SECOND AMENDED AND RESTATED
AGREEMENT
AND
PLAN OF REORGANIZATION AND MERGER
BY AND BETWEEN
MID-PENINSULA BANCORP
AND
CUPERTINO NATIONAL BANCORP
AUGUST 20, 1996
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND
MERGER, dated as of August 20, 1996, ("Agreement"), amends and restates an
Amended and Restated Agreement and Plan of Reorganization and Merger made and
entered into as of June 26, 1996, by and between Mid-Peninsula Bancorp, a
California corporation ("Mid-Peninsula"), and Cupertino National Bancorp, a
California corporation ("Cupertino").
A. The Boards of Directors of Mid-Peninsula and Cupertino deem it advisable
and in the best interests of Mid-Peninsula, Cupertino, their subsidiaries and
their respective shareholders that Mid-Peninsula and Cupertino enter into a
business combination, with the expectation that the resulting company will
combine the best elements of both Mid-Peninsula and Cupertino. Pursuant to such
business combination, Cupertino shall merge with and into Mid-Peninsula (the
"Merger") and Mid-Peninsula will change its name to Greater Bay Bancorp
("Bancorp"). Following the Merger, Cupertino's subsidiary, Cupertino National
Bank & Trust ("CNB") and Mid-Peninsula's subsidiary, Mid-Peninsula Bank ("MPB"),
shall be wholly-owned subsidiaries of Bancorp.
B. This Agreement and the Merger Agreement attached as EXHIBIT A and
intended to be filed with the California Secretary of State (the "Merger
Agreement") have been approved by the Boards of Directors of Mid-Peninsula and
Cupertino, and the principal terms will be submitted for approval of the
shareholders of Cupertino and Mid-Peninsula at special meetings of their
respective shareholders.
C. The Merger is intended to qualify as a tax-free reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"IRC").
D. Pursuant to the Merger, each Cupertino shareholder will receive, in
exchange for each share of Cupertino common stock ("Cupertino Share" or
"Cupertino Shares"), the number of shares of Bancorp common stock ("Bancorp
Share" or "Bancorp Shares") determined in accordance with the Conversion Ratio
as more fully set forth in this Agreement and in the Merger Agreement (the
"Conversion Ratio").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and in the Merger Agreement, the parties hereto agree as
follows:
1. THE MERGER.
1.1 EFFECTIVE DATE. Subject to the terms and conditions of this Agreement,
the Merger shall become effective on the date ("Effective Date") and at the time
("Effective Time of the Merger") an executed copy of the Merger Agreement has
been filed with the California Secretary of State.
1.2 EFFECT OF THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time of the Merger, Cupertino shall be merged with
and into Mid-Peninsula and Mid-Peninsula will change its name to Greater Bay
Bancorp ("Bancorp"). All assets, rights, privileges, immunities, powers,
franchises and interests of Cupertino in and to every type of property (real,
personal and mixed) and choses in action, as they exist as of the Effective
Date, including appointments, designations and nominations and all other rights
and interests as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estate, assignee, receiver and in every other fiduciary
capacity, shall pass and be transferred to and vest in Bancorp by virtue of the
Merger at the Effective Time of the Merger without any deed, conveyance or other
transfer; the separate existence of Cupertino shall cease and the corporate
existence of Mid-Peninsula (with the change of its name as described above) as
Bancorp and as a California corporation shall continue unaffected and unimpaired
by the Merger; and Bancorp shall be deemed to be the same entity as each of
Cupertino and Mid-Peninsula and shall be subject to all of their duties and
liabilities of every kind and description. Bancorp shall be responsible and
liable for all the liabilities and obligations of each of Mid-Peninsula and
Cupertino; and any claim existing or action or proceeding pending by or against
Mid-Peninsula or Cupertino may be prosecuted
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as if the Merger had not taken place, or Bancorp may be substituted in its
place. Neither the rights of creditors nor any liens upon the property of either
Mid-Peninsula or Cupertino shall be impaired by reason of the Merger.
2. CONVERSION AND CANCELLATION OF SHARES.
2.1 CONVERSION OF CUPERTINO SHARES. At the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of any holder of
Cupertino Shares, subject to Section 2.2, 2.3 and 2.5 of this Agreement, each
outstanding Cupertino Share (other than any shares as to which dissenters'
rights have been perfected) shall be converted into the right to receive .81522
Bancorp Shares (the "Conversion Ratio").
2.2 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of Bancorp Shares shall be issued to holders of Cupertino
Shares. In lieu thereof, each such holder entitled to a fraction of a Bancorp
Share shall receive, at the time of surrender of the certificate or certificates
representing such holder's Cupertino Shares, an amount in cash equal to the
market value per share of the Mid-Peninsula common stock ("Mid-Peninsula
Shares"), calculated (to the nearest hundredth) by taking the average of the
closing bid and asked prices quoted by each brokerage firm then acting as a
market maker of Mid-Peninsula Shares, for each of the twenty (20) consecutive
trading days up to and including the last business day of the month-end
immediately preceding the Closing Date (the "Determination Date") (whether or
not there were any trades in Mid-Peninsula Shares on such days), multiplied by
the fraction of a Bancorp Share to which such holder otherwise would be
entitled. No such holder shall be entitled to dividends, voting rights, interest
on the value of, or any other rights in respect of a fractional share.
2.3 SURRENDER OF CUPERTINO SHARES.
a. Prior to the Effective Date, Mid-Peninsula shall appoint U.S. Stock
Transfer Corporation or its successor, or any other bank or trust company
(having capital of at least $50 million) mutually acceptable to Cupertino
and Mid-Peninsula, as exchange agent (the "Exchange Agent") for the purpose
of exchanging certificates representing Cupertino Shares and at and after
the Effective Time of the Merger, Bancorp shall issue and deliver to the
Exchange Agent such number of certificates representing Bancorp Shares and
cash for payment of fractional shares, as shall be required to be delivered
to holders of Cupertino Shares pursuant to Article 2 of the Merger
Agreement. As soon as practicable after the Effective Time of the Merger,
each holder of Cupertino Shares converted pursuant to Section 2.1, upon
surrender to the Exchange Agent of one or more certificates for such
Cupertino Shares for cancellation, will be entitled to receive a certificate
or certificates representing the number of Bancorp Shares determined in
accordance with Section 2.1 and a payment in cash with respect to fractional
shares, if any, determined in accordance with Section 2.2.
b. No dividends or other distributions of any kind which are declared
payable to shareholders of record of the Bancorp Shares after the Effective
Date will be paid to persons entitled to receive such certificates for
Bancorp Shares until such persons surrender their certificates representing
Cupertino Shares. Upon surrender of such certificates representing Cupertino
Shares, the holder thereof shall be paid, without interest, any dividends or
other distributions with respect to the Bancorp Shares as to which the
record date and payment date occurred on or after the Effective Date and on
or before the date of surrender.
c. If any certificate for Bancorp Shares is to be issued in a name
other than that in which the certificate for Cupertino Shares surrendered in
exchange therefor is registered, any transfer costs or expenses (except
taxes) required by reason of the issuance of certificates for such Bancorp
Shares in a name other than the registered holder of the certificate
surrendered shall be paid by Bancorp.
d. All dividends or distributions, and any cash to be paid pursuant to
Section 2.2 in lieu of fractional shares, if held by the Exchange Agent for
payment or delivery to the holders of
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unsurrendered certificates representing Cupertino Shares and unclaimed at
the end of one year from the Effective Date, shall (together with any
interest earned thereon) at such time be paid or redelivered by the Exchange
Agent to Bancorp, and after such time any holder of a certificate
representing Cupertino Shares who has not surrendered such certificate to
the Exchange Agent shall, subject to applicable law, look as a general
creditor only to Bancorp for payment or delivery of such dividends or
distributions or cash, as the case may be.
2.4 NO FURTHER TRANSFERS OF CUPERTINO SHARES. At the Effective Time of the
Merger, the stock transfer books of Cupertino shall be closed and no transfer of
Cupertino Shares theretofore outstanding shall thereafter be made.
2.5 ADJUSTMENTS. If, between the date of this Agreement and the Effective
Date, the outstanding shares of Mid-Peninsula Shares or Cupertino Shares shall
have been changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within such period, the number of Bancorp Shares to
be issued and delivered in the Merger in exchange for each outstanding Cupertino
Share shall be correspondingly adjusted.
2.6 TREATMENT OF STOCK OPTIONS.
a. Each person holding one or more options to purchase Cupertino Shares
("Cupertino Option" or "Cupertino Options") pursuant to Cupertino's (i) 1985
Stock Option Plan, (ii) 1986 Non-Qualified Stock Option Plan, (iii) 1989
Non-Qualified Stock Option Plan, or (iv) 1995 Stock Option Plan, each as
amended to date ("Cupertino Stock Option Plans") shall have the right, in
his or her discretion, to either:
(i) Exercise any vested portion (including any portion vested as a
result of the Merger) of the Cupertino option to acquire Cupertino Shares
prior to the Effective Date; or
(ii) As of the Effective Time of the Merger, surrender the Cupertino
Option agreement to Mid-Peninsula, in which event such person will be
entitled to receive a substitute option ("Substitute Option") exercisable
for (a) the number of Bancorp Shares equal to the number of Cupertino
Shares for which such person held Cupertino Options multiplied by the
Conversion Ratio and rounded up to the nearest whole share, and (b) the
exercise price for the shares subject to said options shall be adjusted
by dividing the pre-Merger exercise price for such Cupertino Options by
the Conversion Ratio, rounded to the nearest penny.
b. The Substitute Options to be received in exchange for Cupertino
Options shall be, to the greatest extent practicable, vested to the same
extent as before the Merger, shall continue to vest on the same vesting
schedule as provided under the original applicable Cupertino Option
agreement, shall be exercisable as provided in the original applicable
Cupertino Option agreement and shall otherwise preserve the
character-istics, terms and conditions of the original Cupertino Option to
the greatest extent possible, subject to the requirements of law and the
rules and regulations of the California Commissioner of Corporations.
3. COVENANTS OF THE PARTIES.
3.1 COVENANTS OF MID-PENINSULA.
a. AMENDMENT OF ARTICLES AND BYLAWS; VOTE REQUIREMENTS. The Board of
Directors of Mid-Peninsula shall take all necessary corporate action, to be
effective at the Effective Time of the Merger, to amend the Articles of
Incorporation and Bylaws of Mid-Peninsula to the extent required by
applicable law or regulation and subject to any required approvals of
shareholders, government agencies or regulatory authorities, to: (i) change
Mid-Peninsula's name to Greater Bay Bancorp; (ii) provide for a range in the
number of authorized directors of not less than seven (7) and not more than
thirteen (13), and to adopt a resolution fixing the exact number of
directors at ten (10); (iii) establish super-majority vote requirements
mutually agreed upon by the parties equal to a two-thirds vote of the Board
of Directors of Bancorp applicable to certain matters
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affecting Bancorp, including (a) a merger, sale of control or sale of
material assets of Bancorp, (b) acquisitions by Bancorp, (c) creation of new
business units of Bancorp or its subsidiaries, MPB and CNB, (d) material
changes in operating budgets of Bancorp or its subsidiaries, MPB and CNB,
(e) material changes in the business organization or organizational
structure of Bancorp or its subsidiaries, MPB and CNB, (f) termination of
any executive or senior officer appointed to the Executive Management
Committee of Bancorp, and (g) any change in the authorized range of
directors.
b. AMENDMENT OF MID-PENINSULA STOCK OPTION PLAN. Mid-Peninsula shall
take all necessary corporate action, including any required approval of the
shareholders of Mid-Peninsula, to amend its 1994 Stock Option Plan or
establish a new stock option plan and cause to be filed and become effective
under the Securities Act of 1933, as amended (the "1933 Act"), as of the
Effective Time of the Merger, a registration statement with respect to the
options to be granted and shares to be issued thereunder to fulfill the
obligations to grant Substitute Options to holders of Cupertino Options
pursuant to Section 2.6 of this Agreement.
c. NASDAQ STOCK MARKET LISTING. Mid-Peninsula shall take all necessary
action to list with the Nasdaq Stock Market for trading on the Nasdaq
National Market System (i) Mid-Peninsula Shares, as soon as practicable
following the execution of this Agreement and (ii) Bancorp Shares under a
symbol mutually agreed upon by the parties, to be effective from and after
the Effective Time of the Merger.
d. DEBENTURE AGREEMENT. Mid-Peninsula shall take all appropriate
action to cause the obligations of Cupertino to the holders of debentures
issued pursuant to certain 11.5% Subordinated Debenture Agreements Due 2005
and related Subscription Agreements and exhibits thereto, to be assumed by
Bancorp in a supplemental debenture agreement in form and substance
reasonably satisfactory to Mid-Peninsula and Cupertino and their respective
counsel, as of the Effective Time of the Merger. The form of such
supplemental debenture agreement shall be delivered by Mid-Peninsula to
Cupertino on or before the Document Delivery Date (as defined in Section
12b(xii)) of this Agreement.
3.2 COVENANTS OF CUPERTINO.
a. TERMINATION OF CUPERTINO STOCK OPTION PLANS. Cupertino shall take
all necessary action to cause the termination of the Cupertino Stock Option
Plans at the Effective Time of the Merger and the exercise or surrender (in
exchange for Substitute Options) of Cupertino Options outstanding
thereunder.
b. TERMINATION OR MERGER OF CUPERTINO BENEFIT PLANS. If requested by
Mid-Peninsula and subject to the mutual agreement of the parties, Cupertino
shall take all necessary action to cause the termination or merger of
Cupertino Benefit Plans at the Effective Time of the Merger.
3.3 MUTUAL COVENANTS OF MID-PENINSULA AND CUPERTINO.
a. APPOINTMENT OF EXECUTIVE OFFICERS. At the Effective Time of the
Merger, the following persons shall become the executive officers of Bancorp
and shall be appointed to the positions indicated: (i) David L. Kalkbrenner,
President and Chief Executive Officer, (ii) Steven C. Smith, Executive Vice
President, Chief Operating Officer and Chief Financial Officer, and (iii)
David R. Hood, Executive Vice President and Chief Credit Officer.
b. APPOINTMENT OF DIRECTORS. At the Effective Time of the Merger, the
five (5) directors named below of Mid-Peninsula and Cupertino, respectively,
shall become and constitute the Board of Directors of Bancorp, and Duncan L.
Matteson and John M. Gatto shall be appointed as co-chairmen of the Board of
Directors of Bancorp. The parties agree that such persons shall be nominated
by management for election as directors of Bancorp at each annual or special
meeting of shareholders of Bancorp at which directors are elected for a
period of not less than two (2) years from the Effective Date. If any such
person fails or declines to serve as a director, the vacancy
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created thereby shall be filled during such two (2) year period by a nominee
selected by a majority of the group consisting of former Mid-Peninsula or
Cupertino directors, respectively, of which such person was a member prior
to the Merger.
(i) from Mid-Peninsula: David L. Kalkbrenner, Duncan L. Matteson,
Donald H. Seiler, Warren R. Thoits and Edwin E. van Bronkhorst; and
(ii) from Cupertino: John M. Gatto, James E. Jackson, Rex D. Lindsay,
Glen McLaughlin and Dick J. Randall.
c. BOARD AND MANAGEMENT COMMITTEES. The parties shall establish (i)
such committees of the Board of Directors of Bancorp as may be mutually
agreed upon, and (ii) an Executive Management Committee of Bancorp comprised
of management personnel to facilitate and coordinate operations of Bancorp
and such other matters as the parties may agree upon. Each party's nominees
for appointment to committees of the Board of Directors of Bancorp shall be
identified to the other party on or before the Determination Date. At the
Effective Time of the Merger, the twelve (12) persons named below shall be
appointed to the Executive Management Committee with the titles and
positions held with Bancorp, MPB and CNB as indicated.
(i) from Mid-Peninsula: David L. Kalkbrenner, President and Chief
Executive Officer of Bancorp and MPB, Director of Bancorp, MPB and CNB,
and Chairman of the Executive Management Committee; Murray B. Dey,
Executive Vice President of MPB; Carol R. Rowland, First Vice President
and Chief Financial Officer of MPB; Susan K. Black, Senior Vice
President, Relationship Management Administration, of MPB; and Kimberly
S. Burgess, Senior Vice President, Bank Support Services, of MPB.
(ii) from Cupertino: C. Donald Allen, Chairman of the Board and Chief
Executive Officer of CNB; Steven C. Smith, Executive Vice President and
Chief Operating Officer of Bancorp and CNB, Chief Financial Officer of
Bancorp, and Vice-Chairman of the Executive Management Committee; David
R. Hood, Executive Vice President of Bancorp and CNB, Chief Credit
Officer of Bancorp and Senior Lending Officer of CNB; Hall Palmer,
Executive Vice President, Trust Group of Bancorp and CNB; Kenneth D.
