1
EXHIBIT 2
Confidential Execution Copy
AGREEMENT AND PLAN OF MERGER
Dated as of November 9, 1995
among
BANK OF THE WEST
NF ACQUISITION CO.
and
NORTHBAY FINANCIAL CORPORATION
2
TABLE OF CONTENTS
Page
----
Parties and Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.03. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Certificate of Incorporation and By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.08. Absence of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.09. Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates . . . 2
SECTION 2.01. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Capital Stock of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cancellation of Company and Parent Owned Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Conversion of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Outstanding options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Appraisal rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Conversion of Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(g) Closure of Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(h) Adjustments for Dilution and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Parent To Provide Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) No Further Ownership Rights in Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.00. Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.01. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) SEC Documents; Financial Statements; Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(h) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Absence of Changes in Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(l) State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(n) Other Activities of the Company and its Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(o) Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(q) Material Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(r) Brokers and Finders; Schedule of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(s) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(t) Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(u) Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(w) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(x) Registration Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(y) Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(z) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(aa) Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(bb) Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(cc) Interest Rate Risk Management Instruments; Structured Notes . . . . . . . . . . . . . . . . . . . . . . 20
(dd) Compliance with Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(ee) Community Reinvestment Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(ff) Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.02. Representations and Warranties of Parent and Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Community Reinvestment Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV Covenants Relating to Conduct of the Company's Business . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.01. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(f) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Advice of Changes; Government Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(k) Compensation; Benefit Plans Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(l) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(m) Settlements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(n) Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(o) Loans and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(p) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(q) No Change in Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(r) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.02. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.01. Preparation of the Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.02. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.03. Company Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.04. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.05. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.06. Stock Options and the ESOP; Profit Sharing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.07. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.08. Indemnification, Exculpation and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.09. Company Accruals and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.10. Letters of Accountants to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.11. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.12. Parent Covenants; Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.13 Joint Implementation Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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SECTION 5.14 Employee Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.15 Environmental, ADA and Seismic Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.16. Certificates re Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VI Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Company Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) No Injunctions or Restraints; Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.02. Conditions to Obligations of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Performance of Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) Burdensome Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Company Stock Options and Company Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Letter of the Company's Independent Accountants; Results of Audit . . . . . . . . . . . . . . . . . . . 34
(f) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(g) Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(h) No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(i) Certain Expense Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(j) Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(k) Certain Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(l) Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(m) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(n) Headquarters and Administrative Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(o) Certificates re Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.03. Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Performance of Obligations of Parent and Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII Termination and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.04. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.01. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.03. Definitions; Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.04. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.05. Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership . . . . . . . . . . . . . . . . . . 41
SECTION 8.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.07. Limitations on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.08. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.09. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.10. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.11. Certain Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.12. Director Health Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.13. Employee Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.14. Subsequent Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of Trust Agreement
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EXHIBIT C Opinion of Company Counsel
EXHIBIT D Individuals to Execute Non-Competition Agreements
EXHIBIT E Opinion of Parent Counsel
EXHIBIT F Individuals Furnishing Proxies
EXHIBIT G Form of Merger Agreement (Parent and Surviving Corporation)
EXHIBIT H Form of Merger Agreement (Parent and NSB)
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AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1995, among BANK OF THE
WEST, a California banking corporation ("Parent"), NF ACQUISITION CO., a
Delaware corporation and a wholly owned first-tier subsidiary of Parent
("Sub"), and NORTHBAY FINANCIAL CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Company is a registered savings and loan holding company under
the Savings and Loan Holding Company Act of 1956, as amended (the "SLHCA");
WHEREAS, Parent is a commercial bank organized and existing under California
law;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub into the Company as set forth below (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each of the 2,750,522 issued and outstanding shares of
common stock, par value U.S.$.10 per share, of the Company ("Company Common
Stock"), not owned directly or indirectly by Parent or the Company, will be
converted into the right to receive U.S.$15.75 in cash (subject to adjustment
as herein provided);
WHEREAS, as a condition and inducement to Parent's and Sub's willingness to
enter into this Agreement, Parent, Sub and the Company are entering into a
Stock Option Agreement dated as of the date hereof in the form of Exhibit A
hereto (the "Stock Option Agreement") pursuant to which the Company has granted
to Parent an option to purchase shares of Company Common Stock constituting
19.9% of the presently outstanding shares of Company Common Stock;
WHEREAS, the Merger requires the approval by an affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon ("Company Stockholder Approval"); and
WHEREAS, Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Stock Option Agreement, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.03). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., California time, on the first Business Day (as defined in
Section 8.03(c)) which is the last Business Day of the month following the
satisfaction (or waiver) of all the conditions set forth in Article VI (the
"Closing Date"), at the offices of Pillsbury Madison & Sutro, 235 Montgomery
Street, San Francisco, California 94104, unless another time, date or place is
agreed to in writing by the parties hereto; provided, however, in the event
that the Closing does not occur on or before 11:59 p.m. June 30, 1996, then in
that event the Closing shall take place within ten days after the satisfaction
of the conditions referred to in this sentence.
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SECTION 1.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") shall be
duly prepared, executed, acknowledged and filed by the parties in accordance
with the relevant provisions of the DGCL with the Secretary of State of the
State of Delaware. Unless Parent shall specify differently, the Certificate of
Merger shall provide that the Merger shall be effective at 12:01 a.m.,
California time, on the calendar day following the Closing Date (the time the
Merger becomes effective being hereinafter referred to as the "Effective
Time").
SECTION 1.04. Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The
certificate of incorporation of the Company as in effect immediately prior to
the Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The by-laws of the Company as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub at the Effective Time shall
be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
SECTION 1.07. Officers. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 1.08. Absence of Control. Subject to any provisions of this
Agreement, it is the intent of the parties that Parent by reason of this
Agreement shall not (until consummation of the transactions contemplated
hereby) control, and shall not be deemed to control, directly or indirectly,
the Company or any of its Subsidiaries (as defined in Section 8.03(c)) and
shall not exercise, or be deemed to exercise, directly or indirectly, a
controlling influence over the management or policies of the Company or any of
its Subsidiaries.
SECTION 1.09. Alternative Structure. Notwithstanding anything contained in
this Agreement to the contrary, Parent may specify that, before or after the
Merger, Parent, Sub, the Company, Northbay Savings Bank, F.S.B. ("NSB") and any
other Subsidiary or Affiliate (as such terms are defined in Section 8.03(c))
shall enter into transactions other than those described in this Article I in
order to effect the purposes of this Agreement, and the Company and Parent
shall take all action necessary and appropriate to effect, or cause to be
effected, such transactions, provided, however, that no such specification may
(a) materially and adversely affect the timing of the consummation of the
transactions contemplated herein or (b) adversely affect the tax effect or
economic benefits of the Merger to the holders of Company Common Stock.
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ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value U.S.$.01 per share, of the
Surviving Corporation.
(b) Cancellation of Company and Parent Owned Stock. Each share of Company
Common Stock that is owned by the Company or by any Subsidiary of the Company
(which shall not include any shares owned by the Company's employee stock
ownership plan and trust (the "ESOP")) and each share of Company Common Stock
that is owned by Parent, Sub or any other Subsidiary of Parent (other than, in
each case, shares in trust accounts, managed accounts, custodial accounts and
the like that are beneficially owned by third parties (any such shares, "Trust
Account Shares")) shall be automatically canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each issued and outstanding share
of Company Common Stock (other than shares to be canceled in accordance with
Section 2.01(b)) shall be converted into the right to receive from the
Surviving Corporation in cash, without interest, U.S.$15.75, subject to
adjustment as hereinafter provided in this Section (the "Merger
Consideration"). As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate previously
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without
interest. Notwithstanding the foregoing provisions of this Section, the Merger
Consideration shall be adjusted downward if, at the Effective Time, the Company
Net Worth (as defined in Section 8.03(c) and as determined in accordance with
Section 5.16) shall be less than the Net Worth Floor (as defined in Section
8.03(c)), by an amount equal to the product of (i) the dollar amount by which
the Company Net Worth at such time is less than such amount and (ii) 1.125,
divided by 2,987,705. Notwithstanding the foregoing provisions of this
Section, in no event shall the Merger Consideration be adjusted downward to
less than U.S.$15.375 per share of Company Common Stock.
(d) Outstanding options. Each Company Employee Option (as defined in
Section 3.01(b)) outstanding as of the Effective Time shall be treated in
accordance with Section 5.06.
(e) Appraisal rights. Each outstanding share of Company Common Stock as to
which a written demand for appraisal is filed in accordance with Section 262 of
the DGCL at or prior to the Company Stockholders' Meeting (as defined in
Section 3.01(c)) and not withdrawn at or prior to the Stockholders' Meeting and
which is not voted in favor of the Merger shall not be converted into or
represent a right to receive the Merger Consideration unless and until the
holder shall have failed to perfect, or shall have effectively withdrawn or
lost his or her right to appraisal of and payment for his or her Company Common
Stock under such Section 262, at which time his or her shares shall be
converted into the Merger Consideration in accordance with the terms hereof.
All such shares of Company Common Stock as to which a written demand for
appraisal is so filed and not withdrawn at or prior to the time of such vote
and which are not voted in favor of the Merger, except any such shares of
Company Common Stock the holder of which, prior to the Effective Time shall
have effectively withdrawn or lost his or her right to appraisal in respect of
his or her shares of Company Common Stock under Section 262, are herein called
"Dissenting Shares." The Company shall give Parent prompt notice upon receipt
by the Company of any demand for appraisal rights, withdrawal of such demands,
and any other instruments served pursuant to Section 262 of the DGCL, and the
Company shall give Parent the opportunity to direct all negotiations and
proceedings with
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respect to such demands. The Company shall not voluntarily make any payment
with respect to any demands for appraisal rights and shall not, except with the
prior written consent of Parent, settle or offer to settle any such demands.
Each holder of Company Common Stock who becomes entitled, pursuant to the
provisions of said Section 262, to payment for his or her shares of Company
Common Stock under the provisions of said section shall receive payment
therefor from the Surviving Corporation and such shares of Company Common Stock
shall be canceled.
