange Act, and prior to the date hereof (the "SBB
Reports"), and (b) communication mailed by SBB to its shareholders since January
1, 1995 and prior to the date hereof, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. Since January 1, 1995, SBB has timely filed all SBB
Reports and other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all SBB Reports
complied in all material respects with the published rules and regulations of
the S.E.C. with respect thereto.
SECTION 4.22 Absence of Certain Business Practices. Except as set forth
on Schedule 4.22, neither SBB, the SBB Subsidiaries nor any officer, employee or
agent of SBB or the SBB Subsidiaries, nor any other person acting on their
behalf, has, directly or indirectly, within the past ten (10) years, given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the business of SBB as a whole (or assist SBB in connection with any
actual or proposed transaction) that (i) would subject SBB or any of the SBB
Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, would have resulted in
a Material Adverse Change with respect to SBB, or (iii) if not continued in the
future, would result in a Material Adverse Change with respect to SBB or would
subject SBB to suit or penalty in any private or governmental litigation or
proceeding.
SECTION 4.23 Registration Statement; Joint Proxy Statement/Prospectus.
None of the information supplied or to be supplied by SBB or any of its
directors, officers, employees or agents for inclusion in the Registration
Statement (as defined in Section 5.03(c)) or the Joint Proxy
Statement/Prospectus (as defined in Section 5.03(c)), or any amendment thereof
or supplement thereto, will be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or at the time of the Pacific Shareholders' Meeting and the SBB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Pacific Shareholders' Meeting and the SBB Shareholders' Meeting. All documents
that SBB is responsible for filing with any regulatory or governmental agency in
connection with the Merger will comply in all material respects with the
provisions of applicable law.
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SECTION 4.24 Pooling of Interests. As of the date of this Agreement,
SBB has no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
SECTION 4.25 Books and Records. The minute books, stock certificate
books and stock transfer ledgers of SBB and the SBB Subsidiaries (i) have been
kept accurately in the ordinary course of business, (ii) are complete and
correct in all material respects, (iii) reflect transactions representing bona
fide transactions, and (iv) do not fail to reflect transactions involving the
business of SBB or the SBB Subsidiaries that were required to have been set
forth therein and that have not been accurately so set forth.
SECTION 4.26 Forms of Instruments, Etc. SBB will make available to
Pacific upon written request copies of all standard forms of notes, mortgages,
deeds of trust and other routine documents of a like nature used on a regular
and recurring basis by SBB and the SBB Subsidiaries in the ordinary course of
their businesses.
SECTION 4.27 Fiduciary Responsibilities. Except as disclosed in
Schedule 4.27, SBB and the SBB Subsidiaries have performed in all material
respects all of their duties as a trustee, custodian, guardian or as an escrow
agent in a manner that complies in all material respects with all applicable
laws, regulations, orders, agreements, instruments and common law standards.
SECTION 4.28 Guaranties. None of the obligations or liabilities of SBB
or the SBB Subsidiaries are guaranteed by any other person, firm or corporation,
nor is any outstanding obligation or liability of any other person, firm or
corporation guaranteed by SBB or the SBB Subsidiaries, except in the ordinary
course of business, according to prudent business practices and in compliance
with applicable law.
SECTION 4.29 Voting Trust or Buy-Sell Agreements. SBB is not aware of
any agreement between or among any of its shareholders relating to a right of
first refusal with respect to the purchase or sale by any such shareholder of
capital stock of SBB or any voting agreement or voting trust with respect to
shares of capital stock of SBB.
SECTION 4.30 Employee Relationships. SBB and the SBB Subsidiaries
(including their respective officers and directors while acting in such
capacities) has complied in all material respects with all applicable laws
relating to its relationships with its employees, and SBB believes that the
relationships between SBB, including the SBB Subsidiaries (including their
respective officers and directors while acting in such capacities) and its
employees are good. To the knowledge of SBB, no key executive officer or manager
of any of the operations operated by SBB and the SBB Subsidiaries or any group
of employees of SBB and the SBB Subsidiaries have any present plans to terminate
their employment with SBB or any SBB Subsidiary. Neither SBB nor any of the SBB
Subsidiaries is a party to any oral or written contracts or agreements granting
benefits or rights to employees or any collective bargaining agreement or to any
conciliation agreement with the Department of Labor, the Equal Employment
Opportunity Commission or any federal, state or local agency that requires equal
employment opportunities or affirmative action in employment. There are no
unfair labor practice complaints pending against SBB, including any of the SBB
Subsidiaries, before the
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National Labor Relations Board and no similar claims pending before any similar
state, local or foreign agency. There is no activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any
employees of SBB, including any SBB Subsidiary, nor of any strikes, slowdowns,
work stoppages, lockouts or threats thereof, by or with respect to any such
employees. SBB and the SBB Subsidiaries are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and neither
SBB nor any of the SBB Subsidiaries are engaged in any unfair labor practice.
SECTION 4.31 Employee Benefit Plans.
(a) Set forth on Schedule 4.31 is a complete and correct list of all
"employee benefit plans" (as defined in ERISA), all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus, incentive,
compensation, deferred compensation, profit sharing, stock option, stock
appreciation right, stock bonus, stock purchase, employee stock ownership,
savings, severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan or any other
similar plan, agreement, policy or understanding (whether written or oral,
qualified or nonqualified, currently effective or terminated), and any trust,
escrow or other agreement related thereto, which (a) is maintained or
contributed to by SBB or any SBB Subsidiary, or with respect to which SBB and
the SBB Subsidiaries has any liability, and (b) provides benefits, or describes
policies or procedures applicable to any officer, employee, service provider,
former officer or former employee of SBB or any SBB Subsidiary, or the
dependents of any such person, regardless of whether funded (the "SBB Employee
Plans").
(b) No SBB Employee Plan is a defined benefit plan within the meaning
of section 3(35) of ERISA. SBB has delivered or made available to Pacific true,
accurate and complete copies of the documents comprising each SBB Employee Plan,
and such other documents, records or other materials related thereto reasonably
requested by Pacific To the best knowledge of SBB, there have been no prohibited
transactions, breaches of fiduciary duty or any other breaches or violations of
any law applicable to the SBB Employee Plans that would subject SBB to any
liabilities. Each SBB Employee Plan intended to be qualified under section
401(a) of the Code has a current favorable determination letter and, to the best
knowledge of SBB, has been operated in compliance with applicable law and in
accordance with its terms. There are no pending claims, lawsuits or actions
relating to any SBB Employee Plan (other than ordinary course claims for
benefits) and, to the best knowledge of SBB, none are threatened. No written or
oral representations have been made to any employee or former employee of SBB or
the SBB Subsidiaries promising or guaranteeing any employer payment or funding
for the continuation of medical, dental, life or disability coverage for any
period of time beyond the end of the current plan year (except to the extent of
coverage required under section 4980B of the Code). SBB is in compliance with
FAS 106. Except as required in connection with qualified plan amendments
required by tax law changes, the consummation of the transactions contemplated
by this Agreement will not accelerate the time of payment or vesting, or
increase the amount, of compensation due to any employee, officer, former
employee or former officer of SBB or any SBB Subsidiary.
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(c) With respect to each "employee benefit plan" (as defined in ERISA)
maintained or contributed to or required to be contributed to, currently or in
the past, by any trade or business with which SBB is required by any of the
rules contained in the Code or ERISA to be treated as a single employer (the
"Controlled Group Plans"):
(i) To the knowledge of SBB, all Controlled Group Plans that
are "group health plans" (as defined in the Code and ERISA) have been operated
to the Closing in a manner so as to not subject SBB to any material liability
under Section 4980B of the Code; and
(ii) There is no Controlled Group Plan that is a defined
benefit plan (as defined in Section 3(35) of ERISA), nor has there been in the
last five (5) calendar years.
(iii) There is no Controlled Group Plan that is a "multiple
employer plan" or "multiemployer plan" (as either such term is defined in
ERISA), nor has there been in the last five (5) calendar years.
SECTION 4.32 Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of SBB or any SBB
Subsidiary or for the account of a customer of SBB or any SBB Subsidiary, were
entered into in the ordinary course of business and, to SBB's knowledge, in
accordance with prudent banking practice and applicable rules, regulations and
policies of any regulatory authority and with counterparties believed to be
financially responsible at the time and are legal, valid and binding obligations
of SBB or an SBB Subsidiary enforceable in accordance with their terms (except
as may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. SBB and each SBB
Subsidiary have duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to perform have
accrued; and, to SBB's knowledge, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
SECTION 4.33 Year 2000.
(a) To the best of SBB's knowledge, SBB and SBB&T are in compliance
with those certain guidances and statements issued by the FFIEC in connection
with the century date change that will take place on January 1, 2000, which
guidances are dated as of June 1996, May 5, 1997, December 17, 1997, March 17,
1998, April 10, 1998, and May 13, 1998 (together with any subsequent FFIEC
issuances on the Year 2000, the "Interagency Statements").
SBB and SBB&T have:
(i) Inventoried and assessed the technologies it uses,
particularly its computer hardware and software, to identify potential problems
areas related to the Year 2000;
(ii) Developed and implemented a Year 2000 Plan, including
comprehensive testing plans, to prepare its "mission critical" information
technology to: (a) process date/time data accurately and without interruption
(including, but not limited to, calculating, comparing, and sequencing) from,
into, and between the years 1999 and 2000, and leap year calculations; (b)
respond to two-digit year-date input in a way that resolves the ambiguity as to
century in a
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disclosed, defined, and predetermined manner; and (c) store and provide output
of date information in ways that are unambiguous as to century; and
(iii) Commenced the development of, and by September 30, 1998
will have completed the development of, contingency plans to ensure continuity
of business in the event of: (a) failure to complete any tasks required by the
Year 2000 Plan, such as remediation or validation; or (b) any externally caused
business interruption related to the century date change.
(iv) Taken commercially reasonable steps to investigate and
test the ability of its "mission critical" information technology to share and
exchange date/time data accurately and without interruption or material delay
with its key vendors and suppliers.
(b) If SBB and SBB&T have been examined by federal or state regulators
for Year 2000 readiness, neither has received a rating that would cause delay or
denial of any regulatory approval of this Agreement and the transactions
contemplated hereby.
(c) SBB's estimate of the out-of -pocket expenses payable to third
parties to complete its consolidated Year 2000 Compliance efforts is not in
excess of $1,300,000.
SECTION 4.34 Representations Not Misleading. To SBB's knowledge, all
material facts relating to the business operations, properties, assets,
liabilities (contingent or otherwise) and financial condition of SBB and the SBB
Subsidiaries have been disclosed to Pacific in or in connection with this
Agreement. No representation or warranty by SBB contained in this Agreement, nor
any statement, exhibit or schedule furnished to Pacific by SBB under and
pursuant to, or in anticipation of or in connection with, this Agreement,
contains or will contain on the Closing Date any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which it was or will be made, not misleading and such representations and
warranties would continue to be true and correct following disclosure to any
governmental authority having jurisdiction over SBB or its properties of the
facts and circumstances upon which they were based. Except as disclosed herein,
there is no matter that materially adversely affects SBB or SBB's ability to
perform the transactions contemplated by this Agreement or the other agreements
contemplated hereby, or to the knowledge of SBB, will in the future result in a
Material Adverse Change with respect to SBB, other than general economic
conditions. No information material to the Merger and that is necessary to make
the representations and warranties herein contained not misleading, has been
withheld by SBB.
ARTICLE V.
COVENANTS OF PACIFIC
Pacific hereby makes the covenants set forth in this Article V to SBB.
SECTION 5.01 Best Efforts. Pacific will use its best efforts to perform
and fulfill all conditions and obligations on its part to be performed or
fulfilled under this Agreement and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions of this
Agreement.
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SECTION 5.02 Merger Agreement. Pacific will, as soon as practicable
after the execution of this Agreement, duly authorize and enter into the Merger
Agreement, the form of which is attached hereto as Exhibit "A", and perform all
of its obligations thereunder.