Brenner, Executive Vice President, Marketing and Business Development, of
CNB; and Heidi R. Wulfe, Senior Vice President of Bancorp and CNB,
Controller of Bancorp and Chief Financial Officer of CNB.
d. BOARD AND MANAGEMENT OF SUBSIDIARIES. The parties intend that the
Boards of Directors and management of Bancorp's subsidiary banks, MPB and
CNB, shall remain substantially the same following the Effective Time of the
Merger; provided, that David L. Kalkbrenner shall be appointed to the Board
of Directors of CNB and John M. Gatto shall be appointed to the Board of
Directors of MPB.
e. APPROVAL BY SHAREHOLDERS. Each party shall cause the principal
terms of the Merger to be submitted promptly for the approval of its
shareholders at a meeting to be called and held in accordance with
applicable laws. Subject to its continuing fiduciary duty to its
shareholders, the Board of Directors of each party, in authorizing the
execution and delivery of this Agreement, unanimously recommends that the
principal terms of the Merger be approved. In connection with the call of
such meeting, each party shall cause the Joint Proxy Statement/Prospectus to
be mailed to its shareholders. Subject to its continuing fiduciary duty to
the shareholders of Mid-Peninsula or Cupertino, as the case may be, the
Board of Directors of each party shall at all times prior to and during such
meeting of its shareholders recommend that the principal terms of the Merger
be approved and, subject to such duty, use its best efforts to cause such
approval (and the Board of Directors of Mid-Peninsula shall recommend that
the amendments to its Articles of Incorporation, Bylaws and 1994 Stock
Option Plan be approved).
f. SHAREHOLDER LISTS AND OTHER INFORMATION. After execution hereof,
each party shall from time to time make available to the other party, upon
request, a list of its shareholders and their addresses, a list showing all
transfers of its common stock and such other information as the other
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party shall reasonably request regarding both the ownership and prior
transfers of each party's common stock, provided that no such information
shall be required for any period prior to the date of this Agreement.
g. GOVERNMENT APPROVALS. Each party will use its best efforts in good
faith to take or cause to be taken as promptly as practicable all such steps
as shall be necessary to obtain (i) the prior approval of the Merger by the
Board of Governors of the Federal Reserve System (the "FRB") under the Bank
Holding Company Act of 1956, as amended, and (ii) all other such consents or
approvals of government agencies and regulatory authorities as shall be
required by law or otherwise desirable, and shall do any and all acts and
things necessary or appropriate in order to cause the Merger to be
consummated on the terms provided in the Merger Agreement and this Agreement
as promptly as practicable. All approvals referred to in this Section 3.3(g)
are hereinafter referred to as the "Government Approvals."
h. CAPITAL COMMITMENTS AND EXPENDITURES. After the execution of this
Agreement, no new capital commitments shall be entered into, and no capital
expenditures shall be made by either party in excess of $50,000 in the
aggregate, including but not limited to, creation of any new branches and
acquisitions or leases of real property, except commitments or expenditures
within existing operating and capital budgets heretofore furnished to and
approved in writing by the other party.
i. NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Each party shall promptly give written notice to the other party
upon becoming aware of the occurrence or impending or threatened occurrence
of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of that party contained or referred
to in the Merger Agreement or this Agreement and shall use its best efforts
to prevent the same or to remedy the same promptly.
j. FINANCIAL STATEMENTS.
(i) Each party has delivered or shall deliver to the other party
prior to the Effective Date true and correct copies of statements of
income, changes in shareholders' equity and statements of cash flows for
the three months ended March 31, 1996 (and any subsequent quarter-end
periods), and for the fiscal years ended December 31, 1995, 1994, 1993,
1992 and 1991, and balance sheets as of the three month period ended
March 31, 1996 (and any subsequent quarter-end periods), and as of
December 31, 1995, 1994, 1993, 1992 and 1991. Such financial statements
at December 31, 1995, 1994, 1993, 1992 and 1991 and for the fiscal years
ended December 31, 1995, 1994, 1993, 1992 and 1991 have been or shall be
audited by KPMG Peat Marwick LLP or its predecessor, Coopers & Lybrand
LLP, as independent public accountants for Mid-Peninsula during the
relevant periods, and Coopers & Lybrand LLP or its predecessor, Deloitte
& Touche LLP, as independent public accountants for Cupertino during the
relevant periods, and include or shall include an opinion of such
accounting firm to the effect that such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered by such financial
statements and present fairly, in all material respects, the consolidated
financial position, results of operations and cash flows of each party at
the dates indicated and for the periods then ending. The opinions of such
accounting firm do not and shall not contain any qualifications.
(ii) Each party shall provide to the other party, at or prior to the
Effective Date, copies of all financial statements and proxy statements
issued or to be issued to its shareholders and/ or directors between the
date of this Agreement and the Effective Date.
(iii) Each party has delivered or shall deliver, to the other party
true and complete copies of its Annual Reports to Shareholders for the
years ended December 31, 1995, 1994, 1993, 1992 and 1991, all periodic
reports required to be filed by it pursuant to Section 13(a) or
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15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")
since December 31, 1990, all proxy statements and other written material
furnished to its shareholders since December 31, 1990, and all other
material reports, including call reports, relating to Mid-Peninsula, MPB,
Cupertino and CNB filed by Mid-Peninsula, MPB, Cupertino, or CNB with the
Federal Deposit Insurance Corporation ("FDIC"), FRB, Office of the
Comptroller of the Currency ("OCC"), or California Superintendent of
Banks ("Superintendent") during 1991 through the Effective Date. As of
their respective filing dates, each of the documents described in the
preceding sentence complied or shall comply in all material respects with
all legal and regulatory requirements applicable thereto.
k. COMPENSATION. Except as may be consistent with past practices
disclosed to each party by the other party, neither party shall make or
approve any increase in the compensation payable or to become payable by it
to any of its directors, officers, employees or agents (including but not
limited to compensation through any profit sharing, pension, retirement,
severance, incentive or other employee benefit program or arrangement), nor
shall any bonus payment or any agreement or commitment to make a bonus
payment be made, nor shall any stock option, warrant or other right to
acquire capital stock be granted (except as provided in Section 2.6), or
employment agreement (other than any such employment agreement that may
arise by operation of law upon the hiring of any new employee) or consulting
agreement be entered into by either party with any such directors, officers,
employees or agents unless the other party has given its prior written
consent. Nothing herein shall prevent the payment to either party's officers
and employees of regular salary increases, consistent with past practices in
connection with regular salary reviews or bonuses consistent with past
practices, as heretofore disclosed to the other party. Without the prior
written consent of the other party, neither party shall hire any new
employee at an annual rate in excess of that party's current customary
practice.
l. CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Prior to the Effective
Time of the Merger:
(i) Both parties shall conduct their businesses (including the
businesses of their subsidiaries) in the ordinary course as heretofore
conducted. For purposes of this Agreement, the "Ordinary Course of
Business" of either party shall consist of the banking and related
businesses as presently conducted by it and its subsidiaries in
compliance with customary safe and sound banking practices and applicable
laws and regulations. Unless either party has given its previous written
consent (which shall be deemed to have been given if no response is
provided following written request therefor within three (3) business
days of receipt of such request) to any act or omission to the contrary,
each party shall, and shall cause its subsidiaries to, until the
Effective Date:
(a) preserve its business and business organizations intact;
(b) preserve the good will of customers and others having
business relations with it and take no action that would impair the
benefit to the other party of the goodwill of it or the other
benefits of the Merger;
(c) consult with the other party as to the making of any
decisions or the taking of any actions in matters other than in the
Ordinary Course of Business;
(d) maintain its properties in customary repair, working order
and condition (reasonable wear and tear excepted);
(e) comply with all laws, regulations and decrees applicable to
the conduct of its business;
(f) use its best efforts to keep in force at not less than its
present limits all policies of insurance (including deposit insurance
of the FDIC) to the extent reasonably practicable in light of the
prevailing market conditions in the insurance industry;
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(g) use its best efforts to keep available to the other party the
services of its present officers and employees (it being understood
that each party shall have the right to terminate the employment of
any of its officers or employees in accordance with its established
employment procedures);
(h) comply with all orders of and agreements or memoranda of
understanding with respect to it made by or with, the FDIC, FRB, OCC,
Superintendent, or any other government agency or regulatory
authority of competent jurisdiction, and promptly forward to the
other party all communications received from any such agency or
authority that are not prohibited by such agency or authority from
being so disclosed and inform the other party of any material
restrictions imposed by any government agency or regulatory authority
on its business;
(i) file in a timely manner (taking into account any extensions
duly obtained) all reports, tax returns and other documents required
to be filed with federal, state, local and other authorities;
(j) conduct an environmental audit prior to foreclosure on any
property concerning which it has knowledge, or should have knowledge,
that asbestos or asbestos-containing material, PCB's or
PCB-contaminated materials, any petroleum product, or hazardous
substance or waste (as defined under any applicable environmental
laws) was or is present, manufactured, recycled, reclaimed, released,
stored, treated, or disposed of, and provide the results of such
audit to and consult with the other party regarding the significance
of the audit prior to the foreclosure on any such property;
(k) not sell, lease, pledge, assign, encumber or otherwise
dispose of any of its assets except in the Ordinary Course of
Business, for adequate value, without recourse and consistent with
its customary practice;
(l) not take any action to create, relocate or terminate the
operations of any banking office or branch, or to form any new
subsidiary or affiliated entity; and
(m) not settle or otherwise take any action to release or reduce
any of its rights with respect to any litigation involving a claim of
more than $25,000 in which it is a party.
(ii) Neither party shall, without first having obtained the written
consent of the other party (which shall be deemed to have been given if
no response is provided following written request therefor within three
(3) business days of receipt of such request), cause its officers to
commit to any loan which does not comply in all material respects with
its credit policies in effect and as disclosed and provided to the other
party prior to the date of this Agreement (except venture loans
originated by CNB which shall be subject to the venture loan approval
procedures in effect at CNB and as disclosed to Mid-Peninsula prior to
the date of this Agreement).
(iii) Each party shall promptly notify the other party in writing upon
the occurrence by it of any of the following:
(a) the classification of any loan as substandard, doubtful or
loss; or
(b) the filing or commencement of any legal action or other
proceeding or investigation against it.
m. PRESS RELEASES. Neither party shall issue any press release or
written statement for general circulation relating to the Merger, this
Agreement or the Merger Agreement unless previously provided to the other
party for review and approval (which approval will not be unreasonably
withheld or delayed) and each party shall cooperate with the other party in
the development and distribution of all news releases and other public
information disclosures with respect to the Merger, this Agreement or the
Merger Agreement; provided that either party may,
8
without the consent of the other party, make any disclosure with regard to
the Merger, this Agreement or the Merger Agreement that it determines with
advice of counsel is required under any applicable law or regulation.
n. NO MERGER OR SOLICITATION.
(i) Subject to the continuing fiduciary duty of the Board of
Directors of each party to its shareholders, prior to the Effective Time
of the Merger, neither party shall effect or agree to effect or enter
into a transaction or series of transactions with one or more third
persons, groups or entities providing for the acquisition of all or a
substantial part of either party or their respective subsidiaries,
whether by way of merger, exchange of stock, sale of assets, or otherwise
("Business Combination"), acquire or agree to acquire any of its own
capital stock or the capital stock or asset (except in a fiduciary
capacity or in the Ordinary Course of Business) of any other entity, or
commence any proceedings for winding up and dissolution affecting either
of them.
(ii) Subject to the continuing fiduciary duty of the Board of
Directors of each party to its shareholders, prior to the Effective Time
of the Merger, neither party nor any officer, director or affiliate of
either party, nor any investment banker, attorney, accountant or other
agent, advisor or representative retained by either party shall (a)
solicit or encourage, directly or indirectly, any inquiries, discussions
or proposals for, continue, propose or enter into discussions or
negotiations looking toward, or enter into any agreement or understanding
providing for, any Business Combination with any third party; or (b)
disclose, directly or indirectly, any nonpublic information to any
corporation, partnership, person or other entity or group concerning such
party's business and properties or afford any such other party access to
its properties, books or records or otherwise assist or encourage any
such other party in connection with the foregoing, or (c) furnish or
cause to be furnished any information concerning its business, financial
condition, operations, properties or prospects to another person, having
any actual or prospective role with respect to any such Business
Combination.
(iii) Each party shall notify the other party immediately of the
details of any indication of interest of any person, corporation, firm,
association or group to acquire by any means a controlling interest in it
or engage in any Business Combination with it.
(iv) Notwithstanding anything to the contrary contained in this
Agreement, in the event the Board of Directors of either party receives a
bona fide unsolicited offer for a Business Combination of it with another
entity, and reasonably determines, upon advice of counsel, that as a
result of such offer, any duty to act or to refrain from doing any act
pursuant to this Agreement is inconsistent with the continuing fiduciary
duties of the Board of Directors to its shareholders, subject to the
provisions of this Agreement including, without limitation, Section
12e(ii) and the rights accorded a party thereunder which shall remain in
effect, such duty to act or to refrain from doing any act shall be
excused and such failure to act or refrain from doing any act shall not
(a) constitute the failure of any condition, breach of any covenant or
otherwise constitute any breach of this Agreement, or (b) create any
claim or cause of action asserting any liability against any member of
the Board of Directors of that party.
o. EMPLOYEE BENEFIT PLANS. Both parties agree that other than the
Mid-Peninsula 1994 Stock Option Plan (as amended in accordance with Section
3.1(b) of this Agreement) and 401(k) Plan which shall survive as employee
benefit plans of Bancorp, either party's employee benefit plans may be
terminated, frozen, modified or merged into the other party's plans on or
after the Effective Date in accordance with applicable laws and regulations
and the provisions of the IRC, as determined by mutual agreement of the
parties or by Bancorp. On the Effective Date, Mid-Peninsula and Cupertino
employees that become employees of Bancorp will commence participation in
Bancorp's employee benefit plans in accordance with the terms and conditions
provided under such plans; provided, however, that each employee of
Mid-Peninsula and each employee of
9
Cupertino who becomes an employee of Bancorp ("Transferred Employee") shall
receive credit for his or her years of service with Mid-Peninsula or
Cupertino, as applicable, for purposes of eligibility and vesting under
Bancorp's employee benefit plans; provided, further, that each Transferred
Employee who elects coverage under Bancorp's indemnity health plan within
thirty (30) days after coverage is extended to him or her shall not be
subject to any pre-existing condition limitation under such indemnity health
plan.
p. CHANGES IN CAPITAL STOCK; DIVIDENDS. On or after the date hereof
and at or prior to the Effective Time of the Merger, except with the prior
written consent of the other party or as otherwise provided in this
Agreement and the Merger Agreement:
(i) Neither party shall amend its Articles of Incorporation or the
Articles of Incorporation or Association of its subsidiary, as the case
may be, or Bylaws of either party or its subsidiary; make any change in
their respective authorized, issued or outstanding capital stock or any
other equity security; issue, grant, sell, pledge, assign or otherwise
encumber or dispose of, or purchase, redeem, retire or otherwise acquire
(other than in a fiduciary capacity), shares of or securities convertible
into, capital stock or other equity securities of their respective
companies, or enter into any agreement, call or commitment of any
character so to do; grant or issue any stock option relating to or right
to acquire shares of their capital stock or other equity security; or
agree to do any of the foregoing, except as expressly provided herein.
Nothing herein shall prohibit the issuance of shares upon exercise of
options granted under the Mid-Peninsula Stock Option Plan or Cupertino
Stock Option Plans and outstanding at the time this Agreement is
executed; and
(ii) Neither party shall declare, set aside or pay any dividend or
other distribution in respect of its common stock (including, without
limitation, any stock dividend or distribution) other than regular
quarterly or semi-annual cash dividends on its common stock in amounts
substantially equivalent to cash dividends paid in the two years prior to
the date hereof (it being understood that declaration of a quarterly or
semi-annual cash dividend equal to the most recent previous quarterly or
semi-annual cash dividend will be deemed to meet this standard).
q. ACCESS TO PROPERTIES, BOOKS AND RECORDS; CONFIDENTIALITY. Prior to
the Effective Time of the Merger, each party shall give the other party and
its counsel, accountants and agents, full access during normal business
hours and upon reasonable request, to all of its properties, books,
contracts, commitments and records including, but not limited to, the
corporate, financial and operational records, papers, reports, instructions,
procedures, tax returns and filings tax settlement letters, material
contracts or commitments, regulatory examinations and correspondences, and
shall allow the other party to make copies of such materials and shall
furnish the other party with all such information concerning its affairs as
the other party may reasonably request. Each party shall also use its best
efforts to cause its independent accountants to make available to the other
party, its accountants, counsel and other agents, to the extent reasonably
requested in connection with such review, such independent accountants' work
papers and documentation relating to its work papers and its audits of the
books and records of each party. The availability or actual delivery of such
information about either party shall not affect the covenants,
representations and warranties of either party contained in this Agreement
and in the Merger Agreement. Each party shall use its best efforts to cause
its officers, directors, employees, auditors, and attorneys to cooperate
with the other in its reasonable requests for information. Each party shall
treat as confidential all such information in the same manner as each party
treats similar confidential information of its own, and if this Agreement is
terminated, each party shall continue to treat all such information as
confidential and to cause its employees to keep all such information
confidential and shall return such documents theretofore delivered by the
other party as the other party shall request, and shall use such
information, or cause it to be used, solely for the purposes of evaluating
and completing the transactions contemplated hereby; provided that each
party may disclose any such information to the extent required by federal or
state securities laws
10
or otherwise required by any government agency or regulatory authority, or
by generally accepted accounting principles. The foregoing confidentiality
obligations shall not apply in respect of any information publicly available
or to any information previously known to the party in question, the use of
which is not otherwise restricted. Notwithstanding the foregoing, the
parties agree to comply with the terms and provisions of that certain
Confidentiality Agreement entered into between the parties dated May 8,
1996, and any inconsistency between the terms and provisions of that
Confidentiality Agreement and the foregoing provisions shall be resolved in
favor of the terms and provisions contained in the Confidentiality
Agreement.
r. LOAN PERFORMANCE. From and after the date of this Agreement until
the Effective Date, each party will provide to the other the following
reports for each such month concurrent with the distribution of the monthly
board report materials for the respective Boards of Directors of MPB and
CNB:
(i) a status report on all loans classified as substandard, doubtful
or loss;
(ii) past due reports by loan;
(iii) non-accrual reports by loan;
(iv) loss reports by loan;
(v) restructured loans reports; and
(vi) quarterly call reports submitted to regulators during such month,
if any.
s. LOAN REVIEW. Prior to the Effective Date, each party will submit to
the other party (for such party's information only) a loan approval/credit
write-up document for any loan that is all of the following: (i) a new loan,
or a restructured (SFAS 15) loan, or a renewal of an existing loan
previously classified by management or internal policy or procedure of
either party or their subsidiaries, or by any outside review examiner,
accountant or any bank regulatory authority as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," or "Loss," or
classified using categories or words with similar import, and (ii) in a
commitment amount over $1,000,000 or when the aggregate debt of the borrower
and its affiliates and/or related interests will exceed $1,000,000.
t. PREPARATION OF JOINT PROXY STATEMENT/PROSPECTUS. Cupertino shall
cooperate with Mid-Peninsula in the preparation pursuant to Section 6 hereof
of a joint proxy statement and prospectus of Mid-Peninsula to be sent to the
shareholders of Mid-Peninsula and Cupertino (the proxy materials and
prospectus, together with any amendments or supplements thereto, being
herein referred to as the "Joint Proxy Statement/Prospectus").