(f) Conversion of Dissenting Shares. If, prior to the Effective Time, any
stockholder of the Company shall fail to perfect, or shall effectively withdraw
or lose, his or her right to appraisal of and payment for his or her Dissenting
Shares under section 262 of the DGCL, the Dissenting Shares of such holder
shall be treated for purposes of this Article II like any other shares of
outstanding Company Common Stock. If, after the Effective Time, any holder of
Company Common Stock shall fail to perfect, or shall effectively withdraw or
lose, his or her right to appraisal of and payment for his or her Dissenting
Shares under Section 262 of the DGCL, each such Dissenting Share of such holder
shall be converted into cash pursuant to this Article II and in accordance with
the procedures, and subject to the conditions, set forth in this Article II and
elsewhere herein.
(g) Closure of Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed as to holders of Company Common
Stock immediately prior to the Effective Time and no transfer of Company Common
Stock by any such holder shall thereafter be made or recognized. If, after the
Effective Time, Certificates (as defined in Section 2.02(c)) are properly
presented in accordance with Section 2.02 to the Paying Agent (as defined in
Section 2.02(a)), such Certificates shall be canceled, and exchanged for a
check representing the amount of cash into which the Company Common Stock
represented thereby was converted in the Merger.
(h) Adjustments for Dilution and Other Matters. If prior to the Effective
Time, the Company shall declare a stock dividend or distribution upon or
subdivide, split up, reclassify or combine Company Common Stock, or declare a
dividend, or make a distribution, on Company Common Stock in any security
convertible into Company Common Stock (provided that no such action may be
taken by the Company without Parent's prior written consent as so provided in
Article IV), appropriate adjustment or adjustments as reasonably determined by
Parent will be made to the Merger Consideration to reflect the change in the
capital stock of the Company as a result thereof. If at the Effective Time,
the Company shall have outstanding more shares of Company Common Stock than are
contemplated to be outstanding or subject to option pursuant to the Company's
representation and warranty in Section 3.01(b), then, at Parent's election and
notwithstanding other provisions hereof, and without limiting any of its other
rights hereunder, the Merger Consideration shall be adjusted downward so as to
reflect the total number of shares of Company Common Stock outstanding over the
amount contemplated pursuant to the Company's representation and warranty in
Section 3.01(b).
SECTION 2.02. Exchange of Certificates. (a) Paying Agent. The trust
department of Parent is hereby designated to act as paying agent (in such
capacity, the "Paying Agent") for the payment of the Merger Consideration upon
surrender of certificates representing Company Common Stock.
(b) Parent To Provide Funds. Parent shall take all steps necessary to
enable and cause Sub, or the Surviving Corporation, to provide to the Paying
Agent on a timely basis, as and when needed on and after the Effective Time,
funds necessary to pay the Merger Consideration in respect of the shares of
Company Common Stock as part of the Merger pursuant to Section 2.01(c) or to
pay any amount required under Section 2.01(e).
(c) Exchange Procedures. As soon as reasonably practicable (and in any
event no later than 10 days) after the Effective Time, Parent shall mail to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
(the "Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.01(c) (i) a letter of
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transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
customary provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed, and such other
customary documents as may be reasonably required by the Paying Agent, the
holder of such Certificate shall be entitled to receive promptly in exchange
therefor the amount of cash into which the shares of Company Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.01(c), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, payment shall
be made to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02(c), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the amount of cash, without
interest, into which the shares of Company Common Stock theretofore represented
by such Certificate shall have been converted pursuant to Section 2.01(c). No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate under any provision of this Agreement.
(d) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of Certificates in accordance with the terms hereof shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement
on or prior to the Effective Time and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
(e) No Liability. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article II would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 3.01(c))), the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interests of any person previously entitled thereto.
(f) Withholding Rights. The Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock such amounts as the Paying Agent
is required to deduct, hold and, if applicable, pay over to a taxing authority
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code") or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Paying Agent.
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ARTICLE III
Representations and Warranties
The Company has heretofore delivered to Parent a disclosure schedule with
respect to the representations and warranties set forth below (the "Company
Disclosure Schedule"). The Company Disclosure Schedule contains section and
subsection references which in each case are references to sections or
subsections of this Agreement. The Company Disclosure Schedule shall in each
case describe the nature of the exception, if any, in reasonable detail and
shall specifically refer to the section or subsection of this Agreement to
which any exception set forth therein to a representation and warranty
contained in this Article III applies (disclosure in any section or subsection
of the Company Disclosure Schedule shall apply only to the corresponding
section or subsection of this Agreement).
SECTION 3.00. Materiality. No representation or warranty of the Company or
Parent contained in Section 3.01 (other than Sections 3.01(b), (c)(i), (l),
(m), (q), (r), (s), (u), (x), (cc), (ff)) or 3.02, respectively, shall be
deemed untrue or incorrect, and no party hereto shall be deemed to have
breached any such representation or warranty, on account of the existence of
any fact, circumstance or event unless, as a consequence of such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any such paragraph of Section 3.01 or
3.02, as applicable, there is reasonably likely to occur a Material Adverse
Effect as defined in Section 8.03(a).
SECTION 3.01. Representations and Warranties of the Company. Except as
specified on the Company Disclosure Schedule, the Company represents and
warrants to Parent and Sub as follows:
(a) Organization and Authority. The Company is a savings and loan holding
company duly registered with the Office of Thrift Supervision ("OTS") under the
SLHCA. NSB is a directly held wholly owned Subsidiary of the Company. Each of
the Company and its Subsidiaries is a savings bank or corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary
except where the failure so to qualify would not have a Material Adverse Effect
(as defined in Section 8.03(a)) on the Company. The deposit accounts of NSB
are insured up to applicable limits by the Savings Association Insurance Fund
(the "SAIF") of the Federal Deposit Insurance Corporation (the "FDIC").
(b) Capital Structure. (i) The authorized capital stock of the Company
consists of 4,000,000 shares of Company Common Stock and 1,000,000 shares of
serial preferred stock, par value U.S.$.10 per share ("Company Preferred
Stock"). At the date hereof, (A) 2,750,522 shares of Company Common Stock were
outstanding, (B) 547,354 shares of Company Common Stock were reserved for
issuance under the Stock Option Agreement, (C) 237,183 shares of Company Common
Stock were reserved for issuance with respect to outstanding options (the
"Company Employee Options") issued under the Company's stock option, stock
bonus and incentive plans, including the 1988 Stock Option and Incentive Plan
(the "Incentive Plan"), a list of which is set forth on the Company Disclosure
Schedule, and (D) no shares of Company Preferred Stock were outstanding.
Except as set forth above, at the date hereof, no shares of capital stock or
other voting securities of the Company were issued, reserved for issuance or
outstanding. The Company Disclosure Schedule sets forth the name of each
holder of an option or other right outstanding under the Incentive Plan, a
description of the exercise or purchase prices, vesting schedules, expiration
dates, and the number of shares of the Company Common Stock subject to each
Company Employee Option, together with a specification of all Company Employee
Options which shall vest at the Effective Time as a result of the Merger.
Except for the Company Employee Options listed on the Company Disclosure
Schedule, there will not be outstanding at any time up to and including the
Effective Time any stock options, stock appreciation rights, restricted stock
grants or any other such right to acquire any shares of the
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Company Common Stock from the Company. Except for shares of Company Common
Stock which may be issued pursuant to the exercise of Company Employee Options,
there will be no increase in the outstanding shares of Company Common Stock and
no issuance of any shares of Company Preferred Stock after the execution and
delivery of this Agreement. Without limiting the foregoing provisions of this
Section 3.01(b)(i), the Company has issued no "rights" or other securities
commonly referred to as "poison pill" or similar securities and there will be
no issuance of any such securities after the execution and delivery of this
Agreement.
(ii) No bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exchangeable for securities having the right to
vote) on any matters on which stockholders may vote ("Voting Debt") of the
Company are issued or outstanding.
(iii) All outstanding shares of the Company Common Stock are, and any shares
of Company Common Stock which may be issued pursuant to the Stock Option
Agreement or upon exercise of Company Employee Options will be, validly issued,
fully paid and nonassessable and will be delivered free and clear of all
claims, liens, encumbrances, charges, pledges or security interests of any kind
or nature whatsoever (collectively, "Liens"), subject to repayment of the
Company's ESOP loan, and not subject to preemptive rights.
(iv) Except for this Agreement, the Incentive Plan and the ESOP (the
"Company Stock Plans"), the Company Employee Options and the Stock Option
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any Subsidiary of the Company is a party or by which it is
bound obligating the Company or any Subsidiary of the Company to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock or any Voting Debt of the Company or of any Subsidiary of the Company or
obligating the Company or any Subsidiary of the Company to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking.
(v) There are no outstanding contractual obligations (A) of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its Subsidiaries, other than the
Stock Option Agreement and the purchase of shares in the market pursuant to the
Employee Stock Purchase Plan and 401(k) plan, or (B) of the Company to vote or
to dispose of or encumber any shares of the capital stock of any of its
Subsidiaries.
(c) Authorization. (i) The Company has all requisite corporate power and
authority to enter into this Agreement and the Stock Option Agreement and,
subject in the case of this Agreement to the Company Stockholder Approval, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of the Company, subject in the
case of this Agreement to the Company Stockholder Approval. Without limiting
the foregoing, (A) this Agreement and the Stock Option Agreement have been
approved by the unanimous vote of all members of the Board of Directors of the
Company, which approval includes a resolution to the effect that the Board of
Directors, subject to its fiduciary duties, recommends that this Agreement and
the transactions contemplated hereby and thereby be approved by the
stockholders of the Company, and (B) the Company has taken all necessary
corporate action to authorize and reserve for issuance that number of shares of
Company Common Stock equal to the maximum number of shares of Company Common
Stock issuable upon exercise of the option granted pursuant to the Stock Option
Agreement. This Agreement and the Stock Option Agreement have been duly
executed and delivered by the Company and each constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with
its respective terms, except as such enforcement may be limited by bankruptcy,
insolvency and other similar laws affecting creditors' rights generally or the
rights of creditors of financial institutions and to general equity principles.