SECTION 5.03 Submission of Merger to Shareholders. Pacific shall:
(a) Duly call, give notice of, con
vene and hold, on a date mutually
selected by Pacific and SBB, a meeting of its shareholders (the "Pacific
Shareholders' Meeting") as soon as practicable for the purpose of approving and
adopting the Merger and the Merger Agreement and the transactions contemplated
hereby and thereby as required by the GCL;
(b) Not impose a requirement that the holders of more than the minimum
required percentage (as set forth in Pacific's current Articles of
Incorporation, current Bylaws or pursuant to provisions of the GCL requiring the
lowest percentage vote) of the Pacific Common Stock entitled to vote on the
Merger and the Merger Agreement approve the Merger and the Merger Agreement;
(c) Cooperate and assist SBB in (i) preparing a Registration Statement
on Form S-4 relating to the shares of SBB Common Stock to be issued to the
Shareholders of Pacific as the Merger Consideration (the "Registration
Statement") and a Joint Proxy Statement/Prospectus, including letter to
shareholders, notice of special meeting, proxy statement and form of proxy
(collectively, the "Joint Proxy Statement/Prospectus") and (ii) filing the
Registration Statement and the Joint Proxy Statement/Prospectus (forming a part
of the Registration Statement) with the S.E.C., including furnishing to SBB all
information concerning Pacific that SBB may reasonably request in connection
with preparation of such Registration Statement and Joint Proxy
Statement/Prospectus;
(d) Subject to the fiduciary duties of the Pacific Board of Directors
to the shareholders of Pacific, (i) include in the Joint Proxy
Statement/Prospectus the recommendation of the Pacific Board of Directors that
the shareholders of Pacific vote in favor of the approval and adoption of the
Merger and the Merger Agreement and the transactions contemplated hereby and
thereby, (ii) use its best efforts to obtain such shareholder approval of the
Merger and the Merger Agreement, and (iii) perform such other acts as may
reasonably be requested by SBB to ensure that such shareholder approval of the
Merger and the Merger Agreement is obtained; and
(e) Cause the Joint Proxy Statement/Prospectus to be mailed to the
shareholders of Pacific as soon as practicable.
SECTION 5.04 Information for Applications and Statements. Pacific will
promptly, but in no event later than ten (10) business days after receipt of a
request by SBB, furnish to SBB all information, data and documents concerning
Pacific, including, but not limited to, financial statements, required for
inclusion in any application or statement to be made by SBB to, or filed by SBB
with, any governmental body in connection with the transactions contemplated by
this Agreement (including the Registration Statement and the Joint Proxy
Statement/Prospectus), or in connection with any other transactions during the
pendency of this Agreement, and Pacific represents and warrants that all
information so furnished for such statements and applications shall be true and
correct in all material respects and shall not omit
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any material fact required to be stated therein or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading. Pacific shall otherwise fully cooperate with SBB in the filing of
any applications or other documents necessary to consummate the transactions
contemplated by this Agreement.
SECTION 5.05 Required Acts of Pacific. Prior to the Closing, Pacific
shall, and, as applicable, shall cause the Pacific Subsidiaries to, unless
otherwise permitted in writing by SBB:
(a) Operate only in the ordinary course of business and consistent with
prudent banking practices;
(b) Except as required by prudent business practices, use all
reasonable efforts to preserve its business organization intact and to retain
its present customers, depositors and employees, and to maintain all offices,
machinery, equipment, materials, supplies, inventories, vehicles and other
properties owned, leased or used by it (whether under its control or the control
of others), in good operating condition and repair, ordinary wear and tear
excepted;
(c) Perform all of its obligations under contracts, leases and
documents relating to or affecting its assets, properties and business, except
such obligations as Pacific may in good faith reasonably dispute;
(d) Maintain in full force and effect all insurance policies now in
effect or renewals thereof and, except as required by prudent business practices
that do not jeopardize insurance coverage, give all notices and present all
claims under all insurance policies in due and timely fashion, and Pacific and
the Pacific Subsidiaries shall have the authority to purchase a rider to
Pacific's existing policy of directors' and officers' liability insurance
providing for the continuation of coverage provided by such policy for a period
of 36 months following the Effective Date with respect to actions occurring
prior to the Effective Date to the extent that such coverage is obtainable for
an aggregate premium not to exceed $125,000;
(e) File all reports required to be filed with governmental authorities
and observe and conform, in all material respects, to all applicable laws,
rules, regulations, ordinances, codes, orders, licenses and permits, except
those being contested in good faith by appropriate proceedings;
(f) Timely file all tax returns required to be filed by it and promptly
pay all taxes, assessments, governmental charges, duties, penalties, interest
and fines that become due and payable, except those being contested in good
faith by appropriate proceedings;
(g) Withhold from each payment made to each of its employees the amount
of all taxes (including, but not limited to, federal income taxes, FICA taxes
and state and local income and wage taxes) required to be withheld therefrom and
pay the same to the proper tax receiving officers; and
(h) Account for all transactions and prepare all financial statements
of Pacific in accordance with GAAP (unless otherwise instructed by RAP in which
instance account for such transaction in accordance with RAP).
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SECTION 5.06 Prohibited Acts of Pacific. Prior to the Closing, Pacific
and, as applicable, the Pacific Subsidiaries shall not, without the prior
written consent of SBB:
(a) Take any action that would reasonably be anticipated to result in a
Material Adverse Change with respect to Pacific;
(b) Take or fail to take any action that would cause or permit the
representations and warranties made in Article III hereof to be inaccurate at
the time of the Closing or preclude Pacific from making such representations and
warranties at the time of the Closing;
(c) Change its Articles of Incorporation or Bylaws or its authorized
capital stock, or change the Articles of Association, Bylaws or authorized
capital stock of any Pacific Subsidiary;
(d) Except as explicitly permitted hereunder or in accordance with
applicable law, engage in any transaction with any affiliated person or allow
such persons to acquire any assets from Pacific or any Pacific Subsidiary except
in the form of wages, salaries, fees for legal services and reimbursement of
expenses and by loans secured by liquid collateral having a fair market value at
least equal to the principal balance due on such loan to its officers, directors
and employees in the ordinary course of business;
(e) Discharge or satisfy any lien, charge or encumbrance or pay any
obligation or liability, whether absolute or contingent, due or to become due,
except in the ordinary course of business consistent with prudent banking
practices and except for liabilities incurred in connection with the
transactions contemplated hereby;
(f) Except as provided in Section 5.21, declare or make any payment of
dividends or other distributions to its shareholder, or purchase, retire or
redeem, or obligate itself to purchase, retire or redeem, any of its shares of
capital stock or other securities;
(g) Issue, reserve for issuance, grant, sell or authorize the issuance
of any shares of its capital stock or other securities or subscriptions,
options, warrants, calls, rights or commitments of any kind relating to the
issuance thereto (except for the issuance of Pacific Common Stock pursuant to
the valid exercise of Pacific Stock Options, as defined in Section 6.17 hereof,
which are outstanding on the date of this Agreement);
(h) Grant any new stock options or accelerate the vesting of any
existing stock options, except as provided in this Agreement;
(i) Accelerate the vesting of pension or other benefits in favor of
employees of Pacific or any Pacific Subsidiary;
(j) Acquire any capital stock or other equity securities or acquire any
equity or ownership interest in any bank, corporation, partnership or other
entity (except (i) through settlement of indebtedness, foreclosure, or the
exercise of creditors' remedies or (ii) in a fiduciary capacity, the ownership
of which does not expose it to any liability from the business, operations or
liabilities of such person);
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(k) Mortgage, pledge or subject to lien or charge, or grant any
security interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible except in the ordinary course of
business and consistent with prudent banking practices;
(l) Sell, transfer, lease to others or otherwise dispose of any of its
assets or cancel or compromise any debt or claim, or waive or release any right
or claim of material value, except in the ordinary course of business and
consistent with past practices and safe and sound banking principles;
(m) Make any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or pay or agree or orally promise
to pay, conditionally or otherwise, any bonus, extra compensation, pension or
severance or vacation pay, to or for the benefit of any of its shareholders,
directors, officers, employees or agents, or enter into any employment or
consulting contract (other than as contemplated by this Agreement) or other
agreement with any director, officer or employee or adopt, amend in any material
respect or terminate any pension, employee welfare, retirement, stock purchase,
stock option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including trust
agreements and insurance contracts embodying such plans), any deferred
compensation, or collective bargaining agreement, any group insurance contract
or any other incentive, welfare or employee benefit plan or agreement maintained
by it for the benefit of its directors, employees or former employees, except
(i) employee severance benefits contemplated by Section 12.16 of this Agreement,
and (ii) in the ordinary course of business and consistent with past practices
and safe and sound banking principles;
(n) Except for improvements or betterments relating to Pacific
Properties, make any capital expenditures or capital additions or betterments in
excess of an aggregate of $1,000,000;
(o) Hire or employ any person as a replacement for an existing position
with an annual salary equal to or greater than $60,000 or hire or employ any
person for any newly created position;
(p) Sell or knowingly dispose of, or otherwise divest itself of the
ownership, possession, custody or control, of any corporate books or records of
any nature that, in accordance with sound business practice, normally are
retained for a period of time after their use, creation or receipt, except at
the end of the normal retention period;
(q) Make any, or acquiesce with any, change in any accounting methods,
principles or material practices, except as required by changes in GAAP as
concurred in by Pacific's independent auditors;
(r) Sell any investment securities in a transaction involving a book
gain or loss of more than $100,000 on such sale or purchase any investment
securities other than purchases of U.S. Treasury securities with a maturity of
two years or less (and only after giving notice to SBB of any purchases in
excess of $5,000,000);
(s) Make, renew, extend the maturity of, or alter any of the material
terms of any loan, other than classified loans (which are addressed in Section
5.06(t), to any single borrower and his or her related interests in excess of
the principal amount of $2,000,000; provided,
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however, that SBB shall be deemed to have given its consent under this Section
5.06(s) unless SBB objects to such transaction no later than 48 hours (weekends
and bank holidays shall not count) after actual receipt by SBB of all
information relating to the making, renewal or alteration of such loan;
(t) Make, renew, extend the maturity of, or alter any of the material
terms of any classified loan to any single borrower and his or her related
interests in excess of the principal amount of $250,000; provided, however, that
SBB shall be deemed to have given its consent under this Section 5.06(t) unless
SBB objects to such transaction no later than 48 hours (weekends and bank
holidays shall not count) after actual receipt by SBB of all information
relating to the making, renewal or alteration of such loan; or
(u) Create any new branches or enter into any acquisitions or leases of
real property, including both new leases and lease extensions.
SECTION 5.07 Access; Pre-Closing Investigation. Subject to the
provisions of Article XI, Pacific shall afford the officers, directors,
employees, attorneys, accountants, investment bankers and authorized
representatives of SBB full access to the properties, books, contracts and
records of Pacific and the Pacific Subsidiaries, permit SBB to make such
inspections (including without limitation with regard to such properties
physical inspection of the surface and subsurface thereof and any structure
thereon pursuant to Section 5.15) as they may require and furnish to SBB during
such period all such information concerning Pacific and the Pacific Subsidiaries
and its affairs as SBB may reasonably request, in order that SBB may have full
opportunity to make such reasonable investigation as it shall desire to make of
the affairs of Pacific and the Pacific Subsidiaries, including, without
limitation, access sufficient to verify the absence of any Material Adverse
Change with respect to Pacific, the accuracy of the representations and
warranties made by Pacific in this Agreement, the value of the assets and the
liabilities of Pacific and the satisfaction of the conditions precedent to SBB's
obligations described in Article VIII of this Agreement. SBB shall use its best
efforts not to disrupt the normal business operations of the Pacific and the
Pacific Subsidiaries. Pacific agrees at any time, and from time to time, to
furnish to SBB as soon as practicable, any additional information that SBB may
reasonably request.
SECTION 5.08 Director and Committee Meetings. Pacific shall give notice
to two (2) designees of SBB and shall invite such persons to attend all regular
and special meetings of the Board of Directors of Pacific and all regular and
special meetings of any board or senior management committee of Pacific,
provided, however, that Pacific reserves the right to exclude such invitees from
any portion of any such meeting at any time. Such invitees shall be designated
by SBB subject to the consent of Pacific, which consent shall not be
unreasonably withheld. In addition, Pacific shall provide SBB with copies of the
minutes of all regular and special meetings of the Board of Directors of Pacific
and minutes of all regular and special meetings of any board or senior
management committee of Pacific (except portions of such minutes which are
devoted to the discussion of this Agreement or the Merger or which, upon the
advise of counsel, are otherwise privileged). Copies of such minutes shall be
provided to SBB within five (5) business days following the date of such
meeting.
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SECTION 5.09 Additional Financial Statements. Pacific shall promptly
furnish SBB with true and complete copies of (i) Call Reports of each of the
Subsidiary Banks for the quarter ended June 30, 1998 and each quarter thereafter
until the Effective Date, (ii) monthly directors' reports of Pacific, and (iii)
unaudited month-end financial statements of Pacific.