4. REPRESENTATIONS AND WARRANTIES OF CUPERTINO.
In the following representations and warranties, all references to assets,
liabilities, properties, rights, obligations, financial condition, operations,
knowledge, information and other characteristics of Cupertino shall be deemed to
include reference to those characteristics of CNB on a consolidated basis,
except as the context otherwise indicates or requires. Cupertino represents and
warrants to Mid-Peninsula that, except as set forth on a Schedule delivered to
Mid-Peninsula on or before the Document Delivery Date, in form and substance
satisfactory to Mid-Peninsula and corresponding in number with the applicable
section:
a. CORPORATE STATUS AND POWER TO ENTER INTO AGREEMENTS. (i) Cupertino
is a corporation duly incorporated, validly existing and in good standing
under California law and is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, (ii) subject to obtaining the
Government Approvals and approval of the principal terms of the Merger by
the Cupertino shareholders, Cupertino has all necessary corporate power to
enter into this Agreement and the Merger Agreement and to carry out all of
the terms and provisions hereof and thereof to be carried out by it, (iii)
CNB holds a currently valid license issued by the OCC to
11
engage in the commercial banking business in California at the locations at
which it is licensed and currently conducts business, and (iv) neither
Cupertino nor CNB is subject to any directive, resolution, memorandum of
understanding or order of the FDIC, FRB, OCC or any other regulatory
authority having jurisdiction over its business or any of its assets or
properties. Neither the scope of the business of Cupertino or CNB nor the
location of their properties requires either of them to be licensed to do
business in any jurisdiction other than the State of California. CNB's
deposits are insured by the FDIC to the maximum extent permitted by
applicable law and regulation.
b. ARTICLES, BYLAWS, BOOKS AND RECORDS. The copies of the Articles of
Incorporation and Articles of Association and Bylaws of Cupertino and CNB,
respectively, heretofore delivered to Mid-Peninsula are complete and
accurate copies thereof as in effect on the date hereof. The minute books of
Cupertino and CNB made available to Mid-Peninsula contain a complete and
accurate record of all meetings of Cupertino's and CNB's respective Boards
of Directors (and committees thereof) and shareholders. The corporate books
and records (including financial statements) of Cupertino and CNB fairly
reflect the material transactions to which Cupertino and CNB are parties or
by which their properties are subject or bound, and such books and records
have been properly kept and maintained.
c. COMPLIANCE WITH LAWS, REGULATIONS AND DECREES. Cupertino and CNB
(i) have the corporate power to own or lease their properties and to conduct
their business as currently conducted, (ii) have complied in all material
respects with, and are not in material default of any laws, regulations,
ordinances, orders or decrees applicable to the conduct of their business
and the ownership of their properties, including but not limited to all
federal and state laws (including but not limited to the Bank Secrecy Act),
rules and regulations relating to the offer, sale or issuance of securities,
and the operation of a commercial bank, other than where such noncompliance
or default is not likely to result in a material limitation on the conduct
of the business of Cupertino or CNB or is not likely to otherwise have a
material adverse effect on Cupertino and CNB taken as a whole, (iii) have
not failed to file with the proper federal, state, local or other
authorities any material report or other document required to be filed, and
(iv) have all approvals, authorizations, consents, licenses, clearances and
orders of, and have currently effective all registrations with, all
government and regulatory authorities which are necessary to the business
and operations of Cupertino and CNB as now being conducted.
d. CAPITALIZATION. The authorized capital stock of Cupertino consists
of 6,000,000 shares of Cupertino common stock, no par value, of which
1,882,547 shares are duly authorized, validly issued, fully paid and
nonassessable and currently outstanding, and 4,000,000 shares of Cupertino
preferred stock of which no shares are outstanding. Said stock has been
offered, sold and issued in compliance with all applicable securities laws.
There are currently outstanding options to purchase 341,382 shares of
Cupertino common stock, at a weighted average exercise price of $7.87 per
share, issued pursuant to the Cupertino Stock Option Plans. Said options
were issued and, upon issuance in accordance with the terms of the
outstanding options said shares shall be issued, in compliance with all
applicable securities laws. Otherwise, there are no outstanding (i) options,
agreements, calls or commitments of any character which would obligate
Cupertino to issue, sell, pledge, assign or otherwise encumber or dispose
of, or to purchase, redeem or otherwise acquire, any Cupertino common stock
or any other equity security of Cupertino, or (ii) warrants or options
relating to, rights to acquire, or debt or equity securities convertible
into, shares of Cupertino common stock or any other equity security of
Cupertino. The outstanding common stock of Cupertino is registered with the
Securities and Exchange Commission (the "Commission") pursuant to Section
12(g) of the 1934 Act. Cupertino owns all of the outstanding equity
securities of CNB. Except as collateral for outstanding loans held in their
loan portfolios, neither Cupertino nor CNB owns, directly or indirectly, any
equity interest in any bank (other than Cupertino's ownership of CNB),
corporation or other entity.
12
e. TRADEMARKS AND TRADE NAMES. To the best of the knowledge of
Cupertino, Cupertino and CNB (i) own and have the exclusive right to use all
trademarks, trade names, patents, copyrights, service marks, trade secrets,
or other intellectual property rights (collectively, "Intellectual Property
Rights") used in or necessary for the conduct of their businesses as now or
heretofore conducted; and (ii) are not infringing upon the Intellectual
Property Rights of any other person or entity. No claim is pending or
threatened by any person or entity against or otherwise affecting the use by
Cupertino or CNB of any Intellectual Property Rights and, to the best of its
knowledge, there is no valid basis for any such claim.
f. FINANCIAL STATEMENTS, REGULATORY REPORTS. No financial statement or
other document provided or to be provided to Mid-Peninsula as required by
Section 3.3(j) hereof, as of the date of such document, contained, or as to
documents to be delivered after the date hereof, will contain, any untrue
statement of a material fact, or, at the date thereof, omitted or will omit
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements were or
will be made, not misleading; provided, however, that information as of a
later date shall be deemed to modify contrary information as of any earlier
date. Cupertino and CNB have filed all material documents and reports
required to be filed by them with the FDIC, FRB, OCC, the Commission and any
other government agency or regulatory authority having jurisdiction over
their business, assets or properties. All such reports conform in all
material respects with the requirements promulgated by such government
agencies and regulatory authorities. All compliance or corrective action
relating to Cupertino and CNB required by government agencies and regulatory
authorities having jurisdiction over Cupertino or CNB has been taken. Except
as disclosed in such statements, reports or documents, neither Cupertino nor
CNB has received any notification, formally or informally, from any agency
or department of any federal, state or local government or any regulatory
authority or the staff thereof (i) asserting that it is not in compliance
with any of the statutes, regulations or ordinances which such government or
regulatory authority enforces, or (ii) threatening to revoke any license,
franchise, permit or government authorization. Cupertino and CNB have paid
all assessments made or imposed by any government agency. Cupertino has
delivered to Mid-Peninsula copies of all annual management letters and
opinions, and has made available to Mid-Peninsula for inspection all
reviews, correspondence and other documents in the files of Cupertino
prepared by Coopers & Lybrand LLP or any other certified public accountant
engaged by Cupertino and
delivered to Cupertino since December 31, 1990. The financial records of
Cupertino have been, and are being and shall be, maintained in all material
respects in accordance with all applicable legal and accounting requirements
sufficient to insure that all transactions reflected therein are, in all
material respects, executed in accordance with management's general or
specific authorization and recorded in conformity with generally accepted
accounting principles at the time in effect. The data processing equipment,
data transmission equipment, related peripheral equipment and software used
by Cupertino in the operation of its business to generate and retrieve its
financial records are adequate for the current needs of Cupertino.
g. TAX RETURNS.
(i) Cupertino and/or CNB has timely filed all federal, state, county,
local and foreign tax returns required to be filed by it, including,
without limitation, estimated tax, use tax, excise tax, real property and
personal property tax reports and returns, employer's withholding tax
returns, other withholding tax returns and Federal Unemployment Tax
Returns, and all other reports or other information required or requested
to be filed by either of them, and each such return, report or other
information was, when filed, complete and accurate in all material
respects. Cupertino and/or CNB has paid all taxes, fees and other
government charges, including any interest and penalties thereon, when
they have become due, except those that are being contested in good
faith, which contested matters have been disclosed to Mid-Peninsula.
Cupertino and/or CNB has not been requested to give nor has it given any
currently effective waivers extending the statutory period of limitation
applicable to any tax
13
return required to be filed by it for any period. There are no claims
pending against Cupertino and/or CNB for any alleged deficiency in the
payment of any taxes, and Cupertino does not know of any pending or
threatened audits, investigations or claims for unpaid taxes or relating
to any liability in respect of any taxes. There have been no events,
including a change in ownership, that would result in a reappraisal and
establishment of a new base-year full value for purposes of applicable
provisions of the California Constitution, of any real property owned in
whole or in part by Cupertino or CNB or to the best of Cupertino's
knowledge, of any real property leased by Cupertino or CNB.
(ii) Cupertino has heretofore delivered to Mid-Peninsula copies of
all its tax returns with respect to taxes payable to the United States of
America and the State of California for the fiscal years ended December
31, 1995, 1994, 1993, 1992 and 1991.
(iii) No consent has been filed relating to Cupertino pursuant to
Section 341(f) of the IRC.
h. MATERIAL ADVERSE CHANGE. Except as heretofore disclosed in writing
by Cupertino to Mid-Peninsula, since December 31, 1995, there has been (i)
no material adverse change in the business, assets, licenses, permits,
franchises, results of operations or financial condition of Cupertino or CNB
(whether or not in the Ordinary Course of Business), (ii) no change in any
of the assets, licenses, permits or franchises of Cupertino or CNB that has
had or can reasonably be expected to have a material adverse effect on any
of the items listed in clause (h)(i) above, (iii) no damage, destruction, or
other casualty loss (whether or not covered by insurance) that has had or
can reasonably be expected to have a material adverse effect on any of the
items listed in clause (h)(i) above, (iv) no amendment, modification, or
termination of any existing, or entering into of any new, contract,
agreement, plan, lease, license, permit or franchise that is material to the
business, financial condition, assets, liabilities or operations of
Cupertino and CNB, except in the Ordinary Course of Business; and (v) no
disposition by Cupertino or CNB of one or more assets that, individually or
in the aggregate, are material to Cupertino or CNB, except sales of assets
in the Ordinary Course of Business.
i. NO UNDISCLOSED LIABILITIES. Except for items for which reserves
have been established in the unaudited balance sheets of Cupertino as of
March 31, 1996, Cupertino has not incurred or discharged, and is not legally
obligated with respect to, any indebtedness, liability (including, without
limitation, a liability arising out of an indemnification, guarantee, hold
harmless or similar arrangement) or obligation (accrued or contingent,
whether due or to become due, and whether or not subordinated to the claims
of its general creditors), other than as a result of operations in the
Ordinary Course of Business after such date. No agreement pursuant to which
any loans or other assets have been or will be sold by Cupertino or CNB
entitles the buyer of such loans or other assets, unless there is a material
breach of a representation or covenant by Cupertino or CNB, to cause
Cupertino or CNB to repurchase such loan or other asset or to pursue any
other form of recourse against Cupertino or CNB. Neither Cupertino nor CNB
has knowingly made or shall make any representation or covenant in any such
agreement that contained or shall contain any untrue statement of a material
fact or omitted or shall omit to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances under
which such representations and/or covenants were made or shall be made, not
misleading. No cash, stock or other dividend or any other distribution with
respect to the Cupertino Shares has been declared, set aside or paid, nor
have any of the Cupertino Shares been purchased, redeemed or otherwise
acquired, directly or indirectly, by Cupertino since December 31, 1995.
14
j. PROPERTIES AND LEASES.
(i) Cupertino and CNB have good and marketable title, free and clear
of all liens and encumbrances and the right of possession, subject to
existing leaseholds, to all real properties and good title, free and
clear of all liens and encumbrances, to all other property and assets,
tangible and intangible, reflected in the Cupertino balance sheet as of
March 31, 1996 (except property held as lessee under leases disclosed in
writing prior to the date hereof and except personal property sold or
otherwise disposed of since March 31, 1996, in the Ordinary Course of
Business), except for (a) liens for taxes or assessments not delinquent,
(b) such other liens and encumbrances and imperfections of title as do
not materially affect the value of such property as reflected in the
Cupertino balance sheet as of March 31, 1996, or as currently shown on
the books and records of Cupertino and which do not interfere with or
impair its present and continued use, or (c) exceptions disclosed in
title reports and preliminary title reports, copies of which have been
provided to Mid-Peninsula. All tangible properties of Cupertino and CNB
conform in all material respects with all applicable ordinances,
regulations and zoning laws. All tangible properties of Cupertino and CNB
are in a good state of maintenance and repair and are adequate for the
current business of Cupertino and CNB. No properties of Cupertino and
CNB, and, to the best of Cupertino's knowledge, no properties in which
Cupertino or CNB holds a collateral or contingent interest or purchase
option, are the subject of any pending or threatened investigation, claim
or proceeding relating to the use, storage or disposal on such property
of or contamination of such property by any toxic or hazardous waste
material or substance. To the best of Cupertino's knowledge, neither
Cupertino nor CNB owns, possesses or has a collateral or contingent
interest or purchase option in any properties or other assets which
contain or have located within or thereon any hazardous or toxic waste
material or substance unless the location of such hazardous or toxic
waste material or other substance or its use thereon conforms in all
material respects with all federal, state and local laws, rules,
regulations or other provisions regulating the discharge of materials
into the environment. As to any real property not owned or leased by
Cupertino or CNB and held as security for a loan or in which Cupertino or
CNB otherwise has an interest, neither Cupertino or CNB has controlled,
directed or participated in the operation or management of any such real
property or any facilities or enterprise conducted thereon, such that it
has become an owner or operator of such real property under applicable
environmental laws.
(ii) All properties held by Cupertino or CNB under leases are held
under valid, binding and enforceable leases, with such exceptions as are
not material and do not interfere with the conduct of the business of
Cupertino or CNB, and Cupertino and CNB enjoy quiet and peaceful
possession of such leased property. Neither Cupertino nor CNB is in
material default in any respect under any material lease, agreement or
obligation regarding its properties to which it is a party or by which it
is bound.
(iii) Except as disclosed to Mid-Peninsula in writing, all of
Cupertino's and CNB's rights and obligations under the leases referred to
in Section 4(j)(ii) above do not require the consent of any other party
to the transaction contemplated by this Agreement and the Merger
Agreement. Where required, Cupertino and CNB shall obtain, prior to the
Effective Date, the consent of such parties to such transaction.
k. MATERIAL CONTRACTS. Except as previously disclosed to Mid-Peninsula
in writing and excluding loans, lines of credit, loan commitments or letters
of credit to which Cupertino or CNB is a party, neither Cupertino nor CNB is
a party to or bound by any contract or other agreement made in the Ordinary
Course of Business which involves aggregate future payments by or to
Cupertino or CNB of more than $20,000 and which is made for a fixed period
expiring more than one year from the date hereof, and neither Cupertino nor
CNB is a party to or bound by any agreement not made in the Ordinary Course
of Business which is to be performed at or after the date hereof. Each of
the contracts and agreements disclosed to Mid-Peninsula pursuant to this
15
Section 4(k) is a legal and binding obligation (subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general applicability), and no breach or default (and no condition which,
with notice or passage of time, or both, could become a breach or default)
exists with respect thereto.
l. CLASSIFIED LOANS. Except as previously disclosed to Mid-Peninsula
in writing, there are no loans presently owned by Cupertino or CNB that have
been classified by Cupertino or CNB management or Cupertino or CNB internal
policy or procedure, any outside review examiner, accountant or any bank
regulatory authority as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," or "Loss" or classified using
categories or words with similar import and all loans or portions thereof so
classified shall have been charged off to the extent required. Cupertino and
CNB regularly review and appropriately classify their loans in accordance
with all applicable legal and regulatory requirements and generally accepted
banking practices. All loans and investments of Cupertino and CNB are legal,
valid and binding obligations enforceable in accordance with their
respective terms and are not subject to any setoffs, counterclaims or
disputes (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general applicability), except as disclosed to
Mid-Peninsula in writing or reserved for in the unaudited balance sheet of
Cupertino as of March 31, 1996, and were duly authorized under and made in
compliance with applicable federal and state laws and regulations. Neither
Cupertino nor CNB has any extensions of credit, investments, guarantees,
indemnification agreements or commitments for the same (including without
limitation commitments to issue letters of credit, to create acceptances, or
to repurchase securities, federal funds or other assets) other than those
documented on the books and records of Cupertino and CNB.
m. RESTRICTIONS ON INVESTMENTS. Except for pledges to secure public
and trust deposits and repurchase agreements in the Ordinary Course of
Business, none of the investments reflected in the Cupertino balance sheet
as of March 31, 1996, and none of the investments made by Cupertino or CNB
since March 31, 1996, is subject to any restriction, whether contractual or
statutory, which materially impairs the ability of Cupertino or CNB to
freely dispose of such investment at any time.
n. EMPLOYMENT BENEFIT PLANS/ERISA.