(ii) The execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby will not, and
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compliance by the Company with any of the provisions hereof or thereof will
not, (A) conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time or both) under, or result in the
termination of, or accelerate the performance required by, or give rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a Lien (any such conflict,
breach, violation, default, termination, acceleration, right of termination,
cancellation or acceleration, loss or creation, a "Violation") pursuant to, any
provision of the certificate or articles of incorporation or by-laws of the
Company, NSB or any other Subsidiary of the Company or (B) subject to obtaining
or making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below and except as
set forth in the Company Disclosure Schedule, result in any Violation of any
loan or credit agreement, note, mortgage, indenture, lease, Company Benefit
Plan (as defined in Section 3.01(j)) or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company, NSB or
any other Subsidiary of the Company or their respective properties or assets,
which Violation under this clause (B) could reasonably be expected to have,
individually or in the aggregate with other such Violations, a Material Adverse
Effect on the Company.
(iii) To the best knowledge of the Company, after consultation with counsel,
no consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company, NSB or any other
Subsidiary of the Company in connection with the execution and delivery of this
Agreement and the Stock Option Agreement by the Company, or the consummation by
the Company of the transactions contemplated hereby and thereby, the failure to
obtain such which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, except for (A) the
filing with the Securities and Exchange Commission ("SEC") of (1) a proxy
statement (as amended or supplemented from time to time, the "Proxy Statement")
relating to the meeting of the Company's stockholders at which a vote is held
on the Merger (the "Company Stockholders Meeting") and (2) such reports under
Sections 13(a), 13(d), 13(g) and 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as may be required in connection with this
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby and the obtaining from the SEC of such orders as may be required in
connection therewith, (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (C) the filing of such notices, applications, filings,
authorizations, orders and approvals as may be required under federal and state
thrift and banking laws, and with and of federal and state thrift and banking
authorities and approval of same (collectively, the "Banking Approvals"), and
(D) consents, authorizations, approvals, filings or exemptions in connection
with compliance with the applicable provisions of the rules of the American
Stock Exchange (the "Amex"), or which are required under consumer finance,
mortgage banking and other similar laws.
(d) SEC Documents; Financial Statements; Reports. (i) The Company has
delivered to Parent a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC (other than reports filed pursuant to Section 13(d) or 13(g) of the
Exchange Act) since January 1, 1992 (the "Company SEC Documents"), which are
all the documents (other than preliminary material and reports required
pursuant to Section 13(d) or 13(g) of the Exchange Act) that the Company was
required to file with the SEC since such date. The Company will promptly
deliver to Parent a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC (other than reports filed pursuant to Section 13(d) or 13(g) of the
Exchange Act) after the date of this Agreement (the "Future Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable thereto. As of
their respective dates, the Future Company SEC Documents will comply in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable thereto. All
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14
material agreements, contracts and other documents required to be filed as
exhibits to any of the Company SEC Documents have been so filed, and in respect
of the Future Company SEC Documents, will be so filed. Except to the extent
that information contained in any Company SEC Document has been revised or
superseded by a later Company SEC Document, none of the Company SEC Documents
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the Future Company SEC Documents will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(ii) The financial statements of the Company included in the Company SEC
Documents or to be included in the Future Company SEC Documents comply or will
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared or will be prepared in accordance with GAAP
(as defined in Section 8.03(c)) during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present or will fairly present
the consolidated financial position of the Company and its consolidated
Subsidiaries at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
(iii) Since January 1, 1992, each of the Company and its Subsidiaries,
including NSB, has filed all material reports, registrations and statements,
together with any required material amendments thereto ("Company Regulatory
Reports"), and has paid all fees and assessments due and payable therewith,
that it was required to file with the FDIC, the OTS, all applicable state
banking and other regulatory authorities and other relevant Governmental
Entities or self regulatory agencies charged with the supervision or regulation
of the Company or any of its Subsidiaries (collectively, "Regulatory
Authorities") and with the Federal Home Loan Bank of San Francisco ("FHLBSF").
As of their respective dates, each such Company Regulatory Report complied in
all material respects with all the rules and regulations promulgated by the
applicable Regulatory Authority (including regulatory accounting practices)
and, except as revised or superseded by a later filed Company Regulatory
Report, does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company has delivered to Parent true and
complete copies of the Company Regulatory Reports.
(e) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement will, at the date of mailing to stockholders and at the time of
the Company Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference therein.
All documents that the Company is responsible for filing with any Governmental
Entity in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable law,
including applicable provisions of the Securities Act and Exchange Act.
Without limiting any of the representations and warranties contained herein, no
representation or warranty to Parent by the Company herein, and no statement by
the Company or other information contained in the Company Disclosure Schedule
or any document incorporated by reference therein, as the date of such
document, contains or contained or will contain, any untrue statement of
material fact, or, at the date thereof, 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 statements are or will be made, not
misleading.
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15
(f) Compliance with Applicable Laws. (i) The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, authorizations, orders and
approvals of all Governmental Entities (the "Company Permits") that are
required for them to own, lease or operate their properties and assets and to
carry on their businesses as presently conducted, and there has occurred no
default under any such Company Permit, except for the lack of Company Permits
and for defaults under Company Permits which lack or default individually or in
the aggregate would not have a Material Adverse Effect on the Company. Except
as disclosed in the Company SEC Documents filed and publicly available prior to
the date of this Agreement, the Company and its Subsidiaries are in compliance
in all material respects with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity, and with their material
internal policies and procedures.
(ii) Neither the Company nor any of its Subsidiaries has received any
notification or communication which has not been fully and finally resolved
from any Regulatory Authorities (A) asserting that any of the Company or any of
its Subsidiaries is not in substantial compliance with any of the statutes,
regulations, ordinances or guidelines which such Regulatory Authority enforces
or administers, or the internal policies and procedures of such company, (B)
threatening to revoke any material Company Permit, including such company's
status as an insured depositary institution under the Federal Deposit Insurance
Act ("FDIA"), (C) requiring or threatening to require the Company or any of its
Subsidiaries, or indicating that the Company or any of its Subsidiaries may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement, to be subject to any directive or
supervisory letter, or to adopt resolutions of its board of directors, in each
case restricting or limiting or purporting to restrict or limit in any material
respect the operations of the Company or any of its Subsidiaries, including any
restriction on the payment of dividends, or relating to its capital adequacy,
its credit policies or its management, or (D) except as set forth in the
Company Disclosure Schedule, directing, restricting or limiting, or purporting
to direct, restrict or limit, in any material respect the operations of the
Company or any of its Subsidiaries, including any restriction on the payment of
dividends, or relating to its capital adequacy, its credit policies or its
management (any such notification, communication, order, agreement, memorandum
of understanding, directive, supervisory letter or required board resolutions
being referred to herein as a "Regulatory Agreement"). Neither the Company nor
any of its Subsidiaries has received, consented to or entered into, or is
subject to, any Regulatory Agreement, nor has the Company or any of its
Subsidiaries been advised by any Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such Regulatory Agreement. The
Company has advised Parent of the substance of any and all criminal referrals
it has filed with the OTS.
(iii) Neither the Company nor any of its Subsidiaries is required by Section
32 of the FDIA to give prior notice to a Regulatory Authority of the proposed
addition of an individual to its board of directors or the employment of an
individual as a senior executive officer.
(iv) To the best knowledge of the Company, each of the Company and its
Subsidiaries is, and has been, and each of the Company's former Subsidiaries,
while Subsidiaries of the Company, was in compliance with all applicable
Environmental Laws (as defined below), except for possible noncompliance which
individually or in the aggregate would not have a Material Adverse Effect on
the Company. The term "Environmental Laws" means any Federal, state, local or
foreign statute, ordinance, rule, regulation, policy, permit, consent,
approval, license, judgment, order, decree, injunction or other authorization
relating to: (A) Releases (as defined in 42 U.S.C. Section 9601(22)) or
threatened Releases of Hazardous Material (as defined below) into the
environment; or (B) the generation, treatment, storage, disposal, use,
handling, manufacturing, transportation or shipment of any Hazardous Material.
The term "Environmental Laws" also includes any common law or equitable
doctrine (including, without limitation, injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damage to, or threatened as a result
of, the presence of or exposure to any Hazardous Material. The term "Hazardous
Material" means (1) hazardous substances (as defined in 42 U.S.C. Section
9601(14)), (2) petroleum, including crude oil and any fractions thereof, (3)
natural gas, synthetic gas and
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16
any mixtures thereof, (4) asbestos and/or asbestos-containing material and (5)
polychlorinated biphenyls ("PCBs"), or materials containing PCBs in excess of
50 ppm.
(v) To the best knowledge of the Company, during the period of ownership or
operation by the Company and its Subsidiaries of any of their respective
current or previously owned or leased properties (including for purposes of
this paragraph any such properties acquired in foreclosures or otherwise in
connection with extensions of credit), there have been no Releases of Hazardous
Material in, on, under or affecting such properties or any surrounding site,
and none of the Company or its Subsidiaries have disposed of any Hazardous
Material or any other substance in a manner that has led, or could reasonably
be anticipated to lead, to a Release, except in each case for those which
individually or in the aggregate would not have a Material Adverse Effect on
the Company. Prior to the period of ownership or operation by the Company and
its Subsidiaries of any of their respective current or previously owned or
leased properties, no Hazardous Material was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped or
disposed of from, such current or previously owned properties, and there were
no Releases of Hazardous Material in, on, under or affecting any such property
or any surrounding site, except in each case for those which individually or in
the aggregate would not have a Material Adverse Effect on the Company.
(vi) To the best knowledge of the Company, the Company and its Subsidiaries
are not subject to any judgment, decree or order relating to compliance with
any Environmental Law or to investigation or cleanup under any Environmental
Law (collectively, "Environmental Enforcement Actions"), except with respect to
Environmental Enforcement Actions which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company and which, in any
event, are listed and described on the Company Disclosure Schedule. To the
best knowledge of the Company, neither the Company nor any of its Subsidiaries
has any contingent liabilities in connection with any Hazardous Materials,
including claims of liability for cleanup of Hazardous Materials related to any
of the Company, its Subsidiaries or any of the Company's former Subsidiaries
that, individually or in the aggregate, would have a Material Adverse Effect on
the Company.