SECTION 5.10 Untrue Representations. Pacific shall promptly notify SBB
in writing if Pacific becomes aware of any fact or condition that makes untrue,
or shows to have been untrue, in any material respect, any schedule or any other
information furnished to SBB or any representation or warranty made in or
pursuant to this Agreement or that results in Pacific's failure to comply with
any covenant, condition or agreement contained in this Agreement.
SECTION 5.11 Litigation and Claims. Pacific shall promptly notify SBB
in writing of any litigation, or of any claim, controversy or contingent
liability that is expected to become the subject of litigation, against Pacific
or any Pacific Subsidiary or affecting any of their respective properties if
such litigation or potential litigation would, in the event of an unfavorable
outcome, result in a Material Adverse Change with respect to Pacific, and
Pacific shall promptly notify SBB of any legal action, suit or proceeding or
judicial, administrative or governmental investigation, pending or, to the
knowledge of Pacific, threatened against Pacific or any Pacific Subsidiary that
questions or is likely to question the validity of this Agreement or the
agreements contemplated hereby, including, but not limited to, the Merger
Agreement or any actions taken or to be taken by Pacific pursuant hereto or
thereto or seeks to enjoin or otherwise restrain the transactions contemplated
hereby or thereby.
SECTION 5.12 Adverse Changes. Pacific shall promptly notify SBB in
writing if any change or development shall have occurred or, to the knowledge of
Pacific, been threatened (or any development shall have occurred or been
threatened involving a prospective change) in the business, financial condition,
operations or prospects of Pacific or the Pacific Subsidiaries that has or may
reasonably be expected to have or lead to a Material Adverse Change with respect
to Pacific or that would adversely affect, prevent or delay the obtaining of any
regulatory approval for the consummation of the transactions contemplated by
this Agreement. Notwithstanding the disclosure to SBB of any such change,
Pacific shall not be relieved of any liability to SBB pursuant to this Agreement
for, nor shall the providing of such information by Pacific to SBB be deemed a
waiver by SBB of, the breach of any representation or warranty of Pacific
contained in this Agreement.
SECTION 5.13 No Negotiation with Others. Until the Effective Date or
the earlier termination of this Agreement, Pacific shall not, directly or
indirectly, nor shall it permit any of its officers, directors, employees,
representatives or agents to, directly or indirectly: (i) encourage, solicit or
initiate discussions or negotiations with, or (ii) except upon advice of counsel
to the extent required to fulfill the fiduciary duties owed to the shareholders
of Pacific, entertain, discuss or negotiate with, or provide any information to,
or cooperate with, any corporation, partnership, person or other entity or group
(other than SBB or its Affiliates or associates or officers, partners, employees
or other authorized representatives of SBB or such Affiliates or associates)
concerning any merger, tender offer or other takeover offer, sale of substantial
assets, sale of shares of capital stock or similar transaction involving
Pacific. As soon as practicable following receipt of any unsolicited written
offer, Pacific will communicate to SBB the terms of any proposal or request for
information.
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SECTION 5.14 Consents and Approvals. Pacific shall use its best efforts
to obtain at the earliest practicable time all consents and approvals from third
parties necessary to consummate the transactions contemplated by this Agreement.
SECTION 5.15 Environmental Investigation; Right to Terminate Agreement.
(a) SBB and its consultants, agents and representatives shall have the
right, to the same extent that Pacific has such right, but not the obligation or
responsibility, to inspect any Pacific Property, including, without limitation,
conducting asbestos surveys and sampling, environmental assessments and
investigation, and other environmental surveys and analyses including soil and
ground sampling ("Environmental Inspections") at any time on or prior to the
date which is forty-five (45) calendar days from the date of this Agreement. SBB
shall notify Pacific prior to any physical inspections of the Pacific Property,
and Pacific may place reasonable restrictions on the time of such inspections.
If, as a result of any such Environmental Inspection, further investigation
("secondary investigation") including, without limitation, test borings, soil,
water and other sampling is deemed desirable by SBB, SBB shall (i) notify
Pacific of any Pacific Property for which it intends to conduct such a secondary
investigation and the reasons for such secondary investigation, and (ii)
commence such secondary investigation, on or prior to the date which is sixty
(60) calendar days from the date of this Agreement. SBB shall give reasonable
notice to Pacific of such secondary investigations, and Pacific may place
reasonable time and place restrictions on such secondary investigations.
(b) SBB shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section 3.19 is
not true and accurate; (ii) the results of such Environmental Inspection,
secondary investigation or other environmental survey are disapproved by SBB
because the environmental inspection, secondary investigation or other
environmental survey identifies violations or potential violations of
Environmental Laws; (iii) Pacific has refused to allow SBB to conduct an
Environmental Inspection or secondary investigation in a manner that SBB
reasonably considers necessary; (iv) the Environmental Inspection, secondary
investigation or other environmental survey identifies any past or present
event, condition or circumstance that would or potentially would require
remedial or cleanup action by Pacific that would result in a Material Adverse
Change; (v) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any underground or above ground
storage tank in, on or under any Pacific Property that is not shown to be in
compliance with all Environmental Laws applicable to the tank either now or at a
future time certain, or that has had a release of petroleum or some other
Hazardous Material that has not been cleaned up to the satisfaction of the
relevant governmental authority or any other party with a legal right to compel
cleanup; or (vi) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in, on or under any Pacific Property, the removal of which would result in a
Material Adverse Change. On or prior to the date which is ninety (90) calendar
days from the date of this Agreement, SBB shall advise Pacific in writing as to
whether SBB intends to terminate this Agreement in accordance with Section 9.02
because SBB disapproves of the results of the Environmental Inspection,
secondary investigation or other environmental survey. Pacific shall have the
opportunity to correct any objected to violations or conditions to SBB's
reasonable satisfaction prior to the date which is one hundred and fifteen (115)
calendar days from the date of this Agreement. In the event that Pacific fails
to demonstrate its satisfactory correction of the
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violations or conditions to SBB, SBB may terminate the Agreement on or before
the date which is one hundred and twenty-five (125) days from the date of this
Agreement.
(c) Pacific agrees to make available to SBB and its consultants, agents
and representatives all documents and other material relating to environmental
conditions of any Pacific Property including, without limitation, the results of
other environmental inspections and surveys. Pacific also agrees that all
engineers and consultants who prepared or furnished such reports may discuss
such reports and information with SBB and shall be entitled to certify the same
in favor of SBB and its consultants, agents and representatives and make all
other data available to SBB and its consultants, agents and representatives.
(d) For purposes of this Section, the term "Pacific Property" or
"Pacific Properties" shall have the same meaning given in Section 3.19(e).
SECTION 5.16 Restrictions on Resales. At least forty (40) days prior to
the Closing Date, Pacific shall deliver to SBB a list identifying each person
who may reasonably be deemed an "affiliate" of Pacific within the meaning of
such term as used in Rule 145 under the Securities Act. Pacific shall obtain and
deliver to SBB, not less than thirty-one (31) days prior to the Closing Date,
the signed agreement, in the form of Exhibit "F" hereto (the "Shareholder
Letter"), of each "affiliate" of Pacific, and of any person who may become an
"affiliate" of Pacific after the date of this Agreement, regarding (i)
compliance with the provisions of such Rule 145, and (ii) compliance with the
requirements of Accounting Principles Board Opinion No. 16 regarding the
disposition of shares of Pacific Common Stock or SBB Common Stock (or reduction
of risk with respect thereto) until such time as the financial results covering
at least thirty (30) days of post-Merger combined operations have been
published. Pacific shall notify all "affiliates" as far in advance as is
reasonably practicable of the date on which the thirty (30) day period prior to
the Closing Date is likely to begin.
SECTION 5.17 Shareholder Lists. After the date of this Agreement,
Pacific shall from time to time make available to SBB, upon request, a list of
its shareholders and their addresses, a list showing all transfers of the
Pacific Common Stock and such other information as SBB may reasonably request
regarding both the ownership and prior transfers of the Pacific Common Stock.
SECTION 5.18 Employee Pension Plans. Pacific agrees the employee
pension plans of Pacific, including the Pacific Capital 401(k) Plan and the
Pacific Employee Stock Ownership Plan (collectively, the "Pacific Pension
Plans") may be frozen, modified or merged into similar employee pension plans
maintained by SBB or SBB&T, including the Santa ▇▇▇▇▇▇▇ Bank & Trust Employee
Stock Ownership Plan and the Santa ▇▇▇▇▇▇▇ Bank & Trust 401(k) Plan, on or after
the Effective Date, as determined by the Surviving Corporation in its sole
discretion, subject to compliance with applicable law, so long as any such
action preserves the rights of the participants in such Pacific Pension Plans
(including, without limitation, vesting rights).
SECTION 5.19 Employee Welfare Benefit Plans. Pacific agrees that
Pacific's employee welfare benefit plans, as defined in Section 3(1) of ERISA,
may be terminated, modified or merged into SBB's welfare benefit plans on or
after the Effective Date, as
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determined by the Surviving Corporation in its sole discretion, subject to
compliance with applicable law so long as any such action preserves the rights
of participants in such plans.
SECTION 5.20 Director Voting. Pacific shall use its best efforts to
have each of its directors agree to vote, or cause to be voted, all shares of
Pacific Common Stock beneficially owned by them at the Pacific Shareholders'
Meeting in favor of the Merger. Subject to such directors' fiduciary duties,
each such director shall execute such documents as are reasonably necessary to
evidence their determination to vote their shares of Pacific Common Stock in
favor of the Merger at the Pacific Shareholders' Meeting.
SECTION 5.21 Dividends. Pacific shall not declare, set aside or pay any
dividend in respect of the Pacific Common Stock or make any other distribution
to shareholders (including, without limitation, any stock dividend, dividends in
kind or other distribution), whether in cash, stock or other property, after the
date of this Agreement, except that Pacific may declare and pay its regular
quarterly dividend on the Pacific Common Stock not to exceed $0.25 per share at
approximately the same time during each quarter which it has historically
declared and paid such dividend; provided, however, that Pacific and SBB shall
cooperate with each other to coordinate the record and payment dates of their
respective dividends for the quarter in which the Effective Date occurs such
that the holders of Pacific Common Stock shall receive a quarterly dividend from
either Pacific or SBB, but not from both with respect to such quarter.
SECTION 5.22 Non-Compete Agreements. Prior to the Closing Date, Pacific
shall use its best efforts to cause each of the persons identified on Exhibit
"G" to enter into an agreement not to compete with the Surviving Corporation to
be dated as of the Closing Date and to become effective on the Effective Date
(each a "Non-Compete Agreement"). The form of the Non-Compete Agreement is
attached as Exhibit "G" hereto.
SECTION 5.23 Pooling of Interests Accounting Treatment. Pacific shall,
and shall use its best efforts to cause its directors and officers to, use all
commercially reasonable efforts not inconsistent with the terms of this
Agreement to structure and consummate the Merger and all actions related thereto
in a manner that will qualify the Merger for "pooling of interests" accounting
treatment as determined by SBB's independent accounting firm and by any
securities regulatory body which shall review the Registration Statement,
including without limitation, the S.E.C.
SECTION 5.24 Disclosure Schedules. Pacific agrees at or prior to the
Closing to provide SBB with supplemental Schedules to be delivered by Pacific
pursuant to this Agreement reflecting any material changes thereto between the
date of this Agreement and the Closing Date.
ARTICLE VI.
COVENANTS OF SBB
SBB hereby makes the covenants set forth in this Article VI to Pacific.
SECTION 6.01 Best Efforts. SBB will use its best efforts to perform and
fulfill all conditions and obligations on its part to be performed of fulfilled
under this Agreement and to
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cause the consummation of the transactions contemplated hereby in accordance
with the terms and conditions of this Agreement.
SECTION 6.02 Merger Agreement. SBB will, as soon as practicable after
the execution of this Agreement, enter into the Merger Agreement, the form of
which is attached hereto as Exhibit "A", and perform all of its obligations
thereunder.
SECTION 6.03 Regulatory Approvals and Registration Statement.
(a) SBB, with the cooperation of Pacific, shall promptly file or cause
to be filed applications for all regulatory approvals required to be obtained by
SBB in connection with this Agreement and the transactions contemplated hereby,
including but not limited to the necessary applications for the prior approval
of the Merger by the Federal Reserve under the BHCA. SBB shall use its best
efforts to obtain all such regulatory approvals and any other approvals from
third parties at the earliest practicable time.