(i) Cupertino has provided to Mid-Peninsula an accurate list setting
forth all bonus, incentive compensation, profit-sharing, pension,
retirement, stock purchase, stock option, deferred compensation,
severance, hospitalization, medical, dental, vision, group insurance,
death benefit, disability and other fringe benefit plans, trust
agreements, arrangements and commitments of Cupertino and CNB (including
but not limited to any such plans, agreements, arrangements and
commitments applicable to former employees or retired employees, or for
which such persons are eligible) (collectively, "Employee Plans"), if
any, together with copies of all such Employee Plans that are documented
and any and all contracts of employment, and has made available to
Mid-Peninsula any Board of Directors' minutes (or committee minutes)
authorizing, approving or guaranteeing such Employee Plans and contracts;
and
(ii) All contributions, premiums or other payments due from Cupertino
and CNB to (or under) any Employee Plans have been fully paid or
adequately provided for on Cupertino's audited financial statements for
the year ended December 31, 1995 or unaudited financial statements for
the three months ended March 31, 1996. All accruals thereon (including,
where appropriate, proportional accruals for partial periods) have been
made in accordance with generally accepted accounting principles
consistently applied on a reasonable basis; and
(iii) Cupertino has disclosed in writing to Mid-Peninsula the names of
each director, officer and employee of Cupertino and CNB; and
16
(iv) The Employee Plans have been administered where required in
substantial compliance with ERISA, the IRC and the terms of such Employee
Plans, and there is no pending or threatened litigation relating to any
such Employee Plan; and
(v) Cupertino and CNB have not offered in the past health benefits
for retired employees; and
(vi) Each Employee Plan is in full force and effect, and neither
Cupertino, CNB nor any other party is in material default under any of
them, and there have been no claims of default and there are no facts or
conditions which if continued, or on notice, will result in a material
default under any Employee Plans; and
(vii) Cupertino has provided to Mid-Peninsula a list of all agreements
or other understandings pursuant to which the consummation of the
transactions contemplated hereby will (a) entitle any current or former
employee or officer of Cupertino or CNB to severance pay, unemployment
compensation or any other payment, or (b) accelerate the time of payment
or vesting or increase the amount of compensation due any such employee
or officer.
o. COLLECTIVE BARGAINING AND EMPLOYMENT AGREEMENTS. Except as provided
in this Agreement or as previously disclosed to Mid-Peninsula in writing,
neither Cupertino nor CNB has any union or collective bargaining or written
employment agreements, contracts or other agreements with any labor
organization or with any member of management, or any management or
consultation agreement not terminable at will by Cupertino or CNB without
liability and no such contract or agreement has been requested by, or is
under discussion by management with, any group of employees, any member of
management or any other person. There are no material controversies pending
between Cupertino or CNB and any current or former employees, and to the
best of Cupertino's knowledge, there are no efforts presently being made by
any labor union seeking to organize any of such employees.
p. COMPENSATION OF OFFICERS AND EMPLOYEES. Except as previously
disclosed to Mid-Peninsula in writing, (i) no officer or employee of
Cupertino or CNB is receiving aggregate direct remuneration at a rate
exceeding $60,000 per annum, and (ii) the consummation of the transactions
contemplated by this Agreement and the Merger Agreement will not (either
alone or upon the occurrence of any additional or further acts or events)
result in any payment (whether of severance pay or otherwise) becoming due
from Cupertino, CNB or Mid-Peninsula to any employee of Cupertino or CNB.
q. LEGAL ACTIONS AND PROCEEDINGS. Except as previously disclosed to
Mid-Peninsula in writing, neither Cupertino nor CNB is a party to, or so far
as known to either of them, threatened with, and to Cupertino's knowledge,
there is no reasonable basis for, any legal action or other proceeding or
investigation before any court, any arbitrator of any kind or any government
agency, and neither Cupertino nor CNB is subject to any potential adverse
claim, the outcome of which could involve the payment or receipt by
Cupertino or CNB of any amount in excess of $50,000, unless an insurer has
agreed to defend against and pay the amount of any resulting liability
without reservation, or, if any such legal action, proceeding, investigation
or claim will not involve the payment by Cupertino or CNB of a monetary
amount, which could materially adversely affect Cupertino or CNB or their
business or property or the transactions contemplated hereby. Cupertino has
no knowledge of any pending or threatened claims or charges under the
Community Reinvestment Act, before the Equal Employment Opportunity
Commission, the California Department of Fair Housing & Economic
Development, the California Unemployment Appeals Board, or any federal or
state human relations commission or agency. There is no labor dispute,
strike, slow-down or stoppage pending or, to the best of the knowledge of
Cupertino, threatened against Cupertino or CNB.
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r. EXECUTION AND DELIVERY OF THE AGREEMENT.
(i) The execution and delivery of this Agreement and the Merger
Agreement have been duly authorized by the Board of Directors of
Cupertino and, when the principal terms of the Merger, this Agreement and
the Merger Agreement have been duly approved by the affirmative vote of
the holders of a majority of the outstanding Cupertino Shares at a
meeting of shareholders duly called and held, the Merger, this Agreement
and the Merger Agreement will be duly and validly authorized by all
necessary corporate action on the part of Cupertino.
(ii) This Agreement has been duly executed and delivered by Cupertino
and (assuming due execution and delivery by Mid-Peninsula) constitutes,
and the Merger Agreement, upon its execution and delivery by Cupertino
(and assuming due execution and delivery by Mid-Peninsula) will
constitute, a legal and binding obligation of Cupertino in accordance
with its terms.
(iii) The execution and delivery by Cupertino of this Agreement and
the Merger Agreement and the consummation of the transactions herein and
therein contemplated (a) do not violate any provision of the Articles of
Incorporation or Articles of Association or Bylaws of Cupertino or CNB,
respectively, or violate in any material respect any provision of federal
or state law or any government rule or regulation (assuming (1) receipt
of the Government Approvals, (2) receipt of the requisite Cupertino
shareholder approval referred to in Section 4(r)(i) hereof, (3) due
registration of the Bancorp Shares under the 1933 Act, and (4) receipt of
appropriate permits or approvals under state securities or "blue sky"
laws, and (b) do not require any consent of any person under, conflict in
any material respect with or result in a material breach of, or
accelerate the performance required by any of the terms of, any material
debt instrument, lease, license, covenant, agreement or understanding to
which Cupertino or CNB is a party or by which it is bound or any order,
ruling, decree, judgment, arbitration award or stipulation to which
Cupertino or CNB is subject, or constitute a material default thereunder
or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction or right of any third party of any kind
whatsoever upon any of the properties or assets of Cupertino or CNB.
s. RETENTION OF BROKER OR CONSULTANT. No broker, agent, finder,
consultant or other party (other than legal, compliance, loan auditors and
accounting advisors) has been retained by Cupertino or CNB or is entitled to
be paid based upon any agreements, arrangements or understandings made by
Cupertino or CNB in connection with any of the transactions contemplated by
this Agreement or the Merger Agreement, except that Cupertino has engaged
the firm of Sutro & Co. Incorporated to render an opinion regarding the
fairness of the consideration to be received by Cupertino shareholders in
the Merger. Cupertino has provided Mid-Peninsula with a true and accurate
copy of its agreement(s) with Sutro & Co. Incorporated.
t. INSURANCE. Cupertino and CNB are and continuously since their
inception have been, insured with reputable insurers against all risks
normally insured against by bank holding companies and banks, and all of the
insurance policies and bonds maintained by Cupertino and CNB are in full
force and effect, Cupertino and CNB are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion. In the
best judgment of the management of Cupertino and CNB, such insurance
coverage is adequate for Cupertino and CNB. Since December 31, 1995, there
has not been any damage to, destruction of, or loss of any assets of
Cupertino or CNB not covered by insurance that could materially and
adversely affect the business, financial condition, properties, assets or
results of operations of Cupertino or CNB.
u. LOAN LOSS RESERVES. The allowance for loan losses in the Cupertino
balance sheets dated December 31, 1995, March 31, 1996, and as of the
Determination Date are and will be adequate in all material respects under
the requirements of all applicable state and federal laws and regulations to
provide for possible loan losses on outstanding loans, net of recoveries.
Cupertino has disclosed to Mid-Peninsula in writing prior to the date
hereof, and will promptly inform
18
Mid-Peninsula of the amounts of all loans, leases, other extensions of
credit or commitments, or other interest-bearing assets of Cupertino and
CNB, that have been classified as of the date hereof or hereafter by
Cupertino or CNB management or Cupertino or CNB internal policy or
procedure, any outside review examiner, accountant or any bank regulatory
authority as "Other Loans Specially Mentioned," "Special Mention,"
"Substandard," "Doubtful," or "Loss" or classified using categories or words
with similar import in the case of loans (or that would have been so
classified, in the case of other interest-bearing assets, had they been
loans). Notwithstanding the above, Cupertino shall be under no obligation to
disclose to Mid-Peninsula any such classification by any bank regulatory
authority where such disclosure would violate any obligation of
confidentiality of Cupertino or CNB imposed by such bank regulatory
authority. Cupertino has furnished and will continue to furnish to
Mid-Peninsula true and accurate information concerning the loan portfolio of
Cupertino and CNB, and no material information with respect to the loan
portfolio has been or will be withheld from Mid-Peninsula.
v. TRANSACTIONS WITH AFFILIATES. Except in the Ordinary Course of
Business, neither Cupertino nor CNB has extended credit, committed itself to
extend credit, or transferred any asset to or assumed or guaranteed any
liability of the employees or directors of Cupertino or CNB, or to any
spouse or child of any of them, or to any of their "affiliates" or
"associates" as such terms are defined in Rule 405 under the 1933 Act.
Neither Cupertino nor CNB has entered into any other transactions with the
employees or directors of Cupertino or CNB or any spouse or child of any of
them, or any of their affiliates or associates, except as disclosed in
writing to Mid-Peninsula. Any such transactions have been on terms no less
favorable to Cupertino and CNB than those which would prevail in an
arms-length transaction with an independent third party. Neither Cupertino
nor CNB has violated any applicable regulation of any government agency or
regulatory authority having jurisdiction over Cupertino or CNB in connection
with any such transactions described in this subsection v.
w. INFORMATION IN MID-PENINSULA REGISTRATION STATEMENT. The
information pertaining to Cupertino which has been or will be furnished to
Mid-Peninsula for or on behalf of Cupertino for inclusion in the
Mid-Peninsula Registration Statement and the Joint Proxy
Statement/Prospectus, or in the applications to be filed to obtain the
Government Approvals (the "Applications"), does not and will not contain any
untrue statement of any material fact or omit or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, that information of a later date shall be
deemed to modify contrary information as of an earlier date. All financial
statements of Cupertino included in the Mid-Peninsula Registration Statement
and the Joint Proxy Statement/Prospectus, or the Applications, will present
fairly the financial condition and results of operations of Cupertino at the
dates and for the periods covered by such statements in accordance with
generally accepted accounting principles consistently applied throughout the
periods covered by such statements. Cupertino shall promptly advise
Mid-Peninsula in writing if prior to the Effective Time of the Merger
Cupertino shall obtain knowledge of any facts that would make it necessary
to amend or supplement the Mid-Peninsula Registration Statement, the Joint
Proxy Statement/Prospectus or any Application, in order to make the
statements therein not misleading or to comply with applicable law or
regulation.
x. ACCURACY AND EFFECTIVE DATE OF REPRESENTATIONS AND WARRANTIES,
COVENANTS AND AGREEMENTS. Each representation, warranty, covenant and
agreement of Cupertino set forth in this Agreement shall be deemed to be
made on and as of the date hereof (except to the extent that a
representation or warranty is qualified as set forth in a Schedule
corresponding in number with the applicable section of such representation
or warranty and delivered on or before the Document Delivery Date, and upon
such delivery it shall be deemed made on and as of the date of delivery),
the Closing Date and the Effective Time of the Merger. No representation or
warranty by Cupertino, and no statement by Cupertino in any certificate,
agreement, schedule or other document furnished or to be furnished in
connection with the transactions contemplated by this
19
Agreement or the Merger Agreement, was or will be inaccurate, incomplete or
incorrect in any material respect as of the date furnished or contains or
will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary to make such representation, warranty
or statement not misleading to Mid-Peninsula.
5. REPRESENTATIONS AND WARRANTIES OF MID-PENINSULA.
In the following representations and warranties, all references to assets,
liabilities, properties, rights, obligations, financial condition, operations,
knowledge, information and other characteristics of Mid-Peninsula shall be
deemed to include reference to those characteristics of MPB on a consolidated
basis, except as the context otherwise indicates or requires. Mid-Peninsula
represents and warrants to Cupertino that, except as set forth on a Schedule
delivered to Cupertino on or before the Document Delivery Date, in form and
substance satisfactory to Cupertino and corresponding in number with the
applicable section:
a. CORPORATE STATUS AND POWER TO ENTER INTO AGREEMENTS. (i)
Mid-Peninsula is a corporation duly incorporated, validly existing and in
good standing under California law and is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, (ii) subject to
obtaining the Government Approvals and approval of the principal terms of
the Merger by the Mid-Peninsula shareholders, Mid-Peninsula has all
necessary corporate power to enter into this Agreement and the Merger
Agreement and to carry out all of the terms and provisions hereof and
thereof to be carried out by it, (iii) MPB holds a currently valid license
issued by the Superintendent to engage in the commercial banking business in
California at the locations at which it is licensed and currently conducts
business, and (iv) neither Mid-Peninsula nor MPB is subject to any
directive, resolution, memorandum of understanding or order of the FDIC,
FRB, Superintendent or any other regulatory authority having jurisdiction
over its business or any of its assets or properties. Neither the scope of
the business of Mid-Peninsula or MPB nor the location of their properties
requires either of them to be licensed to do business in any jurisdiction
other than the State of California. MPB's deposits are insured by the FDIC
to the maximum extent permitted by applicable law and regulation.
b. ARTICLES, BYLAWS, BOOKS AND RECORDS. The copies of the Articles of
Incorporation and Bylaws of Mid-Peninsula and MPB, respectively, heretofore
delivered to Cupertino are complete and accurate copies thereof as in effect
on the date hereof. The minute books of Mid-Peninsula and MPB made available
to Cupertino contain a complete and accurate record of all meetings of
Mid-Peninsula's and MPB's respective Boards of Directors (and committees
thereof) and shareholders. The corporate books and records (including
financial statements) of Mid-Peninsula and MPB fairly reflect the material
transactions to which Mid-Peninsula and MPB are parties or by which their
properties are subject or bound, and such books and records have been
properly kept and maintained.
c. COMPLIANCE WITH LAWS, REGULATIONS AND DECREES. Mid-Peninsula and
MPB (i) have the corporate power to own or lease their properties and to
conduct their business as currently conducted, (ii) have complied in all
material respects with, and are not in material default of any laws,
regulations, ordinances, orders or decrees applicable to the conduct of
their business and the ownership of their properties, including but not
limited to all federal and state laws (including but not limited to the Bank
Secrecy Act), rules and regulations relating to the offer, sale or issuance
of securities, and the operation of a commercial bank, other than where such
noncompliance or default is not likely to result in a material limitation on
the conduct of the business of Mid-Peninsula or MPB or is not likely to
otherwise have a material adverse effect on Mid-Peninsula and MPB taken as a
whole, (iii) have not failed to file with the proper federal, state, local
or other authorities any material report or other document required to be
filed, and (iv) have all approvals, authorizations, consents, licenses,
clearances and orders of, and have currently effective all registrations
with, all government agencies and regulatory authorities which are necessary
to the business and operations of Mid-Peninsula and MPB as now being
conducted.
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d. CAPITALIZATION. The authorized capital stock of Mid-Peninsula
consists of 6,000,000 shares of Mid-Peninsula common stock, no par value, of
which 1,608,443 shares are duly authorized, validly issued, fully paid and
nonassessable and currently outstanding, and 4,000,000 shares of
Mid-Peninsula preferred stock of which no shares are outstanding. Said stock
has been offered, sold and issued in compliance with all applicable
securities laws. There are currently outstanding options to purchase 278,538
shares of Mid-Peninsula common stock, at a weighted average exercise price
of $12.84 per share, issued pursuant to the Mid-Peninsula Stock Option Plan.