(vii) Except as set forth in the Company Disclosure Schedule, to the best
knowledge of the Company, neither the Company nor any Subsidiary participates
in the management of a Loan Property or Participation Facility to an extent
that it would be deemed an "owner or operator" as defined in 42 U.S.C. Section
9601 or any similar Environmental Law. As used herein, the term "Loan
Property" means any property in which the applicable party (or a subsidiary of
it) holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property, and
the term "Participation Facility" means any facility in which the applicable
party (or a subsidiary of it) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where
required by the context, includes the owner or operator of such property.
(g) Litigation. Except as disclosed in the Company SEC Documents, there is
no claim, suit, action or proceeding pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any Subsidiary of the
Company (including any such suit, action or proceeding under the Securities
Act, the Exchange Act, the Community Reinvestment Act of 1977, as amended, or
fair lending laws or by any stockholder or former stockholder of the Company or
any Subsidiary of the Company) that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
that could reasonably be expected to threaten, impede or delay the consummation
of the Merger, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any
Subsidiary of the Company having, or which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company or that could reasonably be expected to threaten, impede or delay the
consummation of the Merger. The Company Disclosure Schedule contains a true,
correct and complete list as of the date hereof of all pending suits, claims,
actions, investigations or proceedings of any nature involving claims against
it or any of its subsidiaries in the amount of $25,000 or more or involving
claims for a specific performance or injunctive relief and suits, claims,
actions and other matters that have been brought and are pending or have been
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17
threatened to be brought by or on behalf of the Company or any of its
Subsidiaries, as plaintiff or other claimant in the amount of $25,000 or more
(excluding loan foreclosures and similar collection actions in the ordinary
course of business).
(h) Taxes. (i) (A) The Company and its Subsidiaries have filed, been
included in or sent all returns, declarations and reports and information
returns and statements required to be filed or sent (including in each case
extensions) by or relating to any of them relating to any taxes with respect to
any income, properties or operations of the Company or any such subsidiary
prior to the Effective Time (collectively, "Company Returns"), (B) as of the
time of filing, the Company Returns correctly reflected in all material
respects the facts regarding the income, business, assets, tax bases,
operations, activities and status of the Company and its Subsidiaries and any
other information required to be shown therein, (C) the Company and its
Subsidiaries have timely paid or made provision for all taxes that have been
shown as due and payable on the Company Returns that have been filed, (D) the
Company and its Subsidiaries have made or will make provision for all taxes
payable for any periods ending on or before the last day of the calendar month
preceding the Effective Time for which no Company Returns have yet been filed
and for any periods that begin before the Effective Time and end after the
Effective Time to the extent such taxes are attributable to the portion of any
such period ending at the Effective Time, (E) the charges, accruals and
reserves for taxes reflected on the books of the Company and its Subsidiaries
do not in the aggregate materially fail to provide for the tax liabilities
accruing or payable by the Company and its Subsidiaries in respect of periods
prior to the date hereof, (F) except as set forth in the Company Disclosure
Schedule, neither the Company nor any Subsidiaries are delinquent in the
payment of any taxes or has requested any extension of time within which to
file or send any Company Return, which Company Return has not since been filed
or sent, (G) no deficiency for any taxes has been proposed, asserted or
assessed in writing against the Company or any of its Subsidiaries other than
those taxes being contested in good faith which have heretofore been advised in
writing by the Company to Parent and other than taxes individually or in the
aggregate which do not exceed more than $50,000 in asserted liability, (H) the
Federal income tax returns of the Company or any consolidated group to which it
belongs have been examined by and/or settled with the United States Internal
Revenue Service (the "IRS") for all fiscal years through June 30, 1991, (I)
neither the Company nor any of its Subsidiaries have granted any extension of
the limitation period applicable to any tax claims (which period has not since
lapsed), other than those taxes being contested in good faith, and (J) neither
the Company nor any Subsidiary have any contractual obligations under any tax
sharing agreement with any corporation which, as of the Effective Time, is not
a member of a consolidated group of which all of and only the Company and its
Subsidiaries are members.
(ii) Any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any of
its affiliates who is a "disqualified individual" (as such term is defined in
Section 280G(c) of the Code) under any employment, severance or termination
agreement, other compensation arrangement or Company Benefit Plan currently in
effect would not be characterized as a "parachute payment" (as such term is
defined in Section 280G(b)(2) of the Code).
(iii) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries of the Company under any contract, plan,
program, arrangement or understanding.
(iv) For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include, except
where the context otherwise requires, all Federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy and other taxes, duties or assessments
of any nature whatsoever (including the California franchise and income tax),
together with all interest, penalties and additions imposed with respect to
such amounts.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the Company
SEC Documents or the Company Disclosure Schedule, there has not been any
adoption or amendment
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18
by the Company or any of its Subsidiaries of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any of its
Subsidiaries. Except as disclosed in the Company SEC Documents or the Company
Disclosure Schedule, there exists (and will not exist at any time prior to the
Effective Time) no employment, bonus, consulting, severance, termination or
indemnification agreements, arrangements or understandings between the Company
or any of its Subsidiaries and any current or former employee, officer or
director of the Company or any of its Subsidiaries. Without limiting the
generality of the foregoing, (A) the aggregate salary and termination benefits
payable to each of the senior officers of the Company under existing employment
agreements are as detailed in the Company Disclosure Schedule, (B) the
termination benefits payable to additional officers and employees under the
Company's severance plan are as detailed in the Company Disclosure Schedule,
and (C) no individuals other than those referred to in clauses (A) and (B) of
this sentence are, or will be at the Effective Time, entitled to salary,
severance, termination, bonus or other such benefits from the Company or NSB.
True and correct copies of all items referred to in this Section 3.01(i) have
been heretofore delivered by the Company to Parent.
(j) ERISA Compliance. (i) The Company Disclosure Schedule contains a list
and brief description of each "employee pension benefit plan" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as a "Pension Plan"), each "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA) and each stock
option, stock purchase, deferred compensation plan or arrangement and each
other employee fringe benefit plan or arrangement maintained, contributed to or
required to be maintained or contributed to by the Company, any of its
subsidiaries or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, a "Commonly Controlled Entity"), for the benefit of any current or
former employees, officers, agents, directors or independent contractors of the
Company or any of its subsidiaries (collectively, "Company Benefit Plans").
The Company has delivered or made available to Parent true, complete and
correct copies of (A) each Company Benefit Plan (or, in the case of any
unwritten Company Benefit Plans, descriptions thereof) and any related trust
agreement, (B) the most recent annual report on Form 5500 filed with the IRS
with respect to each Company Benefit Plan (if any such report was required) and
(C) the most recent summary plan description (or similar document) for each
Company Benefit Plan for which such summary plan description is required or was
provided to plan participants or beneficiaries.
(ii) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms. The Company, its Subsidiaries and all
the Company Benefit Plans are all in compliance in all material respects with
the applicable provisions of ERISA and the Code. To the best knowledge of the
Company, there are no investigations, proceedings or other claims involving any
Company Benefit Plan that could give rise to any material liability.
(iii) All Pension Plans intended to be qualified under Section 401(a) of the
Code have been the subject of determination letters from the IRS to the effect
that such Pension Plans are qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, and, to the
knowledge of the Company, all such letters are valid and effective as of the
date hereof.
(iv) No Pension Plan, other than any Pension Plan that is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA; collectively,
the "Multiemployer Pension Plans"), had, as of the respective last annual
valuation date for each such Pension Plan, an "unfunded benefit liability" (as
such term is defined in Section 4001(a)(18) of ERISA), based on actuarial
assumptions which have been furnished to Parent, and neither the Company nor
any of its Subsidiaries is aware of any facts or circumstances that would
materially change the funded status of any such Company Benefit Plans. None of
the Pension Plans has an "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA or Section 412 of the Code), and there has been
no application for a waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Company Benefit Plan that is a Pension
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19
Plan. No Commonly Controlled Entity has incurred any material liability to a
Pension Plan (other than for contributions not yet due) or to the Pension
Benefit Guaranty Corporation (the "PBGC") (other than for premiums not yet
due).
(v) There have been no non-exempt "prohibited transactions" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility with respect to the Company Benefit Plans
that could subject the Company, any of its subsidiaries or any officer of the
Company or any of its Subsidiaries to tax or penalty under ERISA, the Code or
other applicable law. Neither any of such Company Benefit Plans nor any of
such trusts has been terminated, nor has there been any "reportable event" (as
that term is defined in Section 4043 of ERISA) with respect thereto, during the
last five years.
(vi) Neither the Company nor any Commonly Controlled Entity (A) maintains or
contributes to a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has maintained, contributed to or had an obligation to maintain or
contribute to such a plan within the five full plan years of any such plan
immediately prior to the date hereof, or (B) has incurred any liability to the
PBGC or a Company Benefit Plan upon the termination of or withdrawal from a
Company Benefit Plan, which liability remains unpaid as of the date hereof.
(vii) With respect to any Company Benefit Plan that is an employee welfare
benefit plan, (A) no such Company Benefit Plan is funded through a "welfare
benefit fund", as such term is defined in Section 419(e) of the Code, (B) each
such Company Benefit Plan that is a "group health plan", as such term is
defined in Section 5000(b)(1) of the Code, complies in all material respects
with the applicable requirements of Section 4980B(f) of the Code and (C) except
as set forth in the Company Disclosure Schedule, each such Company Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company or any of its
subsidiaries on or at any time after the consummation of the Merger.
(viii) Except as disclosed in the Company Disclosure Schedule, no employee
of the Company or any Subsidiary of the Company will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of
any benefits under any Company Benefit Plan as a result of the transactions
contemplated by this Agreement or by the Stock Option Agreement.
(k) Subsidiaries. The Company Disclosure Schedule sets forth all the
Subsidiaries of the Company and indicates for each such Subsidiary the
jurisdiction and date of incorporation. Each of the Company's subsidiaries
that is a savings bank is an "insured bank" as defined in the FDIA and
applicable regulations thereunder. Except as set forth on the Company
Disclosure Schedule, all the shares of capital stock of each of the
Subsidiaries of the Company are fully paid and nonassessable and are owned by
the Company or another Subsidiary of the Company free and clear of all Liens.