(b) SBB shall reserve and make available for issuance in connection
with the Merger and in accordance with the terms of this Agreement, the SBB
Common Stock for the Merger Consideration and shall, with the cooperation of
Pacific, file with the S.E.C. the Registration Statement, which Registration
Statement will contain the Joint Proxy Statement/Prospectus, and SBB shall use
its best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
shall comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and shall 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 not false or
misleading, and at the time of mailing thereof to the shareholders of SBB and
Pacific, at the time of the SBB Shareholders' Meeting (as defined in Section
6.04) and the Pacific Shareholders' Meeting and on the Effective Date, the Joint
Proxy Statement/Prospectus included as part of the Registration Statement, as
amended or supplemented by any amendment or supplement, shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not false or misleading.
(c) SBB shall timely file all documents required to obtain all
necessary Blue Sky permits and approvals, if any, required to carry out the
transactions contemplated by this Agreement, shall pay all expenses incident
thereto and shall use its best efforts to obtain such permits and approvals on a
timely basis.
(d) SBB shall promptly and properly prepare and file (i) any
application required to list on Nasdaq the shares of SBB Common Stock to be
issued pursuant to the Merger, and (ii) any filings required under the Exchange
Act, relating to the Merger and the transactions contemplated herein.
(e) SBB shall keep Pacific reasonably informed as to the status of such
applications and filings, and SBB shall promptly furnish Pacific and its counsel
with copies of all such regulatory filings and all correspondence for which
confidential treatment has not been requested.
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(f) SBB shall not take any action at any time after the Effective Date
which would cause the Merger not to qualify as a reorganization within the
meaning of Section 368 of the Code.
SECTION 6.04 Submission of Merger and Related Matters to Shareholders.
SBB shall:
(a) Duly call, give notice of, convene and hold, on a date mutually
selected by SBB and Pacific, a meeting of its shareholders (the "SBB
Shareholders' Meeting") as soon as practicable for the purpose of (i) approving
and adopting the Merger and the Merger Agreement and the transactions
contemplated hereby and thereby as required by the GCL, and (ii) approving and
adopting an amendment to the Bylaws of SBB to increase the number of authorized
directors who may serve on the Board of Directors of SBB to not more than
fifteen (15) persons (the "Bylaw Amendment");
(b) Not impose a requirement that the holders of more than the minimum
required percentage (as set forth in SBB's current Articles of Incorporation,
current Bylaws or pursuant to provisions of the GCL requiring the lowest
percentage vote) of the SBB Common Stock entitled to vote on the Merger and the
Merger Agreement and the Bylaw Amendment approve the Merger and the Merger
Agreement and the Bylaw Amendment;
(c) Subject to the fiduciary duties of the SBB Board of Directors to
the shareholders of SBB, (i) include in the Joint Proxy Statement/Prospectus the
recommendation of the SBB Board of Directors that the shareholders of SBB vote
in favor of the approval and adoption of the Merger and the Merger Agreement and
the transactions contemplated hereby and thereby and the Bylaw Amendment, (ii)
use its best efforts to obtain such shareholder approval of the Merger and the
Merger Agreement and the Bylaw Amendment, and (iii) perform such other acts as
may reasonably be requested by Pacific to ensure that such shareholder approval
of the Merger and the Merger Agreement and the Bylaw Amendment is obtained; and
(d) Cause the Joint Proxy Statement/Prospectus to be mailed to the
shareholders of SBB as soon as practicable.
SECTION 6.05 Information for Applications and Statements. SBB will
promptly, but in no event later than ten (10) business days after receipt of a
request by Pacific, furnish to Pacific all information, data and documents
concerning SBB, including, but not limited to, financial statements, required
for inclusion in any application or statement to be made by Pacific to, or filed
by Pacific with, any governmental body in connection with the transactions
contemplated by this Agreement, or in connection with any other transactions
during the pendency of this Agreement, and SBB represents and warrants that all
information so furnished for such statements and applications shall be true and
correct in all material respects and shall not omit any material fact required
to be stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. SBB shall otherwise
fully cooperate with Pacific in the filing of any applications or other
documents necessary to consummate the transactions contemplated by this
Agreement.
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SECTION 6.06 Required Acts of SBB. Prior to the Closing, SBB shall,
and, as applicable, shall cause the SBB Subsidiaries to, unless otherwise
permitted in writing by Pacific:
(a) Operate only in the ordinary course of business and consistent with
prudent banking practices;
(b) Except as required by prudent business practices, use all
reasonable efforts to preserve its business organization intact and to retain
its present customers, depositors and employees, and to maintain all offices,
machinery, equipment, materials, supplies, inventories, vehicles and other
properties owned, leased or used by it (whether under its control or the control
of others), in good operating condition and repair, ordinary wear and tear
excepted;
(c) Perform all of its obligations under contracts, leases and
documents relating to or affecting its assets, properties and business, except
such obligations as SBB may in good faith reasonably dispute;
(d) Maintain in full force and effect all insurance policies now in
effect or renewals thereof and, except as required by prudent business practices
that do not jeopardize insurance coverage, give all notices and present all
claims under all insurance policies in due and timely fashion;
(e) File all reports required to be filed with governmental authorities
and observe and conform, in all material respects, to all applicable laws,
rules, regulations, ordinances, codes, orders, licenses and permits, except
those being contested in good faith by appropriate proceedings;
(f) Timely file all tax returns required to be filed by it and promptly
pay all taxes, assessments, governmental charges, duties, penalties, interest
and fines that become due and payable, except those being contested in good
faith by appropriate proceedings;
(g) Withhold from each payment made to each of its employees the amount
of all taxes (including, but not limited to, federal income taxes, FICA taxes
and state and local income and wage taxes) required to be withheld therefrom and
pay the same to the proper tax receiving officers; and
(h) Account for all transactions and prepare all financial statements
of SBB in accordance with GAAP (unless otherwise instructed by RAP in which
instance account for such transaction in accordance with RAP).
SECTION 6.07 Prohibited Acts of SBB. Prior to the Closing, SBB and, as
applicable, the SBB Subsidiaries shall not, without the prior written consent of
Pacific:
(a) Take any action that would reasonably be anticipated to result in a
Material Adverse Change with respect to SBB;
(b) Take or fail to take any action that would cause or permit the
representations and warranties made in Article IV hereof to be inaccurate at the
time of the Closing or preclude SBB from making such representations and
warranties at the time of the Closing;
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(c) Except as contemplated by this Agreement, change its Articles of
Incorporation or Bylaws or its authorized capital stock, or change the Articles
of Incorporation, Bylaws or authorized capital stock of any SBB Subsidiary;
(d) Except as explicitly permitted hereunder or in accordance with
applicable law, engage in any transaction with any affiliated person or allow
such persons to acquire any assets from SBB or any SBB Subsidiary except in the
form of wages, salaries, fees for legal services and reimbursement of expenses
and by loans secured by liquid collateral having a fair market value at least
equal to the principal balance due on such loan to its officers, directors and
employees in the ordinary course of business;
(e) Discharge or satisfy any lien, charge or encumbrance or pay any
obligation or liability, whether absolute or contingent, due or to become due,
except in the ordinary course of business consistent with prudent banking
practices and except for liabilities incurred in connection with the
transactions contemplated hereby;
(f) Except as provided in Section 6.19, declare or make any payment of
dividends or other distributions to its shareholder, or purchase, retire or
redeem, or obligate itself to purchase, retire or redeem, any of its shares of
capital stock or other securities;
(g) Except as required pursuant to the terms of this Agreement, and
except for the issuance of SBB Common Stock pursuant to the valid exercise of
SBB Stock Options, as defined in Section 4.03 hereof, which are outstanding on
the date of this Agreement, issue, reserve for issuance, grant, sell or
authorize the issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any kind
relating to the issuance thereto;
(h) Grant any new stock options or accelerate the vesting of any
existing stock options, except as provided in this Agreement;
(i) Accelerate the vesting of pension or other benefits in favor of
employees of SBB or any SBB Subsidiary;
(j) Acquire any capital stock or other equity securities or acquire any
equity or ownership interest in any bank, corporation, partnership or other
entity (except (i) through settlement of indebtedness, foreclosure, or the
exercise of creditors' remedies or (ii) in a fiduciary capacity, the ownership
of which does not expose it to any liability from the business, operations or
liabilities of such person);
(k) Mortgage, pledge or subject to lien or charge, or grant any
security interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible except in the ordinary course of
business and consistent with prudent banking practices;
(l) Sell, transfer, lease to others or otherwise dispose of any of its
assets or cancel or compromise any debt or claim, or waive or release any right
or claim of material value, except in the ordinary course of business and
consistent with past practices and safe and sound banking principles;
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(m) Make any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or pay or agree or orally promise
to pay, conditionally or otherwise, any bonus, extra compensation, pension or
severance or vacation pay, to or for the benefit of any of its shareholders,
directors, officers, employees or agents, or enter into any employment or
consulting contract (other than as contemplated by this Agreement) or other
agreement with any director, officer or employee or adopt, amend in any material
respect or terminate any pension, employee welfare, retirement, stock purchase,
stock option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including trust
agreements and insurance contracts embodying such plans), any deferred
compensation, or collective bargaining agreement, any group insurance contract
or any other incentive, welfare or employee benefit plan or agreement maintained
by it for the benefit of its directors, employees or former employees, except in
the ordinary course of business and consistent with past practices and safe and
sound banking principles;
(n) Except for improvements or betterments relating to SBB Properties,
make any capital expenditures or capital additions or betterments in excess of
an aggregate of $2,000,000;
(o) Hire or employ any person as a replacement for an existing position
with an annual salary equal to or greater than $120,000;
(p) Sell or knowingly dispose of, or otherwise divest itself of the
ownership, possession, custody or control, of any corporate books or records of
any nature that, in accordance with sound business practice, normally are
retained for a period of time after their use, creation or receipt, except at
the end of the normal retention period;
(q) Make any, or acquiesce with any, change in any accounting methods,
principles or material practices, except as required by changes in GAAP as
concurred in by SBB's independent auditors;
(r) Make, renew, extend the maturity of, or alter any of the material
terms of any loan, other than classified loans (which are addressed in Section
6.07(s), to any single borrower and his or her related interests in excess of
the principal amount of $4,000,000; provided, however, that Pacific shall be
deemed to have given its consent under this Section 6.07(r) unless Pacific
objects to such transaction no later than 48 hours (weekends and bank holidays
shall not count) after actual receipt by Pacific of all information relating to
the making, renewal or alteration of such loan; or
(s) Make, renew, extend the maturity of, or alter any of the material
terms of any classified loan to any single borrower and his or her related
interests in excess of the principal amount of $500,000; provided, however, that
Pacific shall be deemed to have given its consent under this Section 6.07(s)
unless Pacific objects to such transaction no later than 48 hours (weekends and
bank holidays shall not count) after actual receipt by Pacific of all
information relating to the making, renewal or alteration of such loan.
SECTION 6.08 Access; Pre-Closing Investigation. Subject to the
provisions of Article XI, SBB shall afford the officers, directors, employees,
attorneys, accountants, investment bankers and authorized representatives of
Pacific full access to the properties, books,
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contracts and records of SBB and the SBB Subsidiaries, permit Pacific to make
such inspections as they may require and furnish to Pacific during such period
all such information concerning SBB and the SBB Subsidiaries and its affairs as
Pacific may reasonably request, in order that Pacific may have full opportunity
to make such reasonable investigation as it shall desire to make of the affairs
of SBB and the SBB Subsidiaries, including, without limitation, access
sufficient to verify the absence of any Material Adverse Change with respect to
SBB, the accuracy of the representations and warranties made by SBB in this
Agreement, the value of the assets and the liabilities of SBB and the
satisfaction of the conditions precedent to Pacific's obligations described in
Article VII of this Agreement. Pacific shall use its best efforts not to disrupt
the normal business operations of the SBB and the SBB Subsidiaries. SBB agrees
at any time, and from time to time, to furnish to Pacific as soon as
practicable, any additional information that Pacific may reasonably request.
SECTION 6.09 Director and Committee Meeting. SBB shall give notice to
two (2) designees of Pacific and shall invite such persons to attend all regular
and special meetings of the Board of Directors of SBB and all regular and
special meetings of any board or senior management committee of SBB, provided,
however, that SBB reserves the right to exclude such invitees from any portion
of any such meeting at any time. Such invitees shall be designated by Pacific
subject to the consent of SBB, which consent shall not be unreasonably withheld.
In addition, SBB shall provide Pacific with copies of the minutes of all regular
and special meetings of the Board of Directors of SBB and minutes of all regular
and special meetings of all regular and special meetings of any board or senior
management committee of SBB (except portions of such minutes which are devoted
to the discussion of this Agreement or the Merger or which, upon the advise of
counsel, are otherwise privileged). Copies of such minutes shall be provided to
Pacific within five (5) business days following the date of such meeting.