Said options were issued and, upon issuance in accordance with the terms of
the outstanding options said shares shall be issued, in compliance with all
applicable securities laws. Otherwise, there are no outstanding (i) options,
agreements, calls or commitments of any character which would obligate
Mid-Peninsula to issue, sell, pledge, assign or otherwise encumber or
dispose of, or to purchase, redeem or otherwise acquire, any Bancorp common
stock or any other equity security of Mid-Peninsula, or (ii) warrants or
options relating to, rights to acquire, or debt or equity securities
convertible into, shares of Bancorp common stock or any other equity
security of Mid-Peninsula. The outstanding common stock of Mid-Peninsula is
registered with the Securities and Exchange Commission (the "Commission")
pursuant to Section 12(g) of the 1934 Act. Mid-Peninsula owns all of the
outstanding equity securities of MPB. Except as collateral for outstanding
loans held in their loan portfolios, neither Mid-Peninsula nor MPB owns,
directly or indirectly, any equity interest in any bank (other than
Mid-Peninsula's ownership of MPB), corporation or other entity.
e. TRADEMARKS AND TRADE NAMES. To the best of the knowledge of
Mid-Peninsula, Mid-Peninsula and MPB (i) own and have the exclusive right to
use all Intellectual Property Rights used in or necessary for the conduct of
their businesses as now or heretofore conducted; and (ii) are not infringing
upon the Intellectual Property Rights of any other person or entity. No
claim is pending or threatened by any person or entity against or otherwise
affecting the use by Mid-Peninsula or MPB of any Intellectual Property
Rights and, to the best of its knowledge, there is no valid basis for any
such claim.
f. FINANCIAL STATEMENTS, REGULATORY REPORTS. No financial statement or
other document provided or to be provided to Cupertino as required by
Section 3.3(j) hereof, as of the date of such document, contained, or as to
documents to be delivered after the date hereof, will contain, any untrue
statement of a material fact, or, at the date thereof, omitted or will omit
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements were or
will be made, not misleading; provided, however, that information as of a
later date shall be deemed to modify contrary information as of any earlier
date. Mid-Peninsula and MPB have filed all material documents and reports
required to be filed by them with the FDIC, FRB, Superintendent, the
Commission and any other government agency or regulatory authority having
jurisdiction over their business, assets or properties. All such reports
conform in all material respects with the requirements promulgated by such
government agencies and regulatory authorities. All compliance or corrective
action relating to Mid-Peninsula and MPB required by government agencies and
regulatory authorities having jurisdiction over Mid-Peninsula or MPB has
been taken. Except as disclosed in such statements, reports or documents,
neither Mid-Peninsula nor MPB has received any notification, formally or
informally, from any agency or department of any federal, state or local
government or any regulatory authority or the staff thereof (a) asserting
that it is not in compliance with any of the statutes, regulations or
ordinances which such government or regulatory authority enforces, or (b)
threatening to revoke any license, franchise, permit or government
authorization. Mid-Peninsula and MPB have paid all assessments made or
imposed by any government agency. Mid-Peninsula has delivered to Cupertino
copies of all annual management letters and opinions, and has made available
to Cupertino for inspection all reviews, correspondence and other documents
in the files of Mid-Peninsula prepared by KPMG Peat Marwick LLP or any other
certified public accountant engaged by Mid-Peninsula and delivered to
Mid-Peninsula since December 31, 1990. The financial records of
Mid-Peninsula have been, and are being and shall be, maintained in all
21
material respects in accordance with all applicable legal and accounting
requirements sufficient to insure that all transactions reflected therein
are, in all material respects, executed in accordance with management's
general or specific authorization and recorded in conformity with generally
accepted accounting principles at the time in effect. The data processing
equipment, data transmission equipment, related peripheral equipment and
software used by Mid-Peninsula in the operation of its business to generate
and retrieve its financial records are adequate for the current needs of
Mid-Peninsula.
g. TAX RETURNS.
(i) Mid-Peninsula and/or MPB has timely filed all federal, state,
county, local and foreign tax returns required to be filed by it,
including, without limitation, estimated tax, use tax, excise tax, real
property and personal property tax reports and returns, employer's
withholding tax returns, other withholding tax returns and Federal
Unemployment Tax Returns, and all other reports or other information
required or requested to be filed by either of them, and each such
return, report or other information was, when filed, complete and
accurate in all material respects. Mid-Peninsula and/or MPB has paid all
taxes, fees and other government charges, including any interest and
penalties thereon, when they have become due, except those that are being
contested in good faith, which contested matters have been disclosed to
Cupertino. Mid-Peninsula and/or MPB has not been requested to give nor
has it given any currently effective waivers extending the statutory
period of limitation applicable to any tax return required to be filed by
it for any period. There are no claims pending against Mid-Peninsula
and/or MPB for any alleged deficiency in the payment of any taxes, and
Mid-Peninsula does not know of any pending or threatened audits,
investigations or claims for unpaid taxes or relating to any liability in
respect of any taxes. There have been no events, including a change in
ownership, that would result in a reappraisal and establishment of a new
base-year full value for purposes of applicable provisions of the
California Constitution, of any real property owned in whole or in part
by Mid-Peninsula or MPB or to the best of Mid-Peninsula's knowledge, of
any real property leased by Mid-Peninsula or MPB.
(ii) Mid-Peninsula has heretofore delivered to Cupertino copies of
all its tax returns with respect to taxes payable to the United States of
America and the State of California for the fiscal years ended December
31, 1995, 1994, 1993, 1992 and 1991.
(iii) No consent has been filed relating to Mid-Peninsula pursuant to
Section 341(f) of the IRC.
h. MATERIAL ADVERSE CHANGE. Except as heretofore disclosed in writing
by Mid-Peninsula to Cupertino, since December 31, 1995, there has been (i)
no material adverse change in the business, assets, licenses, permits,
franchises, results of operations or financial condition of Mid-Peninsula or
MPB (whether or not in the Ordinary Course of Business), (ii) no change in
any of the assets, licenses, permits or franchises of Mid-Peninsula or MPB
that has had or can reasonably be expected to have a material adverse effect
on any of the items listed in clause (h)(i) above, (iii) no damage,
destruction, or other casualty loss (whether or not covered by insurance)
that has had or can reasonably be expected to have a material adverse effect
on any of the items listed in clause (h)(i) above, (iv) no amendment,
modification, or termination of any existing, or entering into of any new,
contract, agreement, plan, lease, license, permit or franchise that is
material to the business, financial condition, assets, liabilities or
operations of Mid-Peninsula and MPB, except in the Ordinary Course of
Business, and (v) no disposition by Mid-Peninsula or MPB of one or more
assets that, individually or in the aggregate, are material to Mid-Peninsula
or MPB, except sales of assets in the Ordinary Course of Business.
i. NO UNDISCLOSED LIABILITIES. Except for items for which reserves
have been established in the unaudited balance sheets of Mid-Peninsula as of
March 31, 1996, Mid-Peninsula has not incurred or discharged, and is not
legally obligated with respect to, any indebtedness, liability (including,
without limitation, a liability arising out of an indemnification,
guarantee, hold
22
harmless or similar arrangement) or obligation (accrued or contingent,
whether due or to become due, and whether or not subordinated to the claims
of its general creditors), other than as a result of operations in the
Ordinary Course of Business after such date. No agreement pursuant to which
any loans or other assets have been or will be sold by Mid-Peninsula or MPB
entitles the buyer of such loans or other assets, unless there is a material
breach of a representation or covenant by Mid-Peninsula or MPB, to cause
Mid-Peninsula or MPB to repurchase such loan or other asset or to pursue any
other form of recourse against Mid-Peninsula or MPB. Neither Mid-Peninsula
nor MPB has knowingly made or shall make any representation or covenant in
any such agreement that contained or shall contain any untrue statement of a
material fact or omitted or shall omit to state a material fact necessary in
order to make the statements contained therein, in light of the
circumstances under which such representations and/or covenants were made or
shall be made, not misleading. No cash, stock or other dividend or any other
distribution with respect to the Bancorp Shares has been declared, set aside
or paid, nor have any of the Bancorp Shares been purchased, redeemed or
otherwise acquired, directly or indirectly, by Mid-Peninsula since May 22,
1996.
j. PROPERTIES AND LEASES.
(i) Mid-Peninsula and MPB have good and marketable title, free and
clear of all liens and encumbrances and the right of possession, subject
to existing leaseholds, to all real properties and good title, free and
clear of all liens and encumbrances, to all other property and assets,
tangible and intangible, reflected in the Mid-Peninsula balance sheet as
of March 31, 1996 (except property held as lessee under leases disclosed
in writing prior to the date hereof and except personal property sold or
otherwise disposed of since March 31, 1996, in the Ordinary Course of
Business), except for (a) liens for taxes or assessments not delinquent,
(b) such other liens and encumbrances and imperfections of title as do
not materially affect the value of such property as reflected in the
Mid-Peninsula balance sheet as of March 31, 1996, or as currently shown
on the books and records of Mid-Peninsula and which do not interfere with
or impair its present and continued use, or (c) exceptions disclosed in
title reports and preliminary title reports, copies of which have been
provided to Cupertino. All tangible properties of Mid-Peninsula and MPB
conform in all material respects with all applicable ordinances,
regulations and zoning laws. All tangible properties of Mid-Peninsula and
MPB are in a good state of maintenance and repair and are adequate for
the current business of Mid-Peninsula and MPB. No properties of
Mid-Peninsula and MPB, and, to the best of Mid-Peninsula's knowledge, no
properties in which Mid-Peninsula or MPB holds a collateral or contingent
interest or purchase option, are the subject of any pending or threatened
investigation, claim or proceeding relating to the use, storage or
disposal on such property of or contamination of such property by any
toxic or hazardous waste material or substance. To the best of
Mid-Peninsula's knowledge, neither Mid-Peninsula nor MPB owns, possesses
or has a collateral or contingent interest or purchase option in any
properties or other assets which contain or have located within or
thereon any hazardous or toxic waste material or substance unless the
location of such hazardous or toxic waste material or other substance or
its use thereon conforms in all material respects with all federal, state
and local laws, rules, regulations or other provisions regulating the
discharge of materials into the environment. As to any real property not
owned or leased by Mid-Peninsula or MPB and held as security for a loan
or in which Mid-Peninsula or MPB otherwise has an interest, neither
Mid-Peninsula or MPB has controlled, directed or participated in the
operation or management of any such real property or any facilities or
enterprise conducted thereon, such that it has become an owner or
operator of such real property under applicable environmental laws.
(ii) All properties held by Mid-Peninsula or MPB under leases are
held under valid, binding and enforceable leases, with such exceptions as
are not material and do not interfere with the conduct of the business of
Mid-Peninsula or MPB, and Mid-Peninsula and MPB
23
enjoy quiet and peaceful possession of such leased property. Neither
Mid-Peninsula nor MPB is in material default in any respect under any
material lease, agreement or obligation regarding its properties to which
it is a party or by which it is bound.
(iii) Except as disclosed to Cupertino in writing, all of
Mid-Peninsula's and MPB's rights and obligations under the leases
referred to in Section 5(j)(ii) above do not require the consent of any
other party to the transaction contemplated by this Agreement and the
Merger Agreement. Where required, Mid-Peninsula and MPB shall obtain,
prior to the Effective Date, the consent of such parties to such
transactions.
k. MATERIAL CONTRACTS. Except as previously disclosed to Cupertino in
writing and excluding loans, lines of credit, loan commitments or letters of
credit to which Mid-Peninsula or MPB is a party, neither Mid-Peninsula nor
MPB is a party to or bound by any contract or other agreement made in the
Ordinary Course of Business which involves aggregate future payments by or
to Mid-Peninsula or MPB of more than $20,000 and which is made for a fixed
period expiring more than one year from the date hereof, and neither
Mid-Peninsula nor MPB is a party to or bound by any agreement not made in
the Ordinary Course of Business which is to be performed at or after the
date hereof. Each of the contracts and agreements disclosed to Cupertino
pursuant to this Section 5(k) is a legal and binding obligation (subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to equitable principles
of general applicability), and no breach or default (and no condition which,
with notice or passage of time, or both, could become a breach or default)
exists with respect thereto.
l. CLASSIFIED LOANS. Except as previously disclosed to Cupertino in
writing, there are no loans presently owned by Mid-Peninsula or MPB that
have been classified by Mid-Peninsula or MPB management or Mid-Peninsula or
MPB internal policy or procedure, any outside review examiner, accountant or
any bank regulatory authority as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," or "Loss" or classified using
categories or words with similar import and all loans or portions thereof so
classified have been charged off to the extent required. Mid-Peninsula and
MPB regularly review and appropriately classify their loans in accordance
with all applicable legal and regulatory requirements and generally accepted
banking practices. All loans and investments of Mid-Peninsula and MPB are
legal, valid and binding obligations enforceable in accordance with their
respective terms and are not subject to any setoffs, counterclaims or
disputes (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general applicability), except as disclosed to
Cupertino in writing or reserved for in the unaudited balance sheet of
Mid-Peninsula as of March 31, 1996, and were duly authorized under and made
in compliance with applicable federal and state laws and regulations.
Neither Mid-Peninsula nor MPB has any extensions of credit, investments,
guarantees, indemnification agreements or commitments for the same
(including without limitation commitments to issue letters of credit, to
create acceptances, or to repurchase securities, federal funds or other
assets) other than those documented on the books and records of
Mid-Peninsula and MPB.
m. RESTRICTIONS ON INVESTMENTS. Except for pledges to secure public
and trust deposits and repurchase agreements in the Ordinary Course of
Business, none of the investments reflected in the Mid-Peninsula balance
sheet as of March 31, 1996, and none of the investments made by Mid-
Peninsula or MPB since March 31, 1996, is subject to any restriction,
whether contractual or statutory, which materially impairs the ability of
Mid-Peninsula or MPB to freely dispose of such investment at any time.
n. EMPLOYMENT BENEFIT PLANS/ERISA.
(i) Mid-Peninsula has provided to Cupertino an accurate list setting
forth all bonus, incentive compensation, profit-sharing, pension,
retirement, stock purchase, stock option, deferred compensation,
severance, hospitalization, medical, dental, vision, group insurance,
death benefit, disability and other fringe benefit plans, trust
agreements, arrangements and
24
commitments of Mid-Peninsula and MPB (including but not limited to any
such plans, agreements, arrangements and commitments applicable to former
employees or retired employees, or for which such persons are eligible)
(collectively, "Employee Plans"), if any, together with copies of all
such Employee Plans that are documented and any and all contracts of
employment, and has made available to Cupertino any Board of Directors'
minutes (or committee minutes) authorizing, approving or guaranteeing
such Employee Plans and contracts; and
(ii) All contributions, premiums or other payments due from
Mid-Peninsula and MPB to (or under) any Employee Plans have been fully
paid or adequately provided for on Mid-Peninsula's audited financial
statements for the year ended December 31, 1995 or unaudited financial
statements for the three months ended March 31, 1996. All accruals
thereon (including, where appropriate, proportional accruals for partial
periods) have been made in accordance with generally accepted accounting
principles consistently applied on a reasonable basis; and
(iii) Mid-Peninsula has disclosed in writing to Cupertino the names of
each director, officer and employee of Mid-Peninsula and MPB; and
(iv) The Employee Plans have been administered where required in
substantial compliance with ERISA, the IRC and the terms of such Employee
Plans, and there is no pending or threatened litigation relating to any
such Employee Plan; and
(v) Mid-Peninsula and MPB have not offered in the past health
benefits for retired employees; and
(vi) Each Employee Plan is in full force and effect, and neither
Mid-Peninsula, MPB nor any other party is in material default under any
of them, and there have been no claims of default and there are no facts
or conditions which if continued, or on notice, will result in a material
default under any Employee Plans; and
(vii) Mid-Peninsula has provided to Cupertino a list of all agreements
or other understandings pursuant to which the consummation of the
transactions contemplated hereby will (a) entitle any current or former
employee or officer of Mid-Peninsula or MPB to severance pay,
unemployment compensation or any other payment, or (b) accelerate the
time of payment or vesting or increase the amount of compensation due any
such employee or officer.
o. COLLECTIVE BARGAINING AND EMPLOYMENT AGREEMENTS. Except as provided
in this Agreement or as previously disclosed to Cupertino in writing,
neither Mid-Peninsula nor MPB has any union or collective bargaining or
written employment agreements, contracts or other agreements with any labor
organization or with any member of management, or any management or
consultation agreement not terminable at will by Mid-Peninsula or MPB
without liability and no such contract or agreement has been requested by,
or is under discussion by management with, any group of employees, any
member of management or any other person. There are no material
controversies pending between Mid-Peninsula or MPB and any current or former
employees, and to the best of Mid-Peninsula's knowledge, there are no
efforts presently being made by any labor union seeking to organize any of
such employees.
p. COMPENSATION OF OFFICERS AND EMPLOYEES. Except as previously
disclosed to Cupertino in writing, (i) no officer or employee of
Mid-Peninsula or MPB is receiving aggregate direct remuneration at a rate
exceeding $60,000 per annum, and (ii) the consummation of the transactions
contemplated by this Agreement and the Merger Agreement will not (either
alone or upon the occurrence of any additional or further acts or events)
result in any payment (whether of severance pay or otherwise) becoming due
from Mid-Peninsula, MPB or Cupertino to any employee of Mid-Peninsula or
MPB.
25
q. LEGAL ACTIONS AND PROCEEDINGS. Except as previously disclosed to
Cupertino in writing, neither Mid-Peninsula nor MPB is a party to, or so far
as known to either of them, threatened with, and to Mid-Peninsula's
knowledge, there is no reasonable basis for, any legal action or other
proceeding or investigation before any court, any arbitrator of any kind or
any government agency, and neither Mid-Peninsula nor MPB is subject to any
potential adverse claim, the outcome of which could involve the payment or
receipt by Mid-Peninsula or MPB of any amount in excess of $50,000, unless
an insurer has agreed to defend against and pay the amount of any resulting
liability without reservation, or, if any such legal action, proceeding,
investigation or claim will not involve the payment by Mid-Peninsula or MPB
of a monetary amount, which could materially adversely affect Mid-Peninsula
or MPB or their business or property or the transactions contemplated
hereby. Mid-Peninsula has no knowledge of any pending or threatened claims
or charges under the Community Reinvestment Act, before the Equal Employment
Opportunity Commission, the California Department of Fair Housing & Economic
Development, the California Unemployment Appeals Board, or any federal or
state human relations commission or agency. There is no labor dispute,
strike, slow-down or stoppage pending or, to the best of the knowledge of
Mid-Peninsula, threatened against Mid-Peninsula or MPB.
r. EXECUTION AND DELIVERY OF THE AGREEMENT.