The Company Disclosure Schedule sets forth the equity interest of any person
other than the Company or any of its Subsidiaries in any of the Subsidiaries of
the Company and also sets forth the identity and address of any such person.
Except for the capital stock of its Subsidiaries and as set forth in the
Company Disclosure Schedule, the Company does not own, directly or indirectly,
any capital stock or other ownership interest in any corporation, bank,
partnership, joint venture or other entity.
(l) State Takeover Statutes. The Board of Directors of the Company has
approved the Merger, this Agreement and the Stock Option Agreement and/ or has
taken such other action, and such approval and/or action is sufficient, to
render inapplicable to the Merger, this Agreement, the Stock Option Agreement
and the transactions contemplated by this Agreement and the Stock Option
Agreement the provisions of Section 203 of the DGCL. No other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Stock Option Agreement and the transactions
contemplated by this Agreement and the Stock Option Agreement.
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20
(m) Vote Required. The Company Stockholder Approval is the only vote of the
holders of any class or series of the Company capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
(n) Other Activities of the Company and its Subsidiaries. (i) Neither the
Company nor any of its Subsidiaries that is not a federal savings bank directly
or indirectly engages in any activity prohibited by the OTS. Without limiting
the generality of the foregoing, any equity investment of the Company and each
Subsidiary that is not a federal savings bank is not prohibited by the OTS.
NSB engages only in activities permissible for federal savings banks under
applicable OTS and FDIC regulations. Neither the Company nor any Subsidiary
directly or indirectly engages in any activity not permitted to a bank holding
company or its subsidiaries under the Bank Holding Company Act of 1956, as
amended (the "BHCA").
(ii) Neither the Company nor any Subsidiary engages in any insurance
activities other than acting as a principal, agent or broker for insurance that
is directly related to an extension of credit by the Company or any Subsidiary
and limited to assuring the repayment of the balance due on the extension of
credit in the event of the death, disability or involuntary unemployment of the
debtor. The Company Disclosure Schedule describes all licenses and approvals
held by the Company and any Subsidiary (and any officer, director or employee
of any of them) to conduct any insurance activities, whether as principal,
agent, broker or otherwise.
(iii) Neither the Company nor any Subsidiary, in connection with its
activities relating to funds transfers, (A) is in default under any agreement
to which it is a party relating to the transfer of funds or settlement with
respect to such transfers; or (B) has agreed to be or is liable for
consequential damages for its error or delay in acting on requests for the
transfer of funds. Each of the Company and its Subsidiaries, as applicable,
has adopted and followed procedures reasonably adapted to avoid such errors and
delay, has adopted commercially reasonable security procedures (as such term is
defined in section 4A-202 of the Uniform Commercial Code) for verifying the
authenticity of requests received for the transfer of funds, and is in
compliance with applicable laws of Governmental Entities relating to the
transfer of funds and settlement with respect thereto with the applicable
operating rules of each funds transfer system of which it is a member or by
which it is bound.
(o) Properties. Except as disclosed in the Company SEC Documents, the
Company and its Subsidiaries (i) have good, clear and marketable title to all
the properties and assets which are material to the Company's business on a
consolidated basis and are reflected in the latest audited statement of
condition included in the Company SEC Documents as being owned by the Company
and its Subsidiaries or acquired after the date thereof (except properties sold
or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all Liens except (A) statutory Liens securing
payments not yet due, (B) Liens on assets of Subsidiaries of the Company
incurred in the ordinary course of their business and (C) such imperfections or
irregularities of title or Liens as do not affect the use of the properties or
assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, in either case in such a manner as to
have a Material Adverse Effect on the Company, and (ii) are collectively the
lessee of all leasehold estates which are material to the Company's business on
a consolidated basis and are reflected in the latest audited financial
statements included in the Company SEC Documents or acquired after the date
thereof (except for leases that have expired by their terms or as to which the
Company has agreed to terminate or convey since the date thereof) and is in
possession of the properties purported to be leased thereunder, and each such
lease is valid without default thereunder by the lessee or, to the Company's
knowledge, the lessor, other than defaults that would not have a Material
Adverse Effect on the Company. The Company Disclosure Schedule lists all of
the owned or leased real property of the Company and its Subsidiaries, except
for real property acquired after the date hereof as a result of foreclosures or
transfers in lieu of foreclosure in the ordinary course of business. Each of
the Company and its Subsidiaries enjoys peaceful and undisturbed possession
under all such leases. All the Company's and its Subsidiaries' owned
buildings, structures and equipment have been well maintained and are in good
and serviceable condition, normal wear and tear excepted.
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(p) Insurance. The Company and its Subsidiaries are presently insured, and
during each of the last five years have been insured, for reasonable amounts
against such risks as companies engaged in similar businesses would, in
accordance with good business practice, customarily be insured. The Company
Disclosure Schedule sets forth a true and complete list and brief description
of all insurance policies (and fidelity or similar bonds) maintained by or for
the benefit of the Company, its subsidiaries or their directors, officers,
employees or agents.
(q) Material Interests of Certain Persons. Except as disclosed in the
Company's Proxy Statement for its 1995 Annual Meeting of Stockholders, no
executive officer or director of the Company or any "associate" (as such term
is defined in Rule 14a-1 under the Exchange Act) of any such executive officer
or director has any material interest in any material contract or property,
real or personal, tangible or intangible, that is used in or pertains to the
business of the Company or any of its subsidiaries.
(r) Brokers and Finders; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Kaplan
Associates, Inc., the fees and expenses of which will be paid by the Company
prior to the Effective Time, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The estimated fees and expenses incurred and to be
incurred by the Company in connection with this Agreement and the Stock Option
Agreement and the transactions contemplated by this Agreement and the Stock
Option Agreement (including the fees of the Company's legal counsel) are set
forth in the Company Disclosure Schedule.
(s) Opinion of Financial Advisor. The Company has received the opinion of
Kaplan Associates, Inc., dated the date of this Agreement, to the effect that,
as of such date, the Merger Consideration to be received by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a signed copy of such opinion has been delivered to Parent.
(t) Allowance for Loan Losses. The allowance for loan losses shown on the
consolidated statement of condition of the Company and its Subsidiaries
reflected in the Company's latest audited financial statements included in the
Company Filed SEC Documents was, and the allowance for loan losses shown on the
consolidated statements of condition of the Company and its subsidiaries
reflected in the Company's financial statements as of dates subsequent to the
date hereof will be, in each case as of the dates thereof, in the opinion of
management, adequate to provide for losses relating to or inherent in the loan
and lease portfolios (including accrued interest receivables) of the Company
and its Subsidiaries and other extensions of credit (including letters of
credit and commitments to make loans or extend credit) by the Company and its
Subsidiaries.
(u) Certain Agreements. Except as disclosed in the Company Disclosure
Schedule or the Company SEC Documents and except for this Agreement and the
Stock Option Agreement, as of the date of this Agreement, neither the Company
nor any of its Subsidiaries is a party to any written or, to the Company's
knowledge, oral (i) consulting or independent contractor agreement (other than
contracts entered into in the ordinary course of business) not terminable on 30
days' or less notice or involving the payment of more than $25,000 per annum,
or union, guild or collective bargaining agreement, (ii) material joint
venture, (iii) noncompetition or similar agreement that restricts the Company
or its Subsidiaries from engaging in a line of business, (iv) agreement with
any executive officer or other employee of the Company or any Subsidiary of the
Company the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or NSB of the nature contemplated by this Agreement or the Stock Option
Agreement, (v) agreement with any executive officer or other employee of the
Company or any Subsidiary of the Company providing for other than at-will
employment, other than individuals who are treated as employed for purposes of
vesting with respect to benefits under any Company Benefit Plan and who (A)
have such status for not more than three years and (B) in respect to which the
Company's obligation to make any payments do not exceed $25,000 per annum, (vi)
agreement or plan, including any severance or "golden parachute" agreement, or
any stock option plan,
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retirement or Pension Plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be payable or
increased, or the vesting of the benefits of which will be accelerated, as a
result of the occurrence of any of the transactions contemplated by this
Agreement or the Stock Option Agreement, or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated
by this Agreement or the Stock Option Agreement, (vii) any real property lease
with annual rental payments aggregating $25,000 or more, (viii) any other
contract or agreement which would be required to be disclosed as an exhibit to
the Company's annual report to the SEC on Form 10-K and which has not been so
disclosed, (ix) any agreement, arrangement or commitment not made in the
ordinary course of business consistent with past practice (and not otherwise
disclosed in the Company Disclosure Schedule) that is material to the Company
on a consolidated basis, or any contract, agreement or understanding relating
to the sale or disposition by the Company or any of its Subsidiaries of
significant assets or businesses of the Company or any of its Subsidiaries, (x)
any material agreement, indenture, credit agreement or other instrument
relating to the borrowing of money by the Company or any of its Subsidiaries
(other than certificates of deposit and customary savings bank funding
instruments) or the guarantee by the Company or any such Subsidiary of any such
obligation. Neither the Company nor any of its Subsidiaries is in default
under any material agreement, commitment, arrangement, lease, insurance policy
or other instrument, whether entered into in the ordinary course of business or
otherwise and whether written or oral and there has not occurred any event
that, with the giving of notice or the lapse of time or both, which constitutes
such a default, except in all cases where such default would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. Neither
the Company or any of its Subsidiaries has received any notice or has any
knowledge that any other party is in default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy other instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its Subsidiaries or the assets, business or operations thereof may be
bound or affected or under which it or its respective assets, business or
operations receives benefits, except for those defaults which have not had, or
cannot reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a default.
True and correct copies of all such agreements referred to above in this
Section 3.01(u), have been delivered or otherwise made available to Parent by
the Company.