SECTION 6.10 Additional Financial Statements. SBB shall promptly
furnish Pacific with true and complete copies of (i) Call Reports of SBB&T for
the quarter ended June 30, 1998 and each quarter thereafter until the Effective
Date, (ii) monthly directors' reports of SBB, and (iii) unaudited month-end
financial statements of SBB.
SECTION 6.11 Untrue Representations. SBB shall promptly notify Pacific
in writing if SBB becomes aware of any fact or condition that makes untrue, or
shows to have been untrue, in any material respect, any schedule or any other
information furnished to Pacific or any representation or warranty made in or
pursuant to this Agreement or that results in SBB's failure to comply with any
covenant, condition or agreement contained in this Agreement.
SECTION 6.12 Litigation and Claims. SBB shall promptly notify Pacific
in writing of any litigation, or of any claim, controversy or contingent
liability that is expected to become the subject of litigation, against SBB or
any SBB Subsidiary or affecting any of their respective properties if such
litigation or potential litigation would, in the event of an unfavorable
outcome, result in a Material Adverse Change with respect to SBB, and SBB shall
promptly notify Pacific of any legal action, suit or proceeding or judicial,
administrative or governmental investigation, pending or, to the knowledge of
SBB, threatened against SBB or any SBB Subsidiary that questions or might
question the validity of this Agreement or the agreements contemplated hereby,
including, but not limited to, the Merger Agreement, or any
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actions taken or to be taken by SBB pursuant hereto or thereto or seeks to
enjoin or otherwise restrain the transactions contemplated hereby or thereby.
SECTION 6.13 Adverse Change. SBB shall promptly notify Pacific in
writing if any change or development shall have occurred or, to the knowledge of
SBB, been threatened (or any development shall have occurred or been threatened
involving a prospective change) in the business, financial condition, operations
or prospects of SBB or the SBB Subsidiaries that has or may reasonably be
expected to have or lead to a Material Adverse Change with respect to SBB or
that would adversely affect, prevent or delay the obtaining of any regulatory
approval for the consummation of the transactions contemplated by this
Agreement. Notwithstanding the disclosure to Pacific of any such change, SBB
shall not be relieved of any liability to Pacific pursuant to this Agreement
for, nor shall the providing of such information by SBB to Pacific be deemed a
waiver by Pacific of, the breach of any representation or warranty of SBB
contained in this Agreement.
SECTION 6.14 No Negotiation with Others. Until the Effective Date or
the earlier termination of this Agreement, SBB shall not, directly or
indirectly, nor shall it permit any of its officers, directors, employees,
representatives or agents to, directly or indirectly: (i) encourage, solicit or
initiate discussions or negotiations with, or (ii) except upon advice of counsel
to the extent required to fulfill the fiduciary duties owed to the shareholders
of SBB, entertain, discuss or negotiate with, or provide any information to, or
cooperate with, any corporation, partnership, person or other entity or group
(other than Pacific or its Affiliates or associates or officers, partners,
employees or other authorized representatives of Pacific or such Affiliates or
associates) concerning any merger, tender offer or other takeover offer, sale of
substantial assets, sale of shares of capital stock or similar transaction
involving SBB (unless any such transaction is expressly conditioned upon the
performance by SBB of all of SBB's obligations under this Agreement). As soon as
practicable following receipt of any unsolicited written offer, SBB will
communicate to Pacific the terms of any proposal or request for information.
SECTION 6.15 Consents and Approvals. SBB shall use its best efforts to
obtain all consents and approvals from third parties necessary to consummate the
transactions contemplated by this Agreement at the earliest practicable time.
SECTION 6.16 Environmental Investigation; Right to Terminate Agreement.
(a) Pacific and its consultants, agents and representatives shall have
the right, to the same extent that SBB has such right, but not the obligation or
responsibility, to inspect any SBB Property, including, without limitation,
conducting asbestos surveys and sampling, environmental assessments and
investigation, and other environmental surveys and analyses including soil and
ground sampling ("Environmental Inspections") at any time on or prior to the
date which is forty-five (45) calendar days from the date of this Agreement.
Pacific shall notify SBB prior to any physical inspections of the SBB Property,
and SBB may place reasonable restrictions on the time of such inspections. If,
as a result of any such Environmental Inspection, further investigation
("secondary investigation") including, without limitation, test borings, soil,
water and other sampling is deemed desirable by Pacific, Pacific shall (i)
notify SBB of any SBB Property for which it intends to conduct such a secondary
investigation and the reasons for such secondary investigation, and (ii)
commence such secondary investigation, on or prior to the date
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which is sixty (60) calendar days from the date of this Agreement. Pacific shall
give reasonable notice to SBB of such secondary investigations, and SBB may
place reasonable time and place restrictions on such secondary investigations.
(b) Pacific shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section 4.19 is
not true and accurate; (ii) the results of such Environmental Inspection,
secondary investigation or other environmental survey are disapproved by Pacific
because the environmental inspection, secondary investigation or other
environmental survey identifies violations or potential violations of
Environmental Laws; (iii) SBB has refused to allow Pacific to conduct an
Environmental Inspection or secondary investigation in a manner that Pacific
reasonably considers necessary; (iv) the Environmental Inspection, secondary
investigation or other environmental survey identifies any past or present
event, condition or circumstance that would or potentially would require
remedial or cleanup action by SBB that would result in a Material Adverse
Change; (v) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any underground or above ground
storage tank in, on or under any SBB Property that is not shown to be in
compliance with all Environmental Laws applicable to the tank either now or at a
future time certain, or that has had a release of petroleum or some other
Hazardous Material that has not been cleaned up to the satisfaction of the
relevant governmental authority or any other party with a legal right to compel
cleanup; or (vi) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in, on or under any SBB Property, the removal of which would result in a
Material Adverse Change. On or prior to the date which is ninety (90) calendar
days from the date of this Agreement, Pacific shall advise SBB in writing as to
whether Pacific intends to terminate this Agreement in accordance with Section
9.02 because Pacific disapproves of the results of the Environmental Inspection,
secondary investigation or other environmental survey. SBB shall have the
opportunity to correct any objected to violations or conditions to Pacific's
reasonable satisfaction prior to the date which is one hundred and fifteen (115)
calendar days from the date of this Agreement. In the event that SBB fails to
demonstrate its satisfactory correction of the violations or conditions to
Pacific, Pacific may terminate the Agreement on or before the date which is one
hundred and twenty-five (125) days from the date of this Agreement.
(c) SBB agrees to make available to Pacific and its consultants, agents
and representatives all documents and other material relating to environmental
conditions of any SBB Property including, without limitation, the results of
other environmental inspections and surveys. SBB also agrees that all engineers
and consultants who prepared or furnished such reports may discuss such reports
and information with Pacific and shall be entitled to certify the same in favor
of Pacific and its consultants, agents and representatives and make all other
data available to Pacific and its consultants, agents and representatives.
(d) For purposes of this Section, the term "SBB Property" or "SBB
Properties" shall have the same meaning given in Section 4.19(e).
SECTION 6.17 Stock Options.
(a) On the Effective Date, each outstanding option to purchase shares
of Pacific Common Stock (a "Pacific Stock Option") issued pursuant to the
Pacific Capital Bancorp 1984
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Stock Option Plan, the Pacific Capital Bancorp 1994 Stock Option Plan and the
Pacific Capital Bancorp 1991 Directors Stock Option Plan (together, the "Pacific
Stock Option Plans"), whether or not exercisable or vested, shall be assumed by
SBB as hereinafter provided. Each Pacific Stock Option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Pacific Stock Option, the number of full shares of SBB
Common Stock calculated in accordance with the provision of Section 1.06(b). In
no event shall SBB be required to issue fractional shares of SBB Common Stock
upon the exercise of a converted option.
(b) SBB shall reserve and make available for issuance in connection
with the Merger and in accordance with the terms of this Agreement the number of
full shares of SBB Common Stock calculated in accordance with Section 1.06(b).
As soon as practicable after the Effective Date, SBB shall deliver to each
holder of Pacific Stock Options appropriate notices setting forth such holders'
rights pursuant to the Pacific Stock Option Plans, and the agreements evidencing
the grants of such Pacific Stock Options shall continue in effect on the same
terms and conditions (subject to the conversion required by Section 1.06(b)
after giving effect to the Merger and the assumption by SBB as set forth above).
To the extent necessary to effectuate the provisions of this Section 6.17, SBB
may deliver new or amended agreements reflecting the terms of each Pacific Stock
Option assumed by SBB and amend the Pacific Stock Option Plans to reflect the
terms hereof.
(c) As soon as practicable after the Effective Date, SBB shall file
with the S.E.C. a registration statement on an appropriate form with respect to
the shares of SBB Common Stock subject to such converted options, and shall use
its best efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the status of the prospectus or
prospectuses with respect thereto) for so long as such options remain
outstanding.
SECTION 6.18 Director and Officer Liability Insurance. Upon the
Effective Date, any executive officer or director of Pacific who becomes and
officer or director of SBB (including any subsidiaries thereof) shall be
included in SBB's director and officer insurance policy.
SECTION 6.19 Dividends. SBB shall not declare, set aside or pay any
dividend in respect of the SBB Common Stock or make any other distribution to
shareholders (including, without limitation, any stock dividend, dividends in
kind or other distribution), whether in cash, stock or other property, after the
date of this Agreement, except that SBB may declare and pay its regular
quarterly dividend on the SBB Common Stock not to exceed $0.18 per share at
approximately the same time during each quarter which it has historically
declared and paid such dividend; provided, however, that SBB and Pacific shall
cooperate with each other to coordinate the record and payment dates of their
respective dividends for the quarter in which the Effective Date occurs such
that the holders of Pacific Common Stock shall receive a quarterly dividend from
either Pacific or SBB, but not from both with respect to such quarter.
SECTION 6.20 Conduct of Business in the Ordinary Course. Except as
specifically provided for in this Agreement, SBB shall conduct its business in
the ordinary course as heretofore conducted. For purposes of this Section 6.20,
the ordinary course of
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business shall consist of the banking and related business as presently
conducted by SBB and the SBB Subsidiaries.
SECTION 6.21 Additions to SBB Board of Directors. SBB shall, prior to
the Effective Date, take all action necessary to effect the Bylaw Amendment so
as to permit the number of directors of the Surviving Corporation identified on
Schedule One to Exhibit "A" hereto to be designated.
SECTION 6.22 Director Voting. SBB shall use its best efforts to have
each of its directors agree to vote, or cause to be voted, all shares of SBB
Common Stock beneficially owned by them at the SBB Shareholders' Meeting in
favor of the Merger. Subject to such directors' fiduciary duties, each such
director shall execute such documents as are reasonably necessary to evidence
their determination to vote their shares of SBB Common Stock in favor of the
Merger at the SBB Shareholders' Meeting.
SECTION 6.23 Pooling of Interests Accounting Treatment. SBB shall, and
shall use its best efforts to cause its directors and officers to, use all
commercially reasonable efforts not inconsistent with the terms of this
Agreement to structure and consummate the Merger and all actions related thereto
in a manner that will qualify the Merger for "pooling of interests" accounting
treatment as determined by SBB's independent accounting firm and by any
securities regulatory body which shall review the Registration Statement,
including without limitation, the S.E.C.
SECTION 6.24 Disclosure Schedules. SBB agrees at or prior to the
Closing to provide Pacific with supplemental Schedules to be delivered by SBB
pursuant to this Agreement reflecting any material changes thereto between the
date of this Agreement and the Closing Date.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC
All obligations of Pacific under this Agreement are subject to the
fulfillment (or, if legally permissible, waiver by Pacific), prior to or at the
Closing, of each of the following conditions:
SECTION 7.01 Compliance with Representations, Warranties and
Agreements.
(a) All representations and warranties made by SBB in this Agreement or
in any document or schedule delivered to Pacific pursuant hereto shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects as of the Closing Date with the same force and
effect as if such representations and warranties were made at and as of the
Closing Date, except with respect to those representations and warranties
specifically made as of an earlier date (in which case such representations and
warranties shall be true as of such earlier date).
(b) SBB shall have performed or complied in all material respects with
all agreements, terms, covenants and conditions required by this Agreement to be
performed or complied with by SBB prior to or at the Closing.