(i) The execution and delivery of this Agreement and the Merger
Agreement have been duly authorized by the Board of Directors of
Mid-Peninsula and, when the principal terms of the Merger, this Agreement
and the Merger Agreement have been duly approved by the affirmative vote
of the holders of a majority of the outstanding Bancorp Shares at a
meeting of shareholders duly called and held, the Merger, this Agreement
and the Merger Agreement will be duly and validly authorized by all
necessary corporate action on the part of Mid-Peninsula.
(ii) This Agreement has been duly executed and delivered by
Mid-Peninsula and (assuming due execution and delivery by Cupertino)
constitutes, and the Merger Agreement, upon its execution and delivery by
Mid-Peninsula (and assuming due execution and delivery by Cupertino) will
constitute, a legal and binding obligation of Mid-Peninsula in accordance
with its terms.
(iii) The execution and delivery by Mid-Peninsula of this Agreement
and the Merger Agreement and the consummation of the transactions herein
and therein contemplated (a) do not violate any provision of the Articles
of Incorporation or Bylaws of Mid-Peninsula or MPB, respectively, or
violate in any material respect any provision of federal or state law or
any government rule or regulation (assuming (1) receipt of the Government
Approvals, (2) receipt of the requisite Mid-Peninsula shareholder
approval referred to in Section 5(r)(i) hereof, (3) due registration of
the Bancorp Shares under the 1933 Act, and (4) receipt of appropriate
permits or approvals under state securities or "blue sky" laws, and (b)
do not require any consent of any person under, conflict in any material
respect with or result in a material breach of, or accelerate the
performance required by any of the terms of, any material debt
instrument, lease, license, covenant, agreement or understanding to which
Mid-Peninsula or MPB is a party or by which it is bound or any order,
ruling, decree, judgment, arbitration award or stipulation to which
Mid-Peninsula or MPB is subject, or constitute a material default
thereunder or result in the creation of any lien, claim, security
interest, encumbrance, charge, restriction or right of any third party of
any kind whatsoever upon any of the properties or assets of Mid-Peninsula
or MPB.
s. RETENTION OF BROKER OR CONSULTANT. No broker, agent, finder,
consultant or other party (other than legal, compliance, loan auditors and
accounting advisors) has been retained by Mid-Peninsula or MPB or is
entitled to be paid based upon any agreements, arrangements or
understandings made by Mid-Peninsula or MPB in connection with any of the
transactions contemplated by this Agreement or the Merger Agreement, except
that Mid-Peninsula has engaged the
26
firm of Alex. Brown & Sons Incorporated to act as its financial advisor and
to render an opinion regarding the fairness of the Conversion Ratio in the
Merger, from a financial point of view, to Mid-Peninsula shareholders.
Mid-Peninsula has provided Cupertino with a true and accurate copy of its
agreement(s) with Alex. Brown & Sons Incorporated.
t. INSURANCE. Mid-Peninsula and MPB are and continuously since their
inception have been, insured with reputable insurers against all risks
normally insured against by bank holding companies and banks, and all of the
insurance policies and bonds maintained by Mid-Peninsula and MPB are in full
force and effect, Mid-Peninsula and MPB are not in default thereunder and
all material claims thereunder have been filed in due and timely fashion. In
the best judgment of the management of Mid-Peninsula and MPB, such insurance
coverage is adequate for Mid-Peninsula and MPB. Since December 31, 1995,
there has not been any damage to, destruction of, or loss of any assets of
Mid-Peninsula or MPB not covered by insurance that could materially and
adversely affect the business, financial condition, properties, assets or
results of operations of Mid-Peninsula or MPB.
u. LOAN LOSS RESERVES. The allowance for loan losses in the
Mid-Peninsula balance sheets dated December 31, 1995, March 31, 1996, and as
of the Determination Date are and will be adequate in all material respects
under the requirements of all applicable state and federal laws and
regulations to provide for possible loan losses on outstanding loans, net of
recoveries. Mid-Peninsula has disclosed to Cupertino in writing prior to the
date hereof, and will promptly inform Cupertino of the amounts of all loans,
leases, other extensions of credit or commitments, or other interest-bearing
assets of Mid-Peninsula and MPB, that have been classified as of the date
hereof or hereafter by Mid-Peninsula or MPB management or Mid-Peninsula or
MPB internal policy or procedure, any outside review examiner, accountant or
any bank regulatory authority as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," or "Loss" or classified using
categories or words with similar import in the case of loans (or that would
have been so classified, in the case of other interest-bearing assets, had
they been loans). Notwithstanding the above, Mid-Peninsula shall be under no
obligation to disclose to Cupertino any such classification by any bank
regulatory authority, where such disclosure would violate any obligation of
confidentiality of Mid-Peninsula or MPB imposed by such bank regulatory
authority. Mid-Peninsula has furnished and will continue to furnish to
Cupertino true and accurate information concerning the loan portfolio of
Mid-Peninsula and MPB, and no material information with respect to the loan
portfolio has been or will be withheld from Cupertino.
v. TRANSACTIONS WITH AFFILIATES. Except in the Ordinary Course of
Business, neither Mid-Peninsula nor MPB has extended credit, committed
itself to extend credit, or transferred any asset to or assumed or
guaranteed any liability of the employees or directors of Mid-Peninsula or
MPB, or to any spouse or child of any of them, or to any of their
"affiliates" or "associates" as such terms are defined in Rule 405 under the
1933 Act. Neither Mid-Peninsula nor MPB has entered into any other
transactions with the employees or directors of Mid-Peninsula or MPB or any
spouse or child of any of them, or any of their affiliates or associates,
except as disclosed in writing to Cupertino. Any such transactions have been
on terms no less favorable to Mid-Peninsula and MPB than those which would
prevail in an arms-length transaction with an independent third party.
Neither Mid-Peninsula nor MPB has violated any applicable regulation of any
government agency or regulatory authority having jurisdiction over
Mid-Peninsula or MPB in connection with any such transactions described in
this subsection v.
w. INFORMATION IN MID-PENINSULA REGISTRATION STATEMENT. The
information pertaining to Mid-Peninsula which has been or will be included
in the Mid-Peninsula Registration Statement and the Joint Proxy
Statement/Prospectus, or in the Applications to be filed to obtain the
Government Approvals, does not and will not contain any untrue statement of
any material fact or omit or will omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they are made, not misleading;
27
provided, however, that information of a later date shall be deemed to
modify contrary information as of an earlier date. All financial statements
of Mid-Peninsula included in the Mid-Peninsula Registration Statement and
the Joint Proxy Statement/Prospectus, or the Applications, will present
fairly the financial condition and results of operations of Mid-Peninsula at
the dates and for the periods covered by such statements in accordance with
generally accepted accounting principles consistently applied throughout the
periods covered by such statements. Mid-Peninsula shall promptly advise
Cupertino in writing if prior to the Effective Time of the Merger Mid-
Peninsula shall obtain knowledge of any facts that would make it necessary
to amend or supplement the Mid-Peninsula Registration Statement, the Joint
Proxy Statement/Prospectus or any Application, in order to make the
statements therein not misleading or to comply with applicable law or
regulation.
x. ACCURACY AND EFFECTIVE DATE OF REPRESENTATIONS AND WARRANTIES,
COVENANTS AND AGREEMENTS. Each representation, warranty, covenant and
agreement of Mid-Peninsula set forth in this Agreement shall be deemed to be
made on and as of the date hereof (except to the extent that a
representation or warranty is qualified as set forth in a Schedule
corresponding in number with the applicable section of such representation
or warranty and delivered on or before the Document Delivery Date, and upon
such delivery it shall be deemed made on and as of the date of delivery),
the Closing Date and the Effective Time of the Merger. No representation or
warranty by Mid-Peninsula, and no statement by Mid-Peninsula in any
certificate, agreement, schedule or other document furnished or to be
furnished in connection with the transactions contemplated by this Agreement
or the Merger Agreement, was or will be inaccurate, incomplete or incorrect
in any material respect as of the date furnished or contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation, warranty or statement
not misleading to Cupertino.
6. SECURITIES ACT OF 1933; SECURITIES EXCHANGE ACT OF 1934.
a. PREPARATION AND FILING OF REGISTRATION STATEMENT. Mid-Peninsula
shall promptly prepare and file with the Commission (i) a registration
statement on the appropriate form (the "Mid-Peninsula Registration
Statement") under and pursuant to the provisions of the 1933 Act for the
purpose of registering a sufficient number of Mid-Peninsula Shares to
complete the exchange of Bancorp Shares for the outstanding Cupertino Shares
pursuant to the Conversion Ratio and the provisions of Section 2.1 above,
and (ii) in sufficient time to be effective on or before the Effective Time
of the Merger one or more registration statements or amendments to existing
registration statements under the 1933 Act for the purpose of registering
the maximum number of Bancorp Shares to which the holders of Substitute
Options may be entitled pursuant to Section 2.6 above at or after the
Effective Time of the Merger. Mid-Peninsula shall promptly prepare a Joint
Proxy Statement/Prospectus for the purpose of submitting the principal terms
of the Merger, this Agreement and the Merger Agreement to the shareholders
of Mid-Peninsula and Cupertino for approval. Cupertino shall cooperate in
all reasonable respects with regard to the preparation of the Joint Proxy
Statement/Prospectus. The Joint Proxy Statement/Prospectus in definitive
form is expected to serve as the prospectus to be included in the
Mid-Peninsula Registration Statement. Mid-Peninsula and Cupertino shall each
provide promptly to the other such information concerning its business and
financial condition and affairs as may be required or appropriate for
inclusion in the Mid-Peninsula Registration Statement or the Joint Proxy
Statement/Prospectus, and shall cause its counsel and auditors to cooperate
with the other's counsel and auditors in the preparation of the
Mid-Peninsula Registration Statement and the Joint Proxy Statement/
Prospectus.
b. EFFECTIVENESS OF REGISTRATION STATEMENT. Mid-Peninsula and
Cupertino shall use their best efforts to have the Mid-Peninsula
Registration Statement and any amendments or supplements thereto declared
effective under the 1933 Act as soon as practicable, and thereafter Mid-
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Peninsula and Cupertino shall distribute the Joint Proxy
Statement/Prospectus to holders of their respective common stock in
accordance with applicable laws and the Articles of Incorporation and Bylaws
of each.
c. SALES AND RESALES OF COMMON STOCK. Mid-Peninsula shall not be
required to maintain the effectiveness of the Mid-Peninsula Registration
Statement for the purpose of sale or resale of the Bancorp Shares by any
person.
d. RULE 145. Securities representing Bancorp Shares issued to
affiliates of Cupertino (as determined by counsel to Mid-Peninsula and
Cupertino) under Rule 145 of the 1933 Act pursuant to the Merger Agreement
may be subject to stop transfer orders which confirm that such securities
representing Bancorp Shares have been issued or transferred to the
registered holder as the result of a transaction to which Rule 145 under the
1933 Act applies, and that such securities may not be sold, hypothecated,
transferred or assigned, and the issuer or its transfer agent shall not be
required to give effect to any attempted sale, hypothecation, transfer or
assignment, except (i) pursuant to a then current effective registration
statement under the 1933 Act, (ii) in a transaction permitted by Rule 145 as
to which the issuer has, in the opinion of its counsel, received reasonably
satisfactory evidence of compliance with the provisions of Rule 145, or
(iii) in a transaction which, in the opinion of counsel satisfactory to the
issuer or as described in a "no action" or interpretive letter from the
staff of the Securities and Exchange Commission, is not required to be
registered under the 1933 Act.
7. CONDITIONS TO THE OBLIGATIONS OF MID-PENINSULA.
The obligations of Mid-Peninsula under this Agreement are, at its option,
subject to fulfillment at or prior to the Effective Time of the Merger of each
of the following conditions; provided, however, that any one or more of such
conditions may be waived by the Board of Directors of Mid-Peninsula at any time
at or prior to the Effective Time of the Merger:
a. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Cupertino in Section 4 hereof shall be true and correct in all material
respects on and as of the date of this Agreement (except to the extent that
a representation or warranty is qualified as set forth in a Schedule
corresponding in number with the applicable section of such representation
or warranty and delivered on or before the Document Delivery Date, and upon
such delivery it shall be deemed made on and as of the date of delivery),
the Closing Date and the Effective Time of the Merger, with the same effect
as though such representations and warranties had been made on and as of
each such date or time except as to any representation or warranty which
specifically relates to an earlier date or time.
b. COMPLIANCE AND PERFORMANCE UNDER AGREEMENT. Cupertino shall have
performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement and the Merger Agreement required
to be performed or complied with by it at or prior to the Effective Time of
the Merger.
c. MATERIAL ADVERSE CHANGE. No materially adverse change shall have
occurred since March 31, 1996, in the business, financial condition, results
of operations or assets of Cupertino and CNB, taken as a whole, and neither
Cupertino nor CNB shall be a party to or threatened with, and to the best of
Cupertino's knowledge there is no reasonable basis for, any legal action or
other proceeding before any court, any arbitrator of any kind or any
government agency, which legal action or proceeding, in the reasonable
judgment of Mid-Peninsula, could materially adversely affect Cupertino and
CNB, taken as a whole, or their business, financial condition, results of
operations or assets.
d. APPROVAL OF AGREEMENT. The principal terms of the Merger, this
Agreement and the Merger Agreement shall have been duly approved by (i) the
affirmative vote or consent of the holders of a majority of the outstanding
Cupertino Shares and (ii) the affirmative vote or consent of the holders of
a majority of the outstanding Mid-Peninsula Shares.
29
e. OFFICER'S CERTIFICATE. Mid-Peninsula shall have received a
certificate, dated the Effective Date, signed on behalf of Cupertino by its
President and Chief Financial Officer, in substantially the form delivered
to Mid-Peninsula on or before the Document Delivery Date.
f. OPINION OF COUNSEL. Manatt, Phelps & Phillips, LLP, counsel to
Cupertino, shall have delivered to Mid-Peninsula its opinion dated the
Effective Date in substantially the form delivered to Mid-Peninsula on or
before the Document Delivery Date.
g. ABSENCE OF PROCEEDINGS. No legal, administrative, arbitration,
investigatory or other proceeding by any government agency or regulatory
authority shall have been instituted or threatened to restrain or prohibit
the Merger or the transactions contemplated by this Agreement.
h. EFFECTIVENESS OF REGISTRATION STATEMENT. The Mid-Peninsula
Registration Statement and any amendments or supplements thereto shall have
become effective under the 1933 Act, no stop order suspending the
effectiveness of such Registration Statement shall be in effect and no
proceedings for such purpose shall have been initiated or threatened by or
before the Commission and the Mid-Peninsula Shares registered thereby shall
have received all state securities and "blue sky" permits or approvals
required to consummate the transactions contemplated by this Agreement and
the Merger Agreement.
i. GOVERNMENT APPROVALS. All Government Approvals shall be in effect,
and all conditions or requirements prescribed by law or by any such
Approvals shall have been satisfied; provided, however, that no Government
Approval shall be deemed to have been received if it shall require the
divestiture or cessation of any of the present businesses or operations
conducted by either of the parties hereto or shall impose any other
condition or requirement, which condition or requirement Mid-Peninsula in
its reasonable judgment shall deem to be materially burdensome (in which
case Mid-Peninsula shall promptly notify Cupertino). For purposes of this
agreement no condition or requirement shall be deemed to be "materially
burdensome" if such condition or requirement does not materially differ from
conditions or requirements regularly imposed in orders approving
transactions of the type contemplated by this Agreement and compliance with
such condition or requirement would not:
(i) require the taking of any action materially inconsistent with the
manner in which Mid-Peninsula or Cupertino has conducted its business
previously;
(ii) have a material adverse effect upon the business, financial
condition or results of operations of Mid-Peninsula or Cupertino; or
(iii) preclude satisfaction of any of the conditions to consummation
of the transactions contemplated by this Agreement.
j. TAX OPINION. Bronson, Bronson & McKinnon LLP, Mid-Peninsula's
counsel, shall have delivered to Mid-Peninsula and Cupertino a tax opinion
subject to customary assumptions and exceptions included in such opinions
and the prior delivery of certificates from Cupertino and Mid-Peninsula in
form and substance reasonably satisfactory to Mid-Peninsula's counsel,
substantially to the effect that under federal income tax law and California
income and franchise tax law:
(i) The Merger will not result in any recognized gain or loss to
Mid-Peninsula or Cupertino;
(ii) Except for any cash received in lieu of any fractional share, no
gain or loss will be recognized by holders of Cupertino Shares who
receive Bancorp Shares in exchange for the Cupertino Shares which they
hold;
30
(iii) The holding period of Bancorp Shares exchanged for Cupertino
Shares will include the holding period of the Cupertino Shares for which
they are exchanged, assuming the Cupertino Shares are capital assets in
the hands of the holder thereof at the Effective Date; and
(iv) The basis of the Bancorp Shares received in the exchange will be
the same as the basis of the Cupertino Shares for which they are
exchanged, less any basis attributable to fractional shares for which
cash is received.