(v) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed prior to the date hereof, since June 30, 1995, the
Company and its Subsidiaries have not incurred any material liability, except
in the ordinary course of their business consistent with their past practices,
nor has there been any change, or any event involving a prospective change, in
the Condition of the Company or any of its Subsidiaries which has had, or is
reasonably likely to have, a Material Adverse Effect on the Company. Without
limiting the generality of the foregoing, since such date, except as set forth
in the Company Disclosure Schedule, there has not been any change in any of the
licenses, permits or franchises of the Company or any Subsidiary thereof that
has had or can reasonably be expected to have a Material Adverse Effect on the
Company individually or in the aggregate, or any 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 the Company, except
in the ordinary course of business, any amendment, modification or termination
of any existing, or entering into any new contract, agreement, plan, lease,
license, permit or franchise that is material to the Condition of the Company,
any disposition by the Company or a Subsidiary thereof, of an asset that is
material to the Company, except sales of properties in the ordinary course of
business, or entering into any new employment agreement or bonus arrangement or
Company Benefit Plan by the Company or any Subsidiary thereof, or any increase
by the Company or any Subsidiary in the rate of compensation or the benefits
payable or to become payable to any officer or other employee in excess of 5%
per annum or to any agent or consultant in excess of the current customary
practice of the Company and its Subsidiaries (except as otherwise expressly
contemplated by the terms of this Agreement).
(w) Labor and Employment Matters. Except to the extent set forth in the
Company Disclosure Schedule, (i) the Company and its Subsidiaries are and have
been in compliance in all
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material respects with all applicable laws of Governmental Entities respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including, without limitation, the Immigration Reform and
Control Act ("IRCA"), the Worker Adjustment and Retraining Notification Act
("WARN"), any such laws respecting employment discrimination, disability rights
or benefits, equal opportunity, plant closure issues, affirmative action,
workers' compensation, employee benefits, severance payments, labor relations,
employee leave issues, wage and hour standards, occupational safety and health
requirements and unemployment insurance and related matters, and are not
engaged in and have not engaged in any unfair labor practice; (ii) to the best
knowledge of the Company, no investigation or review by or before any
Governmental Entity concerning any possible conflicts with or violations of any
such applicable laws is pending, nor is any such investigation threatened, nor
has any such investigation occurred during the last three years, and no
Governmental Entity has provided any notice to the Company or any of its
Subsidiaries or otherwise asserted an intention to conduct any such
investigation or review, nor is there any basis for any such investigation or
review; (iii) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or directly affecting the Company or any of its
Subsidiaries; (iv) no union representation question or union organizational
activity exists respecting the employees of the Company or any of its
Subsidiaries; (v) no collective bargaining agreement exists which is binding on
the Company or any of its Subsidiaries; (vi) neither the Company nor any of its
Subsidiaries has experienced any material work stoppage or other material labor
difficulty since December 31, 1991; (vii) neither the Company nor any of its
Subsidiaries is delinquent in payments to any of its officers, directors,
employees or agents for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them or amounts required to
be reimbursed to such officers, directors, employees or agents; (viii) in the
event of termination of the employment of any of said officers, directors,
employees or agents for any reason, neither the Company, any of its
Subsidiaries, Parent, Sub, nor any other Subsidiaries of Parent, will, pursuant
to any agreement or by reason of anything done prior to the Effective Time by
the Company or any of its Subsidiaries or predecessors, be liable to any of
said officers, directors, employees or agents for so-called "severance pay" or
any other similar payments or benefits, including, without limitation,
post-employment health care (other than pursuant to COBRA) or insurance
benefits; (ix) all benefits payable to current, terminated or retired
employees, including, without limitation, post-employment health care or
insurance benefits, may be modified or terminated by the Company at any time;
(x) within the three-year period prior to the date hereof there has not been
any termination of employment of any officer, director, employee or agent of
the Company or any of its Subsidiaries who receives salary or compensation in
excess of $60,000 per annum or any termination of any officer, director,
employee or agent of the Company or its Subsidiaries that could result in a
liability to Parent in excess of $60,000; and (xi) all employees of the Company
and its Subsidiaries are employed at will. Except as set forth in the Company
Disclosure Schedule, there are no pending or, to the Company's knowledge,
threatened suits, claims, actions, charges, investigations or proceedings of
any material nature respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation (i)
under or alleging violation of IRCA, NLRA, FLSA, WARN or any applicable law
respecting employment discrimination, equal opportunity, labor relations,
affirmative action, disability rights or benefits, employee leave issues or
wage and hour standards, workers' compensation, plant closure issues, employee
benefits, severance payments, occupational safety and health requirements or
unemployment insurance and related matters, or (ii) relating to alleged unfair
labor practices (or the equivalent thereof under any applicable law).
(x) Registration Obligations. Except as set forth in the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is under any
obligation, contingent or otherwise, which will survive the Merger by reason of
any agreement to register any of its securities under the Securities Act.
(y) Accounting Records.
(i) Each of the Company and its Subsidiaries maintains records that
accurately, validly and fairly reflect its transactions and dispositions of
assets and maintains a system of internal accounting controls, policies and
procedures sufficient to make it reasonable to expect that
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(A) such transactions are executed in accordance with its management's general
or specific authorization, (B) such transactions are recorded in conformity
with GAAP and in such a manner as to permit preparation of financial statements
in accordance with GAAP and any other criteria applicable to such statements
and to maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization, (D) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences, and (E) except as set forth in the Company Disclosure Schedule,
records of such transactions are retained, protected and duplicated in
accordance with prudent banking practices and applicable regulatory
requirements.
(ii) The data processing equipment, data transmission equipment, related
peripheral equipment and software used by the Company and its Subsidiaries in
the operation of their businesses (including any disaster recovery facility) to
generate and retrieve such records (whether owned or leased by the Company or
any Subsidiaries, or provided under any agreement or other arrangement with a
third party for data processing services) are adequate for the needs of the
Company and its Subsidiaries.
(iii) The Company has delivered to Parent true, correct and complete copies
of all annual management letters and opinions, and has made available to Parent
for inspection all reviews, correspondence, and other documents in the files of
the Company and NSB, prepared by any certified public accounting firm and
delivered to the Company or NSB since January 1, 1989.
(z) Undisclosed Liabilities. Except as disclosed in the Company Disclosure
Schedule or as disclosed or provided for in the Company SEC Documents, neither
the Company nor any of its Subsidiaries is subject to any liabilities of any
nature (whether or not required to be accrued or disclosed under SFAS No. 5)
which have had or can reasonably be expected to have a Material Adverse Effect
with respect to the Company.
(aa) Investment Securities. Each of the Company and its Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any mortgage, lien, pledge or encumbrance, except to the extent
such securities are pledged in the ordinary course of business consistent with
prudent banking practice to secure obligations of the Company or any of its
Subsidiaries. Such securities are valued on the books of the Company in
accordance with GAAP.
(bb) Loans.
(i) Except as disclosed in the Company Disclosure Schedule, (A) each
outstanding loan, lease or other extension of credit or commitment to extend
credit exceeding $50,000 of the Company or any of its Subsidiaries is a legal,
valid and binding obligation, is in full force and effect and is enforceable in
accordance with its terms except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally or equitable principles limiting the right to obtain specific
performance or other similar relief; (B) each of the Company and its
Subsidiaries has duly performed in all material respects all of its respective
obligations thereunder to the extent that such obligations to perform have
accrued; (C) all documents and agreements necessary for the Company or any
Subsidiary that is a party thereto to enforce such loan, lease or other
extension of credit are in existence; (D) no claims, counterclaims, set-off
rights or other rights exist, nor do the grounds for any such claim,
counterclaim, set-off right or other right exist, with respect to any such
loans, leases or other extensions of credit which could impair the
collectibility thereof; and (E) each such loan, lease and extension of credit
has been, in all material respects, originated and serviced in accordance with
the Company's or a Subsidiary's then applicable underwriting guidelines, the
terms of the relevant credit documents and agreements and applicable laws of
Governmental Entities.
(ii) The Company Disclosure Schedule lists all loan commitments exceeding
$50,000 of the Company and its Subsidiaries (with single-family loan
commitments and consumer commit-
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ments listed in the aggregate only) outstanding as of the date hereof. Except
as set forth in the Company Disclosure Schedule (with single-family loan
commitments and consumer commitments viewed in the aggregate only), as of the
date hereof, (A) there are no loans, leases, other extensions of credit or
commitments to extend credit of the Company or any of its Subsidiaries that
have been or, to the Company's knowledge, should have been classified by the
Company and its Subsidiaries as "Other Assets Especially Mentioned,"
"Substandard," "Doubtful," "Loss" or any comparable classification, and (B)
there are no loans due to the Company or its Subsidiaries as to which any
payment of principal, interest or any other amount is 30 days or more past due.
The Company shall promptly after the end of any month inform Parent of any such
classification arrived at any time after the date hereof. There is no material
disagreement with any Regulatory Authority as to the classifications referred
to in the second sentence of this Section 3.01(b)(ii). The Company has
provided to Parent true, correct and complete information concerning the loan
portfolios of the Company and each of its Subsidiaries, and no material
information with respect to the loan portfolios has been withheld from Parent.
(iii) All loans and extensions of credit that have been made by the Company
and that are subject to Section 11 of the Home Owners' Loan Act comply
therewith.
(cc) Interest Rate Risk Management Instruments; Structured Notes.
(i) The Company Disclosure Schedule contains a true, correct and complete
list of all interest rate swaps, caps, floors, and option agreements and other
interest rate risk management arrangements to which the Company or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound. The Company has delivered to Parent true, correct and complete copies
of all such interest rate risk management agreements and arrangements.
(ii) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which the Company or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to the
Company's knowledge, in accordance with prudent banking practice and applicable
rules, regulations and policies of the Regulatory Authorities and with
counterparties believed to be financially responsible and are legal, valid and
binding obligations enforceable in accordance with their terms (except as may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. The Company and each of
its Subsidiaries has duly performed in all material respects all of its
obligations thereunder to the extent that such obligations to perform have
accrued; and to the Company's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
(iii) The Company and its Subsidiaries own no securities that are referred
to generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes," or "capped floating rate mortgage derivatives" or that
are likely to have changes in value as a result of interest or exchange rage
changes that significantly exceed normal changes in value attributable to
interest or exchange rate changes, except for those securities and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices, and disclosed in
the Company Disclosure Schedule or disclosed in the Company SEC Documents.
(dd) Compliance with Policies. Since January 1, 1994, the Company has
followed in all material respects its applicable internal credit, risk
management, trust, trading, equity investing and similar policies and
procedures in conducting the operations which are subject to such policies.