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SECTION 7.02 Shareholder Approvals. The holders of at least the minimum
required percentage of SBB Common Stock and Pacific Common Stock entitled to
vote on the Agreement, the Merger Agreement and the Merger shall have approved
the Agreement, the Merger Agreement and the Merger, and the holders of at least
the minimum required percentage of SBB Common Stock entitled to vote on the
Bylaw Amendment shall have approved the Bylaw Amendment.
SECTION 7.03 Government and Other Approvals. SBB and Pacific shall have
received approvals, acquiescence or consents, all on terms and conditions
mutually acceptable to SBB and Pacific, of the transactions contemplated by this
Agreement, and the Merger Agreement, from all necessary governmental agencies
and authorities and other third parties, including but not limited to the
S.E.C., and the Federal Reserve, and all applicable waiting periods shall have
expired, and SBB and Pacific shall have received the approvals and consents of
all third parties required to consummate this Agreement and the other agreements
contemplated hereby, including, but not limited to, the Merger Agreement and the
transactions contemplated hereby and thereby. Such approvals and the
transactions contemplated hereby shall not have been contested or threatened to
be contested by any Federal or state governmental authority or by any other
third party (except shareholders asserting statutory dissenters' appraisal
rights) by formal proceedings.
SECTION 7.04 No Litigation. No action shall have been taken, and no
statute, rule, regulation or order shall have been promulgated, enacted,
entered, enforced or deemed applicable to this Agreement, the Merger, or the
transactions contemplated hereby or thereby by any Federal, state or foreign
government or governmental authority or by any court, domestic or foreign,
including the entry of a preliminary or permanent injunction, that would: (a)
make this Agreement or any other agreement contemplated hereby, including, but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby illegal, invalid or unenforceable, (b) require the divestiture of a
material portion of the assets of SBB, (c) impose material limits in the ability
of any party to this Agreement to consummate the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby, (d) otherwise
result in a Material Adverse Change, or (e) if the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby are consummated,
subject Pacific or subject any officer, director, shareholder or employee of
Pacific to criminal or civil liability. No action or proceeding before any court
or governmental authority, domestic or foreign, by any government or
governmental authority or by any other person, domestic or foreign, shall be
threatened, instituted or pending that would reasonably be expected to result in
any of the consequences referred to in clauses (a) through (e) above.
SECTION 7.05 Delivery of Closing Documents. Pacific shall have received
all documents required to be received from SBB on or prior to the Closing Date
as set forth in Section 2.03 hereof, all in form and substance reasonably
satisfactory to Pacific.
SECTION 7.06 Receipt of Fairness Opinion. The Board of Directors of
Pacific shall have received, on or before the date of the mailing of the Joint
Proxy Statement/Prospectus, from its investment advisor, ▇▇▇ ▇▇▇▇▇▇ & Company,
an unqualified written opinion to the effect that the Merger is fair to the
shareholders of Pacific from a financial point of view.
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SECTION 7.07 Receipt of Pooling Opinions. Pacific shall have received
an opinion letter, dated as of the Closing Date, from KPMG Peat Marwick LLP,
independent public accountants for Pacific, to the effect that Pacific qualifies
as an entity that may be a party to a business combination for which the
"pooling of interests" method of accounting would be available under Accounting
Principles Board Opinion ▇▇. ▇▇ ("▇▇▇ ▇▇"). Pacific shall have also received an
opinion letter, dated as of the Closing Date, from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
independent public accountants for SBB, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment under APB 16 if closed
and consummated in accordance with this Agreement. In addition, there shall have
been no determination by any court, tribunal, regulatory agency or other
governmental entity, that the Merger fails or will fail to qualify for "pooling
of interests" accounting treatment.
SECTION 7.08 Registration Statement. The Registration Statement,
including any amendments or supplements thereto, shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for purpose pending
before or threatened by the S.E.C. All state securities permits or approvals
required by applicable state securities laws to consummate the transactions
contemplated by this Agreement and the Merger Agreement shall have been received
and remain in effect.
SECTION 7.09 Federal Tax Opinion. Pacific shall have received a copy of
the opinion of Jenkens & ▇▇▇▇▇▇▇▇▇, P.C., counsel to SBB, to the effect that if
the Merger is consummated in accordance with the terms set forth in this
Agreement (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) no gain or loss will be recognized for federal
income tax purposes by the holders of shares of Pacific Common Stock upon
receipt of the Merger Consideration (except for cash received in lieu of
fractional shares), (iii) the basis of shares of SBB Common Stock received by
the shareholders of Pacific will be the same as the basis of shares of Pacific
Common Stock exchanged therefor, and (iv) the holding period of the shares of
SBB Common Stock received by such shareholders will include the holding period
of the shares of Pacific Common Stock exchanged therefor, provided such shares
were held as capital assets as of the Effective Date. In rendering such opinion,
such counsel may require and rely upon representations and covenants including
those contained in certificates of officers of SBB, Pacific and others.
SECTION 7.10 Dissenting Shareholders. Holders of not more than a
certain percentage (not to exceed 9.9%) of the issued and outstanding shares of
Pacific Common Stock shall have demanded or be entitled to demand payment of the
fair value of their shares as dissenting shareholders under applicable
provisions of the GCL such that their receipt of cash pursuant to the exercise
of their appraisal rights, when combined with all other cash transactions
required to be considered under GAAP, would result in the Merger not qualifying
for "pooling of interests" accounting treatment under GAAP.
SECTION 7.11 Accounting Treatment. All accounting and tax treatment,
entries and adjustments in connection with the transactions contemplated by this
Agreement and the other agreements contemplated hereby shall be reasonably
satisfactory to Pacific, Pacific shall not have received notification from any
proper regulatory authority that Pacific's accounting and tax treatment, entries
and adjustments used in connection with the Merger are improper, and
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Pacific shall not have been required by any such regulatory authority to make
any accounting or tax adjustments that would constitute a Material Adverse
Change.
SECTION 7.12 Bylaw Amendment. SBB shall have taken all actions
necessary to effect the Bylaw Amendment.
SECTION 7.13 No Material Adverse Change. There shall have been no
Material Adverse Change with respect to SBB since December 31, 1997.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBB
All obligations of SBB under this Agreement are subject to the
fulfillment (or, if legally permissible, waiver by SBB), prior to or at the
Closing, of each of the following conditions:
SECTION 8.01 Compliance with Representations, Warranties and
Agreements.
(a) All representations and warranties made by Pacific in this
Agreement or in any document or schedule delivered to SBB pursuant hereto shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the Closing Date with the same force
and effect as if such representations and warranties were made at and as of the
Closing Date, except with respect to those representations and warranties
specifically made as of an earlier date (in which case such representations and
warranties shall be true as of such earlier date).
(b) Pacific shall have performed or complied in all material respects
with all agreements, terms, covenants and conditions required by this Agreement
to be performed or complied with by Pacific prior to or at the Closing.
SECTION 8.02 Shareholder Approvals. The holders of at least the minimum
required percentage of Pacific Common Stock and SBB Common Stock entitled to
vote on the Agreement, the Merger Agreement and the Merger shall have approved
the Agreement, the Merger Agreement and the Merger; and the holding of at least
the minimum percentage of SBB Common Stock entitled to vote on the Bylaw
Amendment shall have approved the Bylaw Amendment.
SECTION 8.03 Government and Other Approvals. SBB and Pacific shall have
received approvals, acquiescence or consents, all on terms and conditions
mutually acceptable to SBB and Pacific, of the transactions contemplated by this
Agreement and the Merger Agreement, from all necessary governmental agencies and
authorities and other third parties, including but not limited to the S.E.C. and
the Federal Reserve, and all applicable waiting periods shall have expired, and
SBB and Pacific shall have received the approvals and consents of all third
parties required to consummate this Agreement and the other agreements
contemplated hereby, including, but not limited to, the Merger Agreement and the
transactions contemplated hereby and thereby. Such approvals and the
transactions contemplated hereby shall not have been contested or threatened to
be contested by any Federal or state governmental authority or by any other
third party (except shareholders asserting statutory dissenters' appraisal
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rights) by formal proceedings. It is understood that, if such contest is brought
by formal proceedings, SBB may, but shall not be obligated to, answer and defend
such contest or otherwise pursue this transaction over such objection.
SECTION 8.04 No Litigation. No action shall have been taken, and no
statute, rule, regulation or order shall have been promulgated, enacted,
entered, enforced or deemed applicable to this Agreement, the Merger, or the
transactions contemplated hereby or thereby by any Federal, state or foreign
government or governmental authority or by any court, domestic or foreign,
including the entry of a preliminary or permanent injunction, that would (a)
make this Agreement or any other agreement contemplated hereby, including, but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby illegal, invalid or unenforceable, (b) require the divestiture of a
material portion of the assets of Pacific, (c) impose material limits in the
ability of any party to this Agreement to consummate the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby, (d) otherwise
result in a Material Adverse Change, or (e) if the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby are consummated,
subject SBB or subject any officer, director, shareholder or employee of SBB to
criminal or civil liability. No action or proceeding before any court or
governmental authority, domestic or foreign, by any government or governmental
authority or by any other person, domestic or foreign, shall be threatened,
instituted or pending that would reasonably be expected to result in any of the
consequences referred to in clauses (a) through (e) above.
SECTION 8.05 Delivery of Closing Documents. SBB shall have received all
documents required to be received from Pacific on or prior to the Closing Date
as set forth in Section 2.02 hereof, all in form and substance reasonably
satisfactory to SBB.
SECTION 8.06 Receipt of Shareholder Letters. SBB shall have received
from Pacific, at least 31 days prior to the Closing Date, the signed Shareholder
Letters, in the form attached hereto as Exhibit "F" hereof, of each person who
may reasonably be deemed an "affiliate" of Pacific within the meaning of such
term as used in Rule 145 under the Securities Act.
SECTION 8.07 Receipt of Fairness Opinion. The Board of Directors of SBB
shall have received, on or before the date of the mailing of the Joint Proxy
Statement/Prospectus, from its investment advisor, The Bank Advisory Group,
Inc., an unqualified written opinion to the effect that the Merger is fair to
the shareholders of SBB from a financial point of view.
SECTION 8.08 Dissenting Shareholders. Holders of not more than a
certain percentage (not to exceed 9.9%) of the issued and outstanding shares of
Pacific Common Stock shall have demanded or be entitled to demand payment of the
fair value of their shares as dissenting shareholders under applicable
provisions of the GCL such that their receipt of cash pursuant to the exercise
of their appraisal rights, when combined with all other cash transactions
required to be considered under GAAP, would result in the Merger not qualifying
for "pooling of interests" accounting treatment under GAAP.
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SECTION 8.09 Receipt of Pooling Opinions. SBB shall have received an
opinion letter, dated as of the Closing Date, from KPMG Peat Marwick LLP,
independent public accountants for Pacific, to the effect that Pacific qualifies
as an entity that may be a party to a business combination for which the
"pooling of interests" method of accounting would be available under APB 16. SBB
shall have also received an opinion letter, dated as of the Closing Date, from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, its independent public accountants, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment under APB 16
if closed and consummated in accordance with this Agreement. In addition, there
shall have been no determination by any court, tribunal, regulatory agency or
other governmental entity, that the Merger fails or will fail to qualify for
"pooling of interests" accounting treatment.
SECTION 8.10 Registration Statement. The Registration Statement,
including any amendments or supplements thereto, shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for purpose pending
before or threatened by the S.E.C. All state securities permits or approvals
required by applicable state securities laws to consummate the transactions
contemplated by this Agreement and the Merger Agreement shall have been received
and remain in effect.
SECTION 8.11 Federal Tax Opinion. SBB shall have received an opinion of
its counsel, Jenkens & ▇▇▇▇▇▇▇▇▇, P.C., to the effect that if the Merger is
consummated in accordance with the terms set forth in this Agreement (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, (ii) no gain or loss will be recognized for federal income tax
purposes by the holders of shares of Pacific Common Stock upon receipt of the
Merger Consideration (except for cash received in lieu of fractional shares),
(iii) the basis of shares of SBB Common Stock received by the shareholders of
Pacific will be the same as the basis of shares of Pacific Common Stock
exchanged therefor, and (iv) the holding period of the shares of SBB Common
Stock received by such shareholders will include the holding period of the
shares of Pacific Common Stock exchanged therefor, provided such shares were
held as capital assets as of the Effective Date. In rendering such opinion, such
counsel may require and rely upon representations and covenants including those
contained in certificates of officers of SBB, Pacific and others.