k. ACCOUNTANT'S COMFORT LETTERS. On or prior to the date of
effectiveness of the Mid-Peninsula Registration Statement, Mid-Peninsula
shall have received a comfort letter addressed to Mid-Peninsula from Coopers
& Lybrand LLP, independent public accountants for Cupertino, in form and
substance satisfactory to Mid-Peninsula and its counsel. Mid-Peninsula shall
also have received from Coopers & Lybrand LLP a comfort letter dated the
Effective Date, in form and substance satisfactory to Mid-Peninsula and its
counsel, as to such matters, as of a specified date not more than five (5)
business days prior to the Effective Date, as Mid-Peninsula may reasonably
request.
l. DISSENTING SHARES. Holders of not more than nine percent (9%) of
the outstanding Bancorp Shares and Cupertino Shares shall have perfected
dissenter's rights pursuant to Chapter 13 of the California General
Corporation Law.
m. UNAUDITED FINANCIALS. Not later than five (5) business days prior
to the Effective Date, Cupertino shall have furnished Mid-Peninsula a copy
of its most recently prepared unaudited month-end consolidated financial
statements, including a balance sheet and statement of income of Cupertino.
n. AFFILIATE AGREEMENTS. Mid-Peninsula shall have received signed
affiliate agreements on or before the Document Delivery Date, from each
person who, in the opinion of Cupertino's and Mid-Peninsula's counsel, might
be deemed to be an affiliate of Cupertino or Mid-Peninsula under Rule 144 or
145 of the 1933 Act. The agreements will include provisions restricting
certain actions by an affiliate related to Cupertino Shares or Mid-Peninsula
and/or Bancorp Shares, including the sale, purchase, acquisition or transfer
of Cupertino Shares or Mid-Peninsula and/or Bancorp Shares in a manner which
may render pooling-of-interests accounting treatment unavailable in the
Merger.
o. CLOSING DOCUMENTS. Mid-Peninsula shall have received such
certificates and other closing documents as counsel for Mid-Peninsula shall
reasonably request.
p. CONSENTS. Cupertino shall have received, or Mid-Peninsula shall
have satisfied itself that Cupertino will receive, all consents of third
parties as may be required including consents of other parties to and
required by material mortgages, notes, leases, franchises, agreements,
licenses and permits applicable to Cupertino and CNB, in each case in form
and substance reasonably satisfactory to Mid-Peninsula and its counsel, and
no such consent or license or permit shall have been withdrawn or suspended.
q. FAIRNESS OPINION. The Board of Directors of Mid-Peninsula shall
have received an opinion of Alex. Brown & Sons Incorporated, dated the date
of this Agreement and the date of mailing or a date within three (3) days
prior to the date of mailing the Joint Proxy Statement/ Prospectus, to the
effect that the Conversion Ratio in the Merger is fair, from a financial
point of view, to Mid-Peninsula shareholders, and such opinion shall not
have been withdrawn by the Effective Time of the Merger.
r. ACCOUNTING TREATMENT. Mid-Peninsula shall have received a letter
from KPMG Peat Marwick LLP, subject to customary qualifications and receipt
of such certificates as may reasonable and customary in connection with such
letters, satisfactory in form and substance to Mid-Peninsula and its
counsel, to the effect that the Merger shall qualify for the
pooling-of-interests
31
method of accounting in accordance with generally accepted accounting
principles and all applicable rules, regulations and policies of the
Commission. There shall have been no determination by any court, tribunal,
regulatory authority or other government agency, that the Merger fails or
will fail to qualify for pooling-of-interests accounting treatment.
s. SHAREHOLDER AGREEMENTS. Mid-Peninsula and Cupertino shall have
received signed shareholder agreements from members of the Boards of
Directors and the executive officers of Mid-Peninsula and Cupertino on or
before the Document Delivery Date, pursuant to which each such person in
their capacity as a shareholder commits to vote their Mid-Peninsula Shares
or Cupertino Shares in favor of the Merger and the transactions contemplated
thereby and pursuant to this Agreement and the Merger Agreement, and to
recommend to shareholders, subject to the exercise of fiduciary duties, that
they vote in favor of the Merger and the transactions contemplated thereby
and pursuant to this Agreement and the Merger Agreement.
t. PERFORMANCE TESTS. As of the Determination Date, Closing Date and
the Effective Date, Cupertino and CNB on a consolidated basis shall have (i)
total shareholders' equity and leverage, tier 1 and total risk-based capital
ratios, respectively, in amounts required to comply with the "well
capitalized" category of applicable FDIC regulations, (ii) total reserves
for losses on outstanding loans to net loans equal to 1.60%, and (iii) total
shareholders' equity of not less than Twenty Million Dollars ($20,000,000).
u. STOCK OPTION AGREEMENT. Mid-Peninsula shall have received a signed
and dated stock option agreement from Cupertino on or before the Document
Delivery Date, granting an option to Mid-Peninsula to acquire up to nineteen
percent (19%) of the Cupertino Shares in the event of a Business Combination
between Cupertino and any third party.
v. NASDAQ LISTING. Mid-Peninsula shares shall have been listed with
the Nasdaq Stock Market for trading on the Nasdaq National Market System and
Mid-Peninsula shall have taken all necessary action to similarly list
Bancorp Shares under a symbol mutually agreed upon by the parties to be
effective from and after the Effective Time of the Merger.
w. DEBENTURE AGREEMENT. The supplemental debenture agreement to be
delivered pursuant to Section 3.1 of this Agreement shall have been signed
and delivered to Cupertino together with an opinion of Manatt, Phelps &
Phillips, LLP, in form and substance reasonably satisfactory to Cupertino,
Mid-Peninsula and their respective counsel.
8. CONDITIONS TO THE OBLIGATIONS OF CUPERTINO.
The obligations of Cupertino under this Agreement are, at its option,
subject to the fulfillment at or prior to the Effective Time of the Merger of
each of the following conditions provided, however, that any one or more of such
conditions may be waived by the Board of Directors of Cupertino at any time at
or prior to the Effective Time of the Merger:
a. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Mid-Peninsula in Section 5 hereof shall be true and correct in all
material respects on and as of the date of this Agreement (except to the
extent that a representation or warranty is qualified as set forth in a
Schedule corresponding in number with the applicable section of such
representation or warranty and delivered on or before the Document Delivery
Date, and upon such delivery it shall be deemed made on and as of the date
of delivery), the Closing Date and the Effective Time of the Merger, with
the same effect as though such representations and warranties had been made
on and as of each such date or time except as to any representation or
warranty which specifically relates to an earlier date or time.
b. COMPLIANCE AND PERFORMANCE UNDER AGREEMENT. Mid-Peninsula shall
have performed and complied in all material respects with all terms,
agreements, covenants and conditions of this Agreement and the Merger
Agreement required to be performed or complied with by it at or prior to the
Effective Time of the Merger.
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c. MATERIAL ADVERSE CHANGE. No materially adverse change shall have
occurred since March 31, 1996, in the business, financial condition, results
of operations or assets of Mid-Peninsula and MPB, taken as a whole, and
neither Mid-Peninsula nor MPB shall be a party to or threatened with, and to
the best of Mid-Peninsula's knowledge there is no reasonable basis for, any
legal action or other proceeding before any court, any arbitrator of any
kind or any government agency, which legal action or proceeding, in the
reasonable judgment of Cupertino, could materially adversely affect
Mid-Peninsula and MPB, taken as a whole, or their business, financial
condition, results of operations or assets.
d. APPROVAL OF AGREEMENT. The principal terms of the Merger, this
Agreement and the Merger Agreement shall have been duly approved by (i) the
affirmative vote or consent of the holders of a majority of the outstanding
Mid-Peninsula Shares and (ii) the affirmative vote or consent of the holders
of a majority of the outstanding Cupertino Shares.
e. OFFICER'S CERTIFICATE. Cupertino shall have received a certificate,
dated the Effective Date, signed on behalf of Mid-Peninsula by its President
and Chief Financial Officer, in substantially the form delivered to
Cupertino on or before the Document Delivery Date.
f. OPINION OF COUNSEL. Bronson, Bronson & McKinnon LLP,
Mid-Peninsula's counsel, shall have delivered to Cupertino its opinion dated
the Effective Date in substantially the form delivered to Cupertino on or
before the Document Delivery Date.
g. ABSENCE OF PROCEEDINGS. No legal, administrative, arbitration,
investigatory or other proceeding by any government agency or regulatory
authority shall have been instituted or threatened to restrain or prohibit
the Merger or the transactions contemplated by this Agreement.
h. EFFECTIVENESS OF REGISTRATION STATEMENT. The Mid-Peninsula
Registration Statement and any amendments or supplements thereto shall have
become effective under the 1933 Act, no stop order suspending the
effectiveness of such Registration Statement shall be in effect and no
proceedings for such purpose shall have been initiated or threatened by or
before the Commission and the Bancorp Shares registered thereby shall have
received all state securities and "blue sky" permits or approvals required
to consummate the transactions contemplated by this Agreement and the Merger
Agreement.
i. GOVERNMENT APPROVALS. All Government Approvals shall be in effect,
and all conditions or requirements prescribed by law or by any such
Approvals shall have been satisfied; provided, however, that no Government
Approval shall be deemed to have been received if it shall require the
divestiture or cessation of any of the present businesses or operations
conducted by either of the parties hereto or shall impose any other
condition or requirement, which condition or requirement Cupertino in its
reasonable judgment shall deem to be materially burdensome (in which case
Cupertino shall promptly notify Mid-Peninsula). For purposes of this
agreement no condition or requirement shall be deemed to be "materially
burdensome" if such condition or requirement does not materially differ from
conditions or requirements regularly imposed in orders approving
transactions of the type contemplated by this Agreement and compliance with
such condition or requirement would not:
(i) require the taking of any action materially inconsistent with the
manner in which Cupertino or Mid-Peninsula has conducted its business
previously;
(ii) have a material adverse effect upon the business, financial
condition or results of operations of Cupertino or Mid-Peninsula; or
(iii) preclude satisfaction of any of the conditions to consummation
of the transactions contemplated by this Agreement.
j. TAX OPINION. Bronson, Bronson & McKinnon LLP, Mid-Peninsula's
counsel, shall have delivered to Mid-Peninsula and Cupertino a tax opinion
subject to customary assumptions and
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exceptions included in such opinions and the prior delivery of certificates
from Cupertino and Mid-Peninsula in form and substance reasonably
satisfactory to Mid-Peninsula's counsel, substantially to the effect that
under federal income tax law and California income and franchise tax law:
(i) The Merger will not result in any recognized gain or loss to
Cupertino or Mid-Peninsula;
(ii) Except for any cash received in lieu of any fractional share, no
gain or loss will be recognized by holders of Cupertino Shares who
receive Bancorp Shares in exchange for the Cupertino Shares which they
hold;
(iii) The holding period of Bancorp Shares exchanged for Cupertino
Shares will include the holding period of the Cupertino Shares for which
they are exchanged, assuming the Cupertino Shares are capital assets in
the hands of the holder thereof at the Effective Date; and
(iv) The basis of the Bancorp Shares received in the exchange will be
the same as the basis of the Cupertino Shares for which they are
exchanged, less any basis attributable to fractional shares for which
cash is received.
k. ACCOUNTANT'S COMFORT LETTERS. On or prior to the date of
effectiveness of the Mid-Peninsula Registration Statement, Cupertino shall
have received a comfort letter addressed to Cupertino from KPMG Peat Marwick
LLP, independent public accountants for Mid-Peninsula, in form and substance
satisfactory to Cupertino and its counsel. Cupertino shall also have
received from KPMG Peat Marwick LLP, a comfort letter dated the Effective
Date, in form and substance satisfactory to Cupertino and its counsel, as to
such matters, as of a specified date not more than five (5) business days
prior to the Effective Date, as Cupertino may reasonably request.
l. DISSENTING SHARES. Holders of not more than nine percent (9%) of
the outstanding Cupertino Shares and Bancorp Shares shall have perfected
dissenter's rights pursuant to Chapter 13 of the California General
Corporation Law.
m. UNAUDITED FINANCIALS. Not later than five (5) business days prior
to the Effective Date, Mid-Peninsula shall have furnished Cupertino a copy
of its most recently prepared unaudited month-end consolidated financial
statements, including a balance sheet and statement of income of
Mid-Peninsula.
n. AFFILIATE AGREEMENTS. Cupertino shall have received signed
affiliate agreements on or before the Document Delivery Date, from each
person who, in the opinion of Cupertino's and Mid-Peninsula's counsel, might
be deemed to be an affiliate of Cupertino or Mid-Peninsula under Rule 144 or
145 of the 1933 Act. The agreements will include provisions restricting
certain actions by an affiliate related to Cupertino Shares or Mid-Peninsula
and/or Bancorp Shares, including the sale, purchase, acquisition or transfer
of Cupertino Shares or Mid-Peninsula and/or Bancorp Shares in a manner which
may render pooling-of-interests accounting treatment unavailable in the
Merger.
o. CLOSING DOCUMENTS. Cupertino shall have received such certificates
and other closing documents as counsel for Cupertino shall reasonably
request.
p. CONSENTS. Mid-Peninsula shall have received, or Cupertino shall
have satisfied itself that Mid-Peninsula will receive, all consents of third
parties as may be required including consents of other parties to and
required by material mortgages, notes, leases, franchises, agreements,
licenses and permits applicable to Mid-Peninsula and MPB, in each case in
form and substance reasonably satisfactory to Cupertino, and no such consent
or license or permit shall have been withdrawn or suspended.
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q. FAIRNESS OPINION. The Board of Directors of Cupertino shall have
received an opinion of Sutro & Co. Incorporated, dated the date of this
Agreement and the date of mailing or a date within three (3) days prior to
the date of mailing the Joint Proxy Statement/Prospectus, to the effect that
the consideration to be received by Cupertino shareholders in the Merger is
fair, from a financial point of view, to Cupertino and its shareholders, and
such opinion shall not have been withdrawn by the Effective Time of the
Merger.
r. ACCOUNTING TREATMENT. Mid-Peninsula shall have received a letter
from KPMG Peat Marwick LLP, satisfactory in form and substance to Cupertino
and its counsel, to the effect that the Merger shall qualify for the
pooling-of-interests method of accounting in accordance with generally
accepted accounting principles and all applicable rules, regulations and
policies of the Commission. There shall have been no determination by any
court, tribunal, regulatory authority or other government agency, that the
Merger fails or will fail to qualify for pooling-of-interests accounting
treatment.
s. SHAREHOLDER AGREEMENTS. Cupertino and Mid-Peninsula shall have
received signed shareholder agreements from members of the Boards of
Directors and the executive officers of Cupertino and Mid-Peninsula on or
before the Document Delivery Date, pursuant to which each such person in
their capacity as a shareholder commits to vote their Cupertino Shares or
Mid-Peninsula Shares in favor of the Merger and the transactions
contemplated thereby and pursuant to this Agreement and the Merger
Agreement, and to recommend to shareholders, subject to the exercise of
fiduciary duties, that they vote in favor of the Merger and the transactions
contemplated thereby and pursuant to this Agreement and the Merger
Agreement.
t. PERFORMANCE TESTS. As of the Determination Date, Closing Date and
the Effective Date, Mid-Peninsula and MPB on a consolidated basis shall have
(i) total shareholders' equity and leverage, tier 1 and total risk-based
capital ratios, respectively, in amounts required to comply with the "well
capitalized" category of applicable FDIC regulations, (ii) total reserves
for losses on outstanding loans to net loans equal to 1.20%, and (iii) total
shareholders' equity of not less than Twenty-Three Million Dollars
($23,000,000).
u. STOCK OPTION AGREEMENT. Cupertino shall have received a signed and
dated stock option agreement from Mid-Peninsula on or before the Document
Delivery Date, granting an option to Cupertino to acquire up to nineteen
percent (19%) of the Mid-Peninsula Shares in the event of a Business
Combination between Mid-Peninsula and any third party.
v. NASDAQ LISTING. Mid-Peninsula shares shall have been listed with
the Nasdaq Stock Market for trading on the Nasdaq National Market System and
Mid-Peninsula shall have taken all necessary action to similarly list
Bancorp Shares under a symbol mutually agreed upon by the parties to be
effective from and after the Effective Time of the Merger.
w. DEBENTURE AGREEMENT. The supplemental debenture agreement to be
delivered pursuant to Section 3.1 of this Agreement shall have been signed
and delivered to Cupertino together with an opinion of Manatt, Phelps &
Phillips, LLP, in form and substance reasonably satisfactory to Cupertino,
Mid-Peninsula and their respective counsel.
9. CLOSING.
a. CLOSING DATE. The closing (the "Closing") shall, unless another
date, time or place is agreed to in writing by Mid-Peninsula and Cupertino,
be held at the offices of Bronson, Bronson & McKinnon LLP, 10 Almaden Blvd.,
Suite 600, San Jose, California at a time mutually agreed upon between the
parties and as soon as practicable following the Determination Date and the
last to occur of (i) the expiration of any waiting periods under applicable
law or regulation, and (ii) the date on which all conditions to the
obligation of either party to consummate the Merger have been satisfied (the
"Closing Date").
35
b. DELIVERY OF DOCUMENTS. At the Closing, the parties shall use their
respective best efforts to deliver or cause to be delivered the opinions,
certificates and other documents required to be delivered by this Agreement.
c. FILINGS. At the Closing, Mid-Peninsula and Cupertino shall instruct
their respective representatives to make or confirm such filings as shall be
required in the opinion of counsel to Mid-Peninsula and Cupertino to give
effect to the Merger.