(ee) Community Reinvestment Act. NSB is in material compliance with the
applicable provisions of the Community Reinvestment Act (the "CRA") and the
regulations promulgated thereunder, and NSB currently has a CRA rating of
satisfactory or better from the OTS. To the best knowledge of the Company,
there is no fact or circumstance or set of facts or circumstances which would
cause NSB to fail to comply with such provisions or cause the CRA rating of NSB
to fall below satisfactory.
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(ff) Certain Circumstances. The Company knows of no facts or circumstances
that would delay, impede or otherwise adversely affect its ability to promptly
secure all necessary regulatory and other approvals and consents to the Merger
and the transactions contemplated by this Agreement and to promptly consummate
the Merger.
SECTION 3.02. Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:
(a) Organization and Authority. Each of Parent and Sub is a bank or
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated or organized and has the
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each of Parent
and Sub and each of Parent's other subsidiaries is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary except where the failure so to qualify would not have a Material
Adverse Effect on Parent. Sub is a direct wholly owned subsidiary of Parent.
(b) Authorization. (i) Parent and Sub have all requisite corporate power
and authority to enter into this Agreement and the Stock Option Agreement and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub.
All of the outstanding shares of voting common stock of Parent are beneficially
owned, directly or indirectly, by Banque Nationale de Paris, a banking
corporation organized and existing under the laws of the Republic of France
("BNP"). No corporate action on the part of BNP is required for the
consummation of the transactions contemplated by this Agreement and the Stock
Option Agreement. This Agreement and the Stock Option Agreement have been duly
executed and delivered by Parent and Sub and each constitutes a valid and
binding obligation of Parent and Sub, enforceable against Parent and Sub in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally or the rights of creditors of financial institutions and to general
equity principles.
(ii) The execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby will not, and compliance by Parent and Sub with any of the
provisions hereof or thereof will not, (A) result in any Violation pursuant to
any provision of the articles or certificate of incorporation (or similar
constitutive document) or by-laws of Parent, Sub or any other subsidiary of
Parent or (B) subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, result in any Violation of any loan or credit agreement,
note, mortgage, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent, Sub or any
other subsidiary of Parent or their respective properties or assets which
Violation under this clause (B) could reasonably be expected to have,
individually or in the aggregate with other such Violations, a Material Adverse
Effect on Parent.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent, Sub or any other subsidiary of Parent or any other Affiliate
(as defined in Section 8.03(c) hereof) of Parent in connection with the
execution and delivery of this Agreement and the Stock Option Agreement by
Parent and Sub, or the consummation by Parent and Sub of the transactions
contemplated hereby and thereby, the failure to obtain which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent, except for (A) the filing of applications with the
FDIC under 12 U.S.C. Section 1815(d)(3) (the "Oakar statute") and with the OTS
under the SLHCA and the applicable regulations of the OTS and with the FDIC
under the FDIA and approval of the same, (B) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which Parent is
qualified to do business, (C) the Banking Approvals, (D) consents,
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authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of consumer finance, mortgage banking and other
similar laws, and (E) the receipt of a waiver from the Board of Governors of
the Federal Reserve System (the "FRB") of the applicability of the BHCA to the
transactions contemplated hereby.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date of mailing to stockholders and at the time of
the Company Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Parent or Sub with respect to statements
made or incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
(d) Ownership of Company Common Stock. Other than pursuant to the Stock
Option Agreement, as of the date hereof, neither Parent nor any of its
affiliates (as such term is defined under the Exchange Act), (i) beneficially
owns, directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of the Company, which in the aggregate
represent 10% or more of the outstanding shares of Company Common Stock
entitled to vote generally in the election of directors (other than Trust
Account Shares).
(e) Brokers and Finders. No broker, investment banker, financial advisor or
other person, other than the fees and expenses of which will be paid by Parent,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this
Agreement and the Stock Option Agreement based upon arrangements made by or on
behalf of Parent or Sub.
(f) Financing. Parent has available funds sufficient to consummate the
Merger on the terms contemplated by this Agreement, and at the Effective Time,
Parent will have available all the funds necessary to perform its obligations
under this Agreement, including consummating the Merger on the terms
contemplated hereby.
(g) Litigation. There is no suit, action or proceeding pending or, to the
knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries that individually or in the aggregate could reasonably be expected
to (i) impair the ability of Parent to perform its obligations under this
Agreement or (ii) threaten, impede or delay the consummation of the Merger, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Parent or any of its Subsidiaries
having, or which is reasonably likely to have, individually or in the
aggregate, any effect referred to in clause (i) or (ii) above.
(h) Community Reinvestment Act Compliance. Parent is in material compliance
with the applicable provisions of the CRA and the regulations promulgated
thereunder, and Parent currently has a CRA rating of satisfactory or better
from the FDIC. To the best knowledge of Parent, there is no fact or
circumstance or set of facts or circumstances which would cause Parent to fail
to comply with such provisions or cause the CRA rating of Parent to fall below
satisfactory.
(i) Certain Circumstances. Parent knows of no facts or circumstances that
would delay, impede or otherwise adversely affect its ability to promptly
secure all necessary regulatory and other approvals and consents to the Merger
and the transactions contemplated by this Agreement and to promptly consummate
the Merger.
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ARTICLE IV
Covenants Relating to Conduct of the Company's Business
SECTION 4.01. Covenants of the Company. During the period from the date of
this Agreement until the Effective Time, the Company agrees as to itself and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or the Stock Option Agreement):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course consistent
with sound banking and thrift industry practices and use their best efforts to
preserve intact their present business organizations, maintain their rights and
franchises, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect at the Effective
Time. The Company shall not, nor shall it permit any of its Subsidiaries to,
(i) enter into any new material line of business; (ii) except as required by
law, regulation, GAAP or regulatory policies or guidelines, change its or its
Subsidiaries' lending, credit, investment, liability management, deposit
interest rate or service charge and other material banking policies in any
respect which is material to the Company; or (iii) except as required by any
applicable Regulatory Authorities, incur or commit to any capital expenditures,
or any obligations or liabilities in connection therewith, other than capital
expenditures and obligations or liabilities incurred or committed to that are
approved in accordance with the Company's capital expenditure approval policies
and that are not (A) individually in excess of U.S.$25,000 and (B) in the
aggregate in excess of U.S.$100,000. Neither the Company nor any of its
Subsidiaries will form any new Subsidiaries.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it propose to, (i) declare, set aside or
pay any dividends on or make other distributions in respect of, directly or
indirectly, any of its capital stock, except (A) in the event the Effective
Time has not occurred by April 30, 1996, other than by reason of any breach or
default hereunder on the part of the Company, then the Company may declare and
pay a special cash dividend in an amount up to but not exceeding the Company
Net Income after April 30, 1996 (as defined in Section 8.03(c)), provided,
however, that (x) the Company shall not have, nor shall it have permitted any
of its Subsidiaries to have, conducted its operations other than in the
ordinary course of business and consistent with past practices and policies,
including without limitation, its practices and policies for the recognition of
income and expense items, and (y) the Company shall have furnished to Parent on
the date of the declaration of such dividend a certificate of the chief
financial officer of the Company, in form reasonably satisfactory to Parent,
and dated as of such date, to the effect that the Company has duly complied
with the provisions of clause (x) of this proviso, and (B) for dividends by a
direct or indirect wholly owned (other than directors' qualifying shares)
Subsidiary of the Company, (ii) adjust, split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, except for the issuance of shares upon the exercise of options
presently outstanding under the Incentive Plan, or (iii) repurchase, redeem or
otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire
(except for the acquisition of Trust Account Shares and the acquisition of
shares to be used to satisfy obligations under Company Stock Plans), any shares
of its capital stock or any securities convertible into or exchangeable for any
shares of its capital stock.
(c) Issuance of Securities. The Company shall not, nor shall it permit any
of its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its or any of its Subsidiaries'
capital stock of any class, any Voting Debt or any securities convertible into
or exchangeable for, or any rights, warrants or options to acquire, any such
shares or Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than (i) pursuant to the Stock Option Agreement, (ii)
issuances by a direct or indirect wholly owned (other than directors'
qualifying shares) Subsidiary of its capital stock to
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its parent, and (iii) pursuant to options or rights presently outstanding under
the Incentive Plan or the Employee Stock Purchase Plan.
(d) Governing Documents. The Company shall not amend or propose to amend,
nor shall it permit any of its Subsidiaries to amend, the articles or
certificate of incorporation (or similar constitutive documents) or by-laws of
the Company or any of its Subsidiaries.
(e) No Acquisitions. The Company shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole. Without limiting the generality of the foregoing, the
Company shall not, nor shall it permit any of its Subsidiaries to, make any
investment either by purchase of stock or securities, contributions to capital,
property transfers or purchase of any property or assets of any other
individual, corporation or other entity, except, subject to Section 4.01(p),
for investments in the ordinary course of business consistent with past
practice.
(f) No Dispositions. Other than (i) activities in the ordinary course of
business consistent with sound banking and thrift industry practice or (ii) as
set forth on the Company Disclosure Schedule, the Company shall not, nor shall
it permit any of its Subsidiaries to, sell, lease, mortgage, encumber or
otherwise dispose of, any of its assets (including capital stock of
Subsidiaries).
(g) Indebtedness. The Company shall not, nor shall it permit any of its
Subsidiaries to, incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt securities of others, other than in the ordinary courses of
business consistent with past practice (i) short-term indebtedness incurred to
refinance existing short-term indebtedness, (ii) short-term indebtedness of any
Subsidiary of the Company to the Company or another Subsidiary of the Company
or (iii) in the case of NSB, short-term indebtedness consistent with sound
banking and thrift industry practice. Without limiting the foregoing, NSB
shall not extend the maturities beyond one year or otherwise materially change
the terms of its advances from the Federal Home Loan Bank of San Francisco (the
"FHLB").