SECTION 8.12 Accounting Treatment. All accounting and tax treatment,
entries and adjustments in connection with the transactions contemplated by this
Agreement and the other agreements contemplated hereby shall be reasonably
satisfactory to SBB, SBB shall not have received notification from any proper
regulatory authority that SBB's accounting and tax treatment, entries and
adjustments used in connection with the Merger are improper, and SBB shall not
have been required by any such regulatory authority to make any accounting or
tax adjustments that would constitute a Material Adverse Change.
SECTION 8.13 No Material Adverse Change. There shall have been no
Material Adverse Change with respect to Pacific since December 31, 1997.
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ARTICLE IX.
EXPENSES, TERMINATION AND ABANDONMENT
SECTION 9.01 Expenses. Each of the parties hereto shall bear its
respective costs and expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement; provided, however, in the event
that:
(a) this Agreement is terminated by SBB because (i) the Merger
Agreement is not approved by the required vote of shareholders at the Pacific
Shareholders' Meeting, and (ii) the Board of Directors of Pacific (subject to
compliance with its fiduciary duties as advised by counsel) shall have failed to
have used its best efforts to obtain shareholder approval, Pacific shall pay to
SBB within ten (10) business days after such termination (y) a termination fee
of $7,650,000, and (z) all documented fees and expenses of SBB related to this
Agreement and the transactions contemplated hereby (which fees and expenses, as
communicated to Pacific by SBB within five (5) business days after termination,
shall not exceed $250,000); and
(b) this Agreement is terminated by Pacific because (i) the Merger
Agreement is not approved by the required vote of shareholders at the SBB
Shareholders' Meeting, and (ii) the Board of Directors of SBB (subject to
compliance with its fiduciary duties as advised by counsel) shall have failed to
have used its best efforts to obtain shareholder approval, SBB shall pay to
Pacific within ten (10) business days after such termination (y) a termination
fee of $7,650,000, and (z) all documented fees and expenses of Pacific related
to this Agreement and the transactions contemplated hereby (which fees and
expenses, as communicated to SBB by Pacific within five (5) business after
termination, shall not exceed $250,000); and
(c) this Agreement is terminated by Pacific because of a Third Party
Transaction (as defined in Section 9.02, Pacific shall pay to SBB within ten
(10) business days after such termination (y) a termination fee of $7,650,000,
and (z) all documented fees and expenses of SBB related to this Agreement and
the transactions contemplated hereby (which fees and expenses, as communication
to Pacific by SBB within five (5) business days after termination, shall not
exceed $250,000).
The parties hereto acknowledge that the agreements contained in this
Section 9.01 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, SBB and Pacific would not enter
into this Agreement.
SECTION 9.02 Termination. Subject to any payments as provided in
Section 9.01, this Agreement may be terminated, and the Merger may be abandoned,
at any time prior to the Effective Date:
(a) by mutual written agreement between SBB and Pacific, if the Board
of Directors of each party so determines by vote of a majority of the members of
its entire Board;
(b) by either SBB or Pacific, if the Effective Date has not occurred by
January 31, 1999, or such later date as may be mutually agreed to by SBB and
Pacific;
(c) by SBB, if there has been a Material Adverse Change with respect to
Pacific;
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(d) by Pacific, if there has been a Material Adverse Change with
respect to SBB.
(e) by either SBB or Pacific, by written notice to the other, if the
other has breached any of its covenants in Article V or Article VI of this
Agreement, as the case may be, in any material respect and has failed to correct
or cure any such breach within twenty (20) business days after notice thereof is
given by the nonbreaching party;
(f) by either SBB or Pacific, by written notice to the other, if any
representation or warranty given or made by such other party in this Agreement
or in any schedule or other document delivered by such other party in accordance
with the terms of this Agreement, is or becomes untrue or incorrect in any
material respect and is not corrected within twenty (20) business days after
written notice thereof is given by the party terminating this Agreement to the
party giving or making such representation or warranty, provided that any such
notice shall be delivered promptly upon discovery of the breach;
(g) by either SBB or Pacific, if (i) any of the transactions
contemplated by this Agreement or the Merger Agreement are disapproved by any
regulatory authority whose approval is required to consummate such transactions,
(ii) any court of competent jurisdiction in the United States or other United
States (federal or state) governmental body shall have issued an order, decree
or ruling or taken any other action restraining, enjoining, invalidating or
otherwise prohibiting the Agreement or the transactions contemplated hereby and
such order, decree, ruling or other action shall have been final and
nonappealable, or (iii) either Pacific or SBB reasonably determines, in good
faith and after consulting with counsel, there is substantial likelihood that
any necessary regulatory approval will not be obtained or will be obtained only
upon a condition or conditions that make it inadvisable to proceed with the
transactions contemplated by this Agreement;
(h) by SBB or Pacific, if the Merger Agreement is not approved by the
required vote of shareholders of Pacific or SBB;
(i) by Pacific, by written notice to SBB, if (i) a proposal for a Third
Party Transaction (as defined below) involving Pacific has been made or received
and the Board of Directors of Pacific determines, in the exercise of its good
faith judgment (based on written advice of independent legal counsel) that such
termination is required in order for Pacific's Board of Directors to comply with
its fiduciary duties to Pacific's shareholders, or (ii) following receipt by
Pacific of a proposal for a Third Party Transaction, the Board of Directors of
Pacific shall have altered its determination to recommend that the shareholders
of Pacific approve this Agreement or shall have failed to proceed to hold the
special Pacific Shareholders' Meeting to approve this Agreement, in either case
of which Pacific shall give SBB prompt written notice of its election to
terminate this Agreement pursuant to this Section 9.02(i).
For purposes of this Section 9.02(i), a "Third Party Transaction" shall
include (i) any successful tender offer for more than 50% of the outstanding
shares of Pacific, (ii) any merger or consolidation of Pacific with or into any
entity other than SBB or an affiliate of SBB, (iii) any sale of all or
substantially all of the assets of Pacific, (iv) any reorganization of Pacific
or other transaction that results or when completed would result in a
disposition of substantially all of the
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assets of Pacific, or (v) the issuance, sale or disposition of securities
representing 50% or more of the common stock of Pacific;
(j) by SBB pursuant to the terms of Section 5.15(b) hereof;
(k) by Pacific pursuant to the terms of Section 6.16(b) hereof;
(l) by Pacific, if the average of the average closing bid and asked
price of a share of SBB Common Stock as reported on Nasdaq for the twenty (20)
business day period immediately preceding the fifth (5th) business day prior to
the Closing Date (the "SBB Average Price") shall be less than $22.95 (which
number shall be appropriately adjusted to give effect to any Share Adjustment
relative to shares of SBB Common Stock); provided, however, that if the SBB
Average Price shall be less than $22.95, Pacific and SBB shall attempt in good
faith to renegotiate the Exchange Ratio, subject to existing market conditions.
Should the parties fail to so renegotiate the Exchange Ratio within three (3)
business days after determination of the SBB Average Price, Pacific may
terminate this Agreement pursuant to this Section 9.02(l);
(m) by Pacific, if Pacific shall not have received an unqualified
written opinion from its investment advisor, dated as of the mailing of the
Proxy Statement/Prospectus, to the effect that the Merger is fair to the
shareholders of Pacific from a financial point of view; or
(n) by SBB, if SBB shall not have received an unqualified written
opinion from its investment advisor, dated as of the mailing of the Proxy
Statement/Prospectus, to the effect that the Merger is fair to the shareholders
of SBB from a financial point of view.
SECTION 9.03 Notice of Termination. The power of termination provided
for by Section 9.02 hereof may be exercised only by a notice given in writing,
as provided in Section 12.05 of this Agreement.
SECTION 9.04 Effect of Termination. Without limiting any other relief
to which either party hereto may be entitled for breach of this Agreement, in
the event of the termination and abandonment of this Agreement pursuant to the
provisions of Section 9.02 hereof, no party to this Agreement shall have any
further liability or obligation in respect of this Agreement, except for (a)
liability of a party pursuant to Section 9.01 hereof, and (b) the provisions of
Article XI hereof shall remain applicable.
ARTICLE X.
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 10.01 Nonsurvival of Representations and Warranties. The
parties hereto agree that all of their respective representations and warranties
contained in this Agreement shall not survive Closing.
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ARTICLE XI.
CONFIDENTIAL INFORMATION
SECTION 11.01 Definition of "Recipient," "Disclosing Party,"
"Representative" and "Person". For purposes of this Article XI, the term
"Recipient" shall mean the party receiving the Subject Information (as defined
in Section 11.02) and the term "Disclosing Party" shall mean the party
furnishing the Subject Information. The terms "Recipient" or "Disclosing Party",
as used herein, include: (1) all persons and entities related to or affiliated
in any way with the Recipient or the Disclosing Party, as the case may be, and
(2) any person or entity controlling, controlled by or under common control with
the Recipient or the Disclosing Party, as the case may be. The term
"Representative" as used herein, shall include all directors, officers,
shareholders, employees, representatives, advisors, attorneys, accountants and
agents of any of the foregoing. The term "person" as used in this Article XI
shall be broadly interpreted to include, without limitation, any corporation,
company, group, partnership, governmental agency or individual.
SECTION 11.02 Definition of "Subject Information". For purposes of this
Article XI, the term "Subject Information" shall mean all information furnished
to the Recipient or its Representatives (whether prepared by the Disclosing
Party, its Representatives or otherwise and whether or not identified as being
nonpublic, confidential or proprietary) by or on behalf of the Disclosing Party
or its Representatives relating to or involving the business, operations or
affairs of the Disclosing Party or otherwise in possession of the Disclosing
Party. The term "Subject Information" shall not include information that (i) was
already in the Recipient's possession at the time it was first furnished to
Recipient by or on behalf of Disclosing Party, provided that such information is
not known by the Recipient to be subject to another confidentiality agreement
with or other obligation of secrecy to the Disclosing Party, its Subsidiaries or
another party, or (ii) becomes generally available to the public other than as a
result of a disclosure by the Recipient or its Representatives, or (iii) becomes
available to the Recipient on a non-confidential basis from a source other than
the Disclosing Party, its Representative or otherwise, provided that such source
is not known by the Recipient to be bound by a confidentiality agreement with or
other obligation of secrecy to the Disclosing Party, its Representative or
another party.
SECTION 11.03 Confidentiality. Each Recipient hereby agrees that the
Subject Information will be used solely for the purpose of reviewing and
evaluating the transactions contemplated by this Agreement and the other
agreements contemplated hereby, including the Merger Agreement, and that the
Subject Information will be kept confidential by the Recipient and the
Recipient's Representatives; provided, however, that (i) any of such Subject
Information may be disclosed to the Recipient's Representatives (including, but
not limited to, the Recipient's accountants and attorneys) who need to know such
information for the purpose of evaluating any such possible transaction between
the Disclosing Party and the Recipient (it being understood that such
Representatives shall be informed by the Recipient of the confidential nature of
such information and that the Recipient shall direct and cause such persons to
treat such information confidentially); and (ii) any disclosure of such Subject
Information may be made to which the Disclosing Party consents in writing prior
to any such disclosure by Recipient.
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SECTION 11.04 Securities Law Concerns. Each Recipient hereby
acknowledges that the Recipient is aware, and the Recipient will advise the
Recipient's Representatives who are informed as to the matters that are the
subject of this Agreement, that the United States securities laws prohibit any
person who has received material, non-public information from an issuer of
securities from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
SECTION 11.05 Return of Subject Information. In the event of
termination of this Agreement or the Merger Agreement, for any reason, the
Recipient shall promptly return to the Disclosing Party all material containing
or reflecting any of the Subject Information other than information contained in
any application, notice or other document filed with any governmental agency and
not returned to the Recipient by such governmental agency. In making any such
filing, the Recipient will request confidential treatment of such Subject
Information included in any application, notice or other document filed with any
governmental agency.
SECTION 11.06 Specific Performance/Injunctive Relief. Each Recipient
acknowledges that the Subject Information constitutes valuable, special and
unique property of the Disclosing Party critical to its business and that any
breach of Article XI of this Agreement by it will give rise to irreparable
injury to the Disclosing Party that is not compensable in damages. Accordingly,
each Recipient agrees that the Disclosing Party shall be entitled to obtain
specific performance and/or injunctive relief against the breach or threatened
breach of Article XI of this Agreement by the Recipient or its Representatives.
Each Recipient further agrees to waive, and use its reasonable efforts to cause
its Representatives to waive, any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of Article XI of this Agreement, but shall be in
addition to all other remedies available at law or in equity to the Disclosing
Party.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.01 Brokerage Fees and Commissions.