10. POST-CLOSING MATTERS.
Bancorp will prepare and file with the Commission on the appropriate form as
soon as practicable the results of combined operations of Mid-Peninsula and
Cupertino for the first full calendar month after the Effective Date.
11. EXPENSES.
Each party hereto agrees to comply with generally accepted accounting
principles, without right of reimbursement from the other party and whether or
not the transactions contemplated by this Agreement or the Merger Agreement
shall be consummated, relating to the payment of costs and expenses incurred by
such party incident to the performance of its obligations under this Agreement
and the Merger Agreement, including without limitation, costs incident to the
preparation of the Merger Agreement, this Agreement, the Mid-Peninsula
Registration Statement and Joint Proxy Statement/Prospectus (including the
audited financial statements of the parties contained therein) and incident to
the consummation of the Merger and of the other transactions contemplated herein
and in the Merger Agreement, including the fees and disbursements of counsel,
accountants, consultants and financial advisers employed by such party in
connection therewith. Notwithstanding the foregoing, each party shall pay
one-half of (i) the printing costs of the Registration Statement and the Joint
Proxy Statement/Prospectus, (ii) all fees and costs payable pursuant to state
"blue-sky" securities laws, (iii) fees and costs related to obtaining a tax
opinion, (iv) fees and costs related to obtaining a letter from KPMG Peat
Marwick LLP regarding pooling-of-interests accounting treatment, (v) the fee
required to be paid to the Commission to register the Bancorp Shares, (vi) the
fees and costs related to any amendments to the Mid-Peninsula Stock Option Plan
or for the preparation of a new Mid-Peninsula Stock Option Plan including the
cost of obtaining any permits or approvals of government agencies and regulatory
authorities and applicable filing fees, (vii) the fees related to preparation
and filing of applications with government agencies or regulatory authorities
for approval of the transactions contemplated by the Merger, this Agreement and
the Merger Agreement, and (viii) the fees and costs related to the listing of
the Mid-Peninsula Shares and Bancorp Shares with the Nasdaq Stock Market for
trading on the Nasdaq National Market System. Each party shall bear the costs of
distributing the Joint Proxy Statement/Prospectus and other information relating
to these transactions to its shareholders and of conducting a meeting of its
shareholders.
12. AMENDMENT; TERMINATION.
a. AMENDMENT. This Agreement and the Merger Agreement may be amended
by Mid-Peninsula and Cupertino at any time prior to the Effective Time of
the Merger without the approval of the shareholders of Mid-Peninsula and
shareholders of Cupertino with respect to any of their terms except the
terms relating to the Conversion Ratio or the form or amount of
consideration to be delivered to the Cupertino shareholders in the Merger or
otherwise as required by applicable law.
b. TERMINATION. This Agreement and the Merger Agreement may be
terminated as follows:
(i) By the mutual consent of the Boards of Directors of both
Mid-Peninsula and Cupertino at any time prior to the Effective Time of
the Merger.
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(ii) By the Boards of Directors of Mid-Peninsula or Cupertino upon
the failure of the shareholders of Mid-Peninsula or Cupertino to give the
requisite approval of this Agreement and the transactions contemplated
hereby including the amendments to the Mid-Peninsula Articles of
Incorporation, Bylaws and 1994 Stock Option Plan.
(iii) By the Boards of Directors of Mid-Peninsula or Cupertino upon
the expiration of thirty (30) days after any government agency or
regulatory authority denies or refuses to grant any approval, consent or
qualification required to be obtained in order to consummate the
transactions contemplated by this Agreement unless, within said thirty
(30) day period after such denial or refusal, Mid-Peninsula and Cupertino
agree to submit the application to the government agency or regulatory
authority that has denied or refused to grant the approval, consent or
qualification requested.
(iv) By the Board of Directors of Mid-Peninsula on or after the
Termination Date, if any of the conditions in Section 7 to which the
obligations of Mid-Peninsula are subject have not been fulfilled.
(v) By the Board of Directors of Mid-Peninsula if a materially
adverse change shall have occurred since March 31, 1996, in the business,
financial condition, results of operations or assets of Cupertino or CNB.
(vi) By the Board of Directors of Mid-Peninsula or Cupertino in the
event that Cupertino, CNB or their affiliates enter into a Business
Combination; provided, that termination based thereon shall not terminate
the Stock Option Agreement signed by Cupertino in accordance with this
Agreement.
(vii) By the Board of Directors of Mid-Peninsula upon the expiration
of twenty (20) days from delivery of written notice by Mid-Peninsula to
Cupertino of Cupertino's breach of or failure to satisfy any covenant or
agreement contained in this Agreement resulting in a material impairment
of the benefit reasonably expected to be derived by Mid-Peninsula from
the performance or satisfaction of such covenant or agreement (provided
that such breach has not been waived by Mid-Peninsula or cured by
Cupertino prior to expiration of such twenty (20) day period).
(viii) By the Board of Directors of Cupertino on or after the
Termination Date, if any of the conditions contained in Section 8 to
which the obligations of Cupertino are subject have not been fulfilled.
(ix) By the Board of Directors of Cupertino if a materially adverse
change shall have occurred since March 31, 1996 in the business,
financial condition, results of operations or assets of Mid-Peninsula or
MPB.
(x) By the Board of Directors of Cupertino and Mid-Peninsula in the
event Mid-Peninsula, MPB or their affiliates enter into a Business
Combination; provided, that termination based thereon shall not terminate
the Stock Option Agreement signed by Mid-Peninsula in accordance with
this Agreement.
(xi) By the Board of Directors of Cupertino upon the expiration of
twenty (20) days from delivery of written notice by Cupertino to
Mid-Peninsula of Mid-Peninsula's breach of or failure to satisfy any
covenant or agreement contained in this Agreement resulting in a material
impairment of the benefit reasonably expected to be derived by Cupertino
from the performance or satisfaction of such covenant or agreement
(provided that such breach has not been waived by Cupertino or cured by
Mid-Peninsula prior to expiration of such twenty (20) day period).
(xii) By the Board of Directors of Mid-Peninsula in the event that
Cupertino shall fail to deliver or cause to be delivered to Mid-Peninsula
on or before the date which is twenty-seven (27) days after the date of
this Agreement (the "Document Delivery Date") (i) the Schedules
37
to be delivered pursuant to Section 4 hereof, in form and substance
satisfactory to Mid-Peninsula and its counsel; (ii) the following signed
documents, in form and substance reasonably acceptable to Mid-Peninsula
and its counsel: (a) the affiliate agreement to be delivered pursuant to
Section 7(n) hereof; (b) the shareholder agreements to be delivered
pursuant to Section 7(s) hereof; and (d) the stock option agreement to be
delivered pursuant to Section 7(u) hereof; and (iii) the form of the
following documents, in form and substance reasonably acceptable to
Mid-Peninsula and its counsel: (a) the officers certificate to be
delivered pursuant to Section 7(e) hereof; (b) the opinion of counsel to
Cupertino to be delivered pursuant to Section 7(f) hereof; and (c) the
legal opinion in connection with the supplemental debenture agreement to
be delivered pursuant to Section 7(x) hereof.
(xiii) By the Board of Directors of Cupertino in the event that
Mid-Peninsula shall fail to deliver or cause to be delivered to Cupertino
on or before the Document Delivery Date (i) the Schedules to be delivered
pursuant to Section 5 hereof, in form and substance satisfactory to
Cupertino and its counsel; (ii) the following signed documents, in form
and substance reasonably acceptable to Cupertino and its counsel: (a) the
affiliate agreement to be delivered pursuant to Section 8(n) hereof; (b)
the shareholder agreements to be delivered pursuant to Section 8(s)
hereof; and (d) the stock option agreement to be delivered pursuant to
Section 8(u) hereof; and (iii) the form of the following documents, in
form and substance reasonably acceptable to Cupertino and its counsel:
(a) the officers certificate to be delivered pursuant to Section 8(e)
hereof; (b) the opinion of counsel to Mid-Peninsula to be delivered
pursuant to Section 8(f) hereof; and (c) the supplemental debenture
agreement to be delivered pursuant to Section 8(x) hereof.
c. TERMINATION DATE. This Agreement shall be terminated if the Closing
shall not have occurred on or before December 31, 1996; provided, however,
that if the only conditions to the Closing which remain unsatisfied at
December 31, 1996 are the receipt of the Government Approvals or the
expiration of any waiting periods under applicable law or regulation, the
Closing Date shall be automatically extended to February 28, 1997, or such
other date as the parties may mutually agree upon (the "Termination Date"),
for the purpose of obtaining such Government Approvals or the expiration of
such waiting periods.
d. NOTICE. The power of termination hereunder may be exercised by
Mid-Peninsula or Cupertino, as the case may be, only by giving written
notice, signed on behalf of such party by its Chairman of the Board or
President, to the other party.
e. EFFECT OF TERMINATION; LIQUIDATED DAMAGES.
(i) If this Agreement is terminated for any reason, the Merger
Agreement shall automatically terminate. Termination of this Agreement
shall not terminate or affect the obligations of the parties to pay
expenses as provided in Section 11, to maintain the confidentiality of
the other party's information obtained pursuant to this Agreement, or the
provisions of this Section 12(e) or applicable provisions of Section 14.
(ii) If Mid-Peninsula or Cupertino terminates this Agreement pursuant
to Section 12(b)(vi), Cupertino shall pay to Mid-Peninsula, on demand,
the sum of Seven Hundred Fifty Thousand Dollars ($750,000). If Cupertino
or Mid-Peninsula terminates this Agreement pursuant to Section 12(b)(x)
Mid-Peninsula shall pay to Cupertino, on demand, the sum of Seven Hundred
Fifty Thousand Dollars ($750,000). In each case, the amount indicated
shall be deemed liquidated damages for expenses incurred and the lost
opportunity cost for time devoted to the transactions contemplated by
this Agreement.
13. INDEMNIFICATION.
a. BY MID-PENINSULA. Mid-Peninsula agrees to defend, indemnify and
hold harmless Cupertino and CNB, their respective officers and directors,
attorneys, accountants, and each person who controls Cupertino and CNB
within the meaning of the 1933 Act from and against
38
any costs, damages, liabilities and expenses of any nature, insofar as such
costs, damages, liabilities and expenses arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in the Mid-Peninsula Registration Statement and Joint Proxy
Statement/Prospectus or any amendments or supplements thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Mid-Peninsula
shall be liable in any such case only to the extent that any such cost,
damage, liability or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
in said Registration Statement and Joint Proxy Statement/ Prospectus or
amendments or supplements thereto, in reliance upon and in conformity with
information provided by and with respect to Mid-Peninsula used in preparing
the Registration Statement. If and to the extent such agreement to indemnify
may be unenforceable for any reason, Mid-Peninsula shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which may be permitted under applicable law.
b. BY CUPERTINO. Cupertino agrees to defend, indemnify and hold
harmless Mid-Peninsula and MPB, their respective officers and directors,
attorneys, accountants, and each person who controls Mid-Peninsula and MPB
within the meaning of the 1933 Act from and against any costs, damages,
liabilities and expenses of any nature, insofar as such costs, damages,
liabilities and expenses arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
Mid-Peninsula Registration Statement and Joint Proxy Statement/ Prospectus
or any amendments or supplements thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that Cupertino shall be liable in any such
case only to the extent that any such cost, damage, liability or expense
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in said Registration
Statement and Joint Proxy Statement/Prospectus or amendments or supplements
thereto, in reliance upon and in conformity with information provided by and
with respect to Cupertino used in preparing the Registration Statement and
Joint Proxy Statement/Prospectus. If and to the extent such agreement to
indemnify may be unenforceable for any reason, Cupertino shall make the
maximum contribution to the payment and satisfaction of each of the
indemnified liabilities which may be permitted under applicable law.
c. NOTIFICATION. Promptly after receipt by any party to be indemnified
pursuant to this subarticle (the "Indemnified Party") of notice of (i) any
claim or (ii) the commencement of any action or proceeding, the Indemnified
Party will give the other party (the "Indemnifying Party") written notice of
such claim or the commencement of such action or proceeding. The
Indemnifying Party shall have the right, at its option, to compromise or
defend, by its own counsel, any such matter involving the Indemnified
Party's asserted liability. In the event that the Indemnifying Party shall
undertake to compromise or defend any such asserted liability, it shall
promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party agrees to cooperate fully with the Indemnifying Party and
its counsel in the compromise of, or defense against, any such asserted
liability. In any event, the Indemnifying Party shall have the right to
participate in the defense of such asserted liability.
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14. MISCELLANEOUS.
a. NOTICES. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and
delivered personally, or by Federal Express or similar overnight courier, or
by facsimile or sent by first class United States mail, postage prepaid,
registered or certified mail, addressed as follows:
To Mid-Peninsula: To Cupertino:
David L. Kalkbrenner C. Donald Allen
President President
Mid-Peninsula Bancorp Cupertino National Bancorp
420 Cowper Street 20230 Stevens Creek Blvd.
Palo Alto, CA 94301-1504 Cupertino, California 95014
Telephone: (415) 323-5150 Telephone: (408) 996-1144
Telecopier: (415) 323-7421 Telecopier: (408) 996-0657
With a copy to: With a copy to:
Bronson, Bronson & McKinnon LLP Manatt, Phelps & Phillips, LLP
10 Almaden Blvd., Suite 600 11355 W. Olympic Blvd.
San Jose, California 95113 Los Angeles, California 90064
Attn: Glenn T. Dodd Attn: Paul H. Irving
Telephone: (408) 293-0599 William T. Quicksilver
Telecopier: (408) 999-6553 Telephone: (310) 312-4000
Attn: John W. Carr Telecopier: (310) 312-4224
Telephone: (415) 986-4200
Telecopier: (415) 982-1394
or to such other address as either party may designate by notice to the
other, and shall be deemed to have been given upon receipt.
b. KNOWLEDGE. Whenever the term "knowledge" or "to the best of
knowledge" or words of similar import are used in this Agreement in
connection with a party's representations and warranties, it shall mean the
actual knowledge of a party after due inquiry of a party's directors,
executive officers, senior vice presidents, and any officer(s) in charge of
or having responsibility for any department or division of a party or its
subsidiaries, including, without limitation, operations, credit, trust, SBA,
mortgage, real estate, finance, administration, compliance and audit.
c. BINDING AGREEMENT. This Agreement is binding upon and is for the
benefit of Mid-Peninsula and Cupertino and their respective successors and
permitted assigns. This Agreement is not made for the benefit of any person,
firm, corporation or association not a party hereto, and no other person,
firm, corporation or association shall acquire or have any right under or by
virtue of this Agreement. No party may assign this Agreement or any of its
rights, privileges, duties or obligations hereunder without the prior
written consent of the other party to this Agreement.
d. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No investigation by
Mid-Peninsula or Cupertino made before or after the date of this Agreement
shall affect the representations and warranties which are contained in this
Agreement and such representations and warranties shall survive such
investigation, provided that, except with respect to covenants and
agreements to be performed in whole or in part subsequent to the Effective
Time of the Merger (as to which the related representations and warranties
shall survive until their performance) which covenants and agreements shall
survive the Effective Time of the Merger, the representations, warranties,
covenants and agreements of Mid-Peninsula and Cupertino contained in this
Agreement shall terminate upon the Effective Time of the Merger.
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e. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
f. ATTORNEYS' FEES. In any action at law or suit in equity in relation
to this Agreement, the prevailing party in such action or suit shall be
entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
g. ENTIRE AGREEMENT; SEVERABILITY. This Agreement and the documents,
certificates, agreements, letters, schedules and exhibits attached or
required to be delivered pursuant hereto set forth the entire agreement and
understandings of the parties in respect of the transactions contemplated
hereby, and supersede all prior agreements, arrangements and understanding
relating to the subject matter hereof, excluding that certain
Confidentiality Agreement between the parties dated May 8, 1996. Each
provision of this Agreement shall be interpreted in a manner to be effective
and valid under applicable law, but if any provision hereof shall be
prohibited or ruled invalid under applicable law, the validity, legality and
enforceability of the remaining provisions shall not, except as otherwise
required by law, be affected or impaired as a result of such prohibition or
ruling.
h. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
i. EFFECT OF RESTATEMENT. The restatement of this Agreement shall not
constitute a waiver of, or otherwise affect, the rights, obligations or
liabilities of the parties hereto as in effect immediately prior to the
restatement of this Agreement (except to the extent that the terms of this
Agreement have been expressly amended from the terms of this Agreement in
effect immediately prior to the date of the restatement of this Agreement).
Except as expressly stated to the contrary herein, all references herein,
and in any documents or agreements executed pursuant hereto, to "the date of
this Agreement," "the date hereof" or similar phrases with reference to this
Agreement shall be deemed to refer to June 5, 1996, and any representations
or warranties made or deemed to be made as of that date shall not be deemed
to be made again at the time of restatement of this Agreement.
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IN WITNESS WHEREOF, Mid-Peninsula and Cupertino have each caused this Second
Amended and Restated Agreement and Plan of Reorganization and Merger to be
signed by its Chairman of the Board and President as of the day and year first
above written.
MID-PENINSULA BANCORP CUPERTINO NATIONAL BANCORP
By: By: /s/ JOHN M. GATTO
---------------------------------- ----------------------------------
Duncan L. Matteson John M. Gatto
CHAIRMAN OF THE BOARD CHAIRMAN OF THE BOARD
By: /s/ DAVID L. KALKBRENNER By: /s/ C. DONALD ALLEN
---------------------------------- ----------------------------------
David L. Kalkbrenner C. Donald Allen
PRESIDENT PRESIDENT
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