(a) SBB hereby represents to Pacific that, except as set forth on
Schedule 12.01(a), no agent, representative or broker has represented SBB or any
or all of the shareholders in connection with the transactions described in this
Agreement. Pacific shall have no responsibility or liability for any fees,
expenses or commissions payable to any agent, representative or broker of SBB or
any shareholder of SBB, and SBB hereby agrees to indemnify and hold Pacific
harmless for any amounts owed to any agent, representative or broker of SBB or
any shareholder of SBB.
(b) Pacific hereby represents to SBB that, except as set forth on
Schedule 12.01(b), no agent, representative or broker has represented Pacific or
any or all of the shareholders in connection with the transactions described in
this Agreement. SBB shall have no responsibility or liability for any fees,
expenses or commissions payable to any agent, representative or broker of
Pacific or any shareholder of Pacific, and Pacific hereby agrees to indemnify
and hold SBB
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harmless for any amounts owed to any agent, representative or broker of Pacific
or any shareholder of Pacific.
SECTION 12.02 Entire Agreement. This Agreement and the other
agreements, documents, schedules, exhibits and instruments executed and
delivered by the parties to each other at the Closing constitute the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement, no
conditions, usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter or
contemporaneously herewith made in writing and signed by the party to be bound,
and no modification shall be effected by the acknowledgment or acceptance of
documents containing terms or conditions at variance with or in addition to
those set forth in this Agreement.
SECTION 12.03 Further Cooperation. The parties agree that they will, at
any time and from time to time after the Closing, upon request by the other and
without further consideration, do, perform, execute, acknowledge and deliver all
such further acts, deeds, assignments, assumptions, transfers, conveyances,
powers of attorney, certificates and assurances as may be reasonably required in
order to fully consummate the transactions contemplated hereby in accordance
with this Agreement or to carry out and perform any undertaking made by the
parties hereunder.
SECTION 12.04 Severability. In the event that any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws, then (a) such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision were not a part hereof; (b) the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance from this Agreement; and
(c) there shall be added automatically as a part of this Agreement a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and still be legal, valid and enforceable.
SECTION 12.05 Notices. Any and all payments (other than payments at the
Closing), notices, requests, instructions and other communications required or
permitted to be given under this Agreement after the date hereof by any party
hereto to any other party may be delivered personally or by nationally
recognized overnight courier service or sent by mail or (except in the case of
payments) by telex or facsimile transmission, at the respective addresses or
transmission numbers set forth below and shall be effective (a) in the case of
personal delivery, telex or facsimile transmission, when received; (b) in the
case of mail, upon the earlier of actual receipt or five (5) business days after
deposit in the United States Postal Service, first class certified or registered
mail, postage prepaid, return receipt requested; and (c) in the case of
nationally-recognized overnight courier service, one (1) business day after
delivery to such courier service together with all appropriate fees or charges
and instructions for such overnight delivery. The parties may change their
respective addresses and transmission numbers by written notice to all other
parties, sent as provided in this Section 12.05. All communications must be in
writing and addressed as follows:
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IF TO PACIFIC:
Pacific Capital Bancorp
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Administrative Officer
WITH A COPY TO:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO SBB:
Santa ▇▇▇▇▇▇▇ Bancorp
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
President and Chief Executive Officer
WITH A COPY TO:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Jenkens & ▇▇▇▇▇▇▇▇▇,
a Professional Corporation
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 12.06 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA (INCLUDING
THOSE LAWS RELATING TO CHOICE OF LAW) APPLYING TO CONTRACTS ENTERED INTO AND TO
BE PERFORMED WITHIN THE STATE OF CALIFORNIA, WITHOUT REGARD FOR THE PROVISIONS
THEREOF REGARDING CHOICE OF LAW. VENUE FOR ANY CAUSE OF ACTION ARISING FROM THIS
AGREEMENT SHALL LIE IN SANTA BARBARA, CALIFORNIA.
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SECTION 12.07 Multiple Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all counterparts hereof so executed by the
parties hereto, whether or not such counterpart shall bear the execution of each
of the parties hereto, shall be deemed to be, and shall be construed as, one and
the same Agreement. A telecopy or facsimile transmission of a signed counterpart
of this Agreement shall be sufficient to bind the party or parties whose
signature(s) appear thereon.
SECTION 12.08 Certain Definitions.
A. "Affiliate" means, with respect to any person or entity, any person
or entity that, directly or indirectly, controls, is controlled by, or is under
common control with, such person or entity in question. For the purposes of this
definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with") as used with respect to any
person or entity, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person or entity, whether through the ownership of voting securities or by
contract or otherwise.
B. "Subsidiary" means, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity or any partnership, joint venture or other
enterprise in which any entity has, directly or indirectly, any equity interest.
C. "Material Adverse Change" means any material adverse change
(excluding the occurrence of expenses in connection with the Merger) since
December 31, 1997 in the business, results of operations, condition (financial
or otherwise), assets, properties, liabilities (absolute, accrued, contingent or
otherwise), reserves of Pacific or SBB, as the case may be, and their respective
Subsidiaries taken as a whole, and specifically includes, without limitation,
with respect to Pacific, any change that reduces the tangible shareholders'
equity of Pacific below $70,000,000, or, with respect to SBB, any change that
reduces the tangible shareholders' equity of SBB below $118,000,000.
D. "Environmental Laws" mean all federal, state and local laws,
regulations, statutes, ordinances, codes, rules, decisions, orders or decrees
relating or pertaining to the public health and safety or the environment, or
otherwise governing the generation, use, handling, collection, treatment,
storage, transportation, recovery, recycling, removal, discharge or disposal of
Hazardous Materials, including, without limitation, the Solid Waste Disposal
Act, 42 U.S.C. 6901 et seq., as amended ("SWDA," also known as "RCRA" for a
subsequent amending act), (b) the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., as amended
("CERCLA"), (c) the Clean Water Act, 33 U.S.C. ss.1251 et seq., as amended
("CWA"), (d) the Clean Air Act, 42 U.S.C. ss.7401 et seq., as amended ("CAA"),
(e) the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq., as amended
("TSCA"), (f) the Emergency Planning and Community Right to Know Act, 15 U.S.C.
ss.2601 et seq., as amended ("EPCRKA"), and (g) the Occupational Safety and
Health Act, 29 U.S.C. ss. 651 et seq., as amended.
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E. "Hazardous Material" means, without limitation, (a) any "hazardous
wastes" as defined under RCRA, (b) any "hazardous substances" as defined under
CERCLA, (c) any toxic pollutants as defined under CWA, (d) any hazardous air
pollutants as defined under CAA, (e) any hazardous chemicals as defined under
TSCA, (f) any hazardous substances or extremely hazardous substances as defined
under EPCRKA, (g) asbestos, (h) polychlorinated biphenyls, (i) underground
storage tanks, whether empty, filled or partially filled with any substance, (j)
any substance the presence of which on the property in question is prohibited
under any Environmental Law, and (k) any other substance which under any
Environmental Law requires special handling or notification of or reporting to
any federal, state or local governmental entity in its generation, use,
handling, collection, treatment, storage, re-cycling, treatment, transportation,
recovery, removal, discharge or disposal. Notwithstanding the foregoing,
"Hazardous Material" shall not include materials employed in normal consumer or
office uses, such as gasoline, lubricants, printing materials, cleaners,
disinfectants, pesticides, building materials, fluorescent lights and ballasts,
batteries and refrigerants, as long as such materials are used and stored only
in quantities typical of consumer and office uses.
SECTION 12.09 Specific Performance. Each of the parties hereto
acknowledges that the other parties would be irreparably damaged and would not
have an adequate remedy at law for money damages in the event that any of the
covenants contained in this Agreement were not performed in accordance with its
terms or otherwise were materially breached. Each of the parties hereto
therefore agrees that, without the necessity of proving actual damages or
posting bond or other security, the other party shall be entitled to temporary
and/or permanent injunction or injunctions to prevent breaches of such
performance and to specific enforcement of such covenants in addition to any
other remedy to which they may be entitled, at law or in equity.
SECTION 12.10 Attorneys' Fees and Costs. In the event attorneys' fees
or other costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.
SECTION 12.11 Rules of Construction. Each use herein of the masculine,
neuter or feminine gender shall be deemed to include the other genders. Each use
herein of the plural shall include the singular and vice versa, in each case as
the context requires or as it is otherwise appropriate. The word "or" is used in
the inclusive sense. All articles and sections referred to herein are articles
and sections, respectively, of this Agreement and all exhibits and schedules
referred to herein are exhibits and schedules, respectively, attached to this
Agreement. Descriptive headings as to the contents of particular sections are
for convenience only and shall not control or affect the meaning, construction
or interpretation of any provision of this Agreement. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are and shall be incorporated
herein by reference hereto as though fully set forth herein verbatim.
SECTION 12.12 Binding Effect; Assignment. All of the terms, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors, representatives and permitted assigns. Nothing
expressed or referred to herein is intended or
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shall be construed to give any person other than the parties hereto any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provision herein contained, it being the intention of the parties hereto that
this Agreement, the assumption of obligations and statements of responsibilities
hereunder, and all other conditions and provisions hereof are for the sole
benefit of the parties to this Agreement and for the benefit of no other person.
Nothing in this Agreement shall act to relieve or discharge the obligation or
liability of any third party to any party to this Agreement, nor shall any
provision give any third party any right of subrogation or action over or
against any party to this Agreement. No party to this Agreement shall assign
this Agreement, by operation of law or otherwise, in whole or in part, without
the prior written consent of the other parties. Any assignment made or attempted
in violation of this Section 12.12 shall be void and of no effect.
SECTION 12.13 Public Disclosure. Neither SBB nor Pacific will make,
issue or release any announcement, statement, press release, acknowledgment or
other public disclosure of the existence of, or reveal the terms, conditions or
the status of, this Agreement or the transactions contemplated hereby without
the prior written consent of the other parties to this Agreement; provided,
however, that notwithstanding the foregoing, SBB and Pacific will be permitted
to make any public disclosures or governmental filings as legal counsel may deem
necessary to maintain compliance with or to prevent violations of applicable
federal or state laws or regulations or which may be necessary to obtain
regulatory approval for the transactions contemplated hereby.
SECTION 12.14 Extension; Waiver. At any time prior to the Closing Date,
the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance with any of the agreements or conditions contained herein. Such
action shall be evidenced by a signed written notice given in the manner
provided in Section 12.05 hereof. No party to this Agreement shall by any act
(except by a written instrument given pursuant to Section 12.05 hereof) be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising any right, power or privilege hereunder by any party
hereto shall operate as a waiver thereof. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver of any
party of any right or remedy on any one occasion shall not be construed as a bar
to any right or remedy that such party would otherwise have on any future
occasion or to any right or remedy that any other party may have hereunder.
SECTION 12.15 Amendments. To the extent permitted by applicable law,
this Agreement may be amended by action taken by or on behalf of the Board of
Directors of SBB and Pacific at any time before or after adoption of this
Agreement by the shareholders of SBB and Pacific but, after any submission of
this Agreement to such shareholders for approval, no amendment shall be made
that (i) decreases the Merger Consideration to be paid for the Pacific Common
Stock as set forth in Section 1.04 or (ii) materially and adversely affects the
rights of the shareholders of either SBB or Pacific hereunder without the
requisite approval of such shareholders. This Agreement may be amended, modified
or supplemented only by an
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instrument in writing executed by the party against which enforcement of the
amendment, modification or supplement is sought.
SECTION 12.16 Access; Due Diligence.
(a) Subject to the confidentiality provisions of Article XI, Pacific
shall, for a period of forty-five (45) calendar days following the date of this
Agreement, afford the officers, directors, employees, attorneys, accountants,
investment bankers and authorized representatives of SBB full access to the
properties, books, contracts and records of Pacific in order to conduct due
diligence of Pacific to assess the condition and results of operations of
Pacific.
(b) Subject to the confidentiality provisions of Article XI, SBB shall,
for a period of forty-five (45) calendar days following the date of this
Agreement, afford the officers, directors, employees, attorneys, accountants,
investment bankers and authorized representatives of Pacific full access to the
properties, books, contracts and records of SBB in order to conduct due
diligence of SBB to assess the condition and results of operations of SBB.
[Signatures Follow]
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IN WITNESS WHEREOF, SBB and Pacific have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SANTA ▇▇▇▇▇▇▇ BANCORP
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Vice Chairman
and Chief Operating Officer
and
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
PACIFIC CAPITAL BANCORP
By: /s/ D. ▇▇▇▇▇▇ ▇▇▇▇▇▇
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D. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman of the Board and
Chief Executive Officer
and
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and
Chief Administrative Officer