(h) Other Actions. The Company shall not, nor shall it permit any of its
Subsidiaries to, knowingly or wilfully take any action that would, or
reasonably could be expected to, result in any of its representations and
warranties set forth in this Agreement that are qualified as to materiality
being or becoming untrue, any of such representations and warranties that are
not so qualified being or becoming untrue in any material respect, any of the
conditions to the Merger set forth in Article VI not being satisfied or a
material Violation of any provision of the Stock Option Agreement, or (unless
such action is required by applicable law or sound banking and thrift industry
practice) which could reasonably be expected to adversely affect or delay the
ability of any of Parent, Sub or the Company or their Subsidiaries to obtain
any of the Requisite Regulatory Approvals (as defined in Section 6.01(b))
without imposition of a condition or restriction of the type referred to in
Section 6.02(c).
(i) Advice of Changes; Government Filings. The Company shall confer on a
regular and frequent basis with Parent, report on operational matters and
promptly advise Parent orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, could have, individually or in
the aggregate a Material Adverse Effect on the Company or which would cause or
constitute a material breach of any of the representations, warranties or
covenants of the Company contained herein. The Company shall file all reports
required to be filed by it with the SEC or the Amex between the date of this
Agreement and the Effective Time and shall deliver to Parent copies of all such
reports promptly after the same are filed. The Company and each Subsidiary of
the Company that is a savings bank shall file all reports, applications and
other documents required to be filed with the OTS and any other Regulatory
Authorities between the date hereof and the Effective Time and shall make
available to Parent
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copies of all such reports and other items promptly after the same are filed.
Except where prohibited by applicable statutes and regulations, the Company
shall promptly provide Parent with copies of all other filings made by the
Company with any Governmental Entity in connection with this Agreement, the
Stock Option Agreement or the transactions contemplated hereby or thereby.
(j) Accounting Methods. Except as contemplated by Section 5.09, the Company
shall not change its fiscal year or its methods of accounting in effect at July
1, 1995, except as required by changes in GAAP or regulatory accounting
practices as concurred in by the Company's independent auditors.
(k) Compensation; Benefit Plans Employment Agreement. Except as
contemplated by this Agreement, neither the Company nor any of its Subsidiaries
will (i) declare or pay (or agree to declare or pay) any bonuses or other
special compensation to any directors or officers, (ii) enter into, adopt,
amend or terminate any Company Benefit Plan or any other employee benefit plan
or any agreement, arrangement, plan or policy between such party and one or
more of its directors, officers or employees, (iii) increase in any manner the
compensation or fringe benefits of any of its directors, officers or employees
or provide any other benefit not required by any plan and arrangement as in
effect as of the date hereof (including the granting of bonuses or stock
options, stock appreciation rights, restricted stock, restricted stock units or
performance units or shares), except for normal salary increases in the
ordinary course of business consistent with past practice, (iv) create or,
except as required by law or regulation, amend any Company Stock Plan or grant
any equity based award pursuant to any Company Stock Plan or otherwise, (v)
enter into or renew any contract, agreement, commitment or arrangement
providing for the payment to any director, officer or employee of such party of
compensation or benefits contingent, or the terms of which are materially
altered, upon the occurrence of any of the transactions contemplated by this
Agreement or the Stock Option Agreement (except for those agreements that are
set forth on the Company Disclosure Schedule, which may be renewed on the same
terms and conditions as contained therein), or (vi) enter into or amend any
employment agreement with any employee or director, hire any new employee at
the level of Vice President or above or fill any vacancy created by the
departure (for any reason) of any employee at the level of Vice President or
above, in each case, without previously consulting with Parent.
(l) Tax Matters. From the date hereof until the Effective Time, (i) the
Company and its Subsidiaries will file all Company Returns required to be filed
with any taxing authority in accordance with all applicable laws, (ii) the
Company and its Subsidiaries will timely pay all taxes shown as due and payable
on the respective Company Returns that are so filed and as of the time of
filing, the Company Returns will correctly reflect the facts regarding the
income, business, assets, operations, activities and the status of the Company
and its Subsidiaries in all material respects, and (iii) the Company and its
Subsidiaries will promptly notify Parent of any action, suit, proceeding,
investigation, audit or claim pending against or with respect to the Company or
any Subsidiary in respect of any tax where there is a reasonable possibility of
a determination or decision which would reasonably be expected to have a
significant adverse effect on the Company's tax liabilities or other tax
attributes. The Company shall not, nor shall it permit any of its Subsidiaries
to, make any tax election or settle or compromise any income tax liability.
(m) Settlements, Etc. The Company shall not, nor shall it permit any of its
Subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with sound banking and thrift
industry practice or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Company SEC Documents or incurred since the date of such financial statements
in the ordinary course of business consistent with sound banking and thrift
industry practice.
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(n) Material Contracts. Except in the ordinary course of business
consistent with sound banking and thrift industry practice or as required by
the terms of this Agreement, the Company shall not, nor shall it permit any of
its Subsidiaries to, modify, amend or terminate any material contract, lease or
agreement to which the Company or any Subsidiary is a party or waive, release
or assign any material rights or claims thereunder. Without limiting the
generality of the foregoing, without the prior written consent of Parent, the
Company shall not waive any standstill provision contained in any
confidentiality agreement in existence as of the date hereof between the
Company and any other person. Without the prior written consent of Parent
(which shall not be unreasonably withheld), the Company shall not, nor shall it
permit any of its Subsidiaries to, enter into any contract, agreement or
arrangement which, if entered into prior to the date hereof, would have been
covered by Section 3.01(u) or Section 3.01(cc).
(o) Loans and Commitments. The Company shall not, nor shall it permit
any of its Subsidiaries to, without prior consultation with Parent, make,
renegotiate, renew, increase, extend or purchase any loans, advances or loan
commitments (and the Company and such Subsidiaries shall not make any loans,
advances or commitments to which Parent has reasonably objected), except loans,
advances or commitments of less than U.S.$1,000,000 made in the ordinary course
of business.
(p) Investments. The Company shall not, nor shall it permit any of its
Subsidiaries to, without prior consultation of Parent, make or purchase any
investment of any kind (and the Company and such Subsidiaries shall not make or
purchase any investments to which Parent has reasonably objected), except
investments of less than U.S.$1,000,000 made in the ordinary course of
business.
(q) No Change in Rates. The Company shall not, nor shall it permit any
of its Subsidiaries to, without the prior consent of Parent, offer interest
rates or terms on any category of deposits at any of its branches which are not
consistent with recent practice as disclosed by the Company to Parent, except
as may be necessary in the good faith judgment of the Company in response to
competitive market developments.
(r) General. The Company shall not, nor shall it permit any of its
Subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 4.01.
SECTION 4.02. No Solicitation. (a) The Company agrees that neither it nor
any of its Subsidiaries nor any of the respective officers and directors of the
Company or any of its Subsidiaries shall, and the Company shall direct and
cause its employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to stockholders of the
Company) with respect to a merger, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets,
deposits or any equity securities of, the Company or any of its Subsidiaries
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, except to the extent legally required for the discharge by the
Company's board of directors of its fiduciary duties as advised by such board's
counsel with respect to an unsolicited offer from a third party, engage in any
negotiations concerning or provide any information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties (other than the
Parent) conducted heretofore with respect to any of the foregoing. The Company
will take the necessary steps to inform promptly the appropriate individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 4.02(a). The Company agrees that it will notify the Parent
immediately if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with the Company or any of its
Subsidiaries. The Company also agrees that it promptly shall request each
other person (other than the Parent) that has heretofore executed a
confidentiality agreement in
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connection with its consideration of acquiring the Company or any of its
Subsidiaries to return all confidential information heretofore furnished to
such person by or on behalf of the Company or any of Subsidiaries.
(b) Except to the extent legally required for the discharge by the Company's
board of directors of its fiduciary duties as advised by such board's counsel,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to Parent or Sub, the approval or recommendation by such Board of Directors of
this Agreement or the Merger, (ii) approve or recommend, or propose to approve
or recommend, any takeover proposal or (iii) enter into any agreement with
respect to any takeover proposal.
(c) In addition to the obligations of the Company set forth in Section
4.02(b), the Company promptly shall advise Parent orally and in writing of any
request for information or of any takeover proposal, or any inquiry with
respect to or which could lead to any takeover proposal, the material terms and
conditions of such request, takeover proposal or inquiry and the identity of
the person making any such request, takeover proposal or inquiry. The Company
will keep Parent fully informed of the status and details (including amendments
or proposed amendments) of any such request, takeover proposal or inquiry.
(d) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
the Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company based on the written opinion of independent counsel,
failure to do so would be inconsistent with applicable laws; provided that the
Company does not, withdraw or modify, its position with respect to the Merger
or approve or recommend, or propose to approve or recommend, a takeover
proposal, except as permitted by the last sentence of Section 5.03.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement. The Company will use all
reasonable efforts to prepare and file promptly a preliminary Proxy Statement
with the SEC and will use all reasonable efforts to respond to any comments of
the SEC or its staff and to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the SEC or its staff. The Company will notify
Parent promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Proxy Statement or the Merger. If at any time prior to the Company
Stockholders Meeting there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company will promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company will not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
SECTION 5.02. Access to Information. The Company shall, and shall cause
each of its Subsidiaries to, afford to Parent and to the officers, employees,
accountants, counsel and other representatives and advisors of Parent,
reasonable access, during normal business hours during the period prior to the
Effective Time, to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to Parent (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal or
state securities laws or Federal or state banking or thrift laws (other than
reports or documents which the Company or subsidiary is not permitted to
disclose under applicable law) and (b) all other information concerning its
business, properties and
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personnel as Parent may reasonably request. Parent will, and will cause its
advisors and representatives to, hold any such information which is nonpublic
in confidence to the extent required by, and in accordance with, the terms of
the Confidentiality Agreement dated as of January 17, 1995, between the Company
and Parent (the "Confidentiality Agreement"). No investigation by either
Parent or Sub shall affect the representations and warranties of the Company,
and each such representation and warranty shall survive such investigation.
During the period from the date of this Agreement to the Effective Time, the
Company shall promptly furnish to Parent as the same become available and shall
cause one or more of its designated representatives with appropriate knowledge
of the details reflected in or underlying such financial statements and budgets
to confer on a regular and frequent basis with Parent: (w) copies of all
monthly and quarterly interim financial statements (including budgets and
variances from budgets), (x) detailed information regarding monthly deposit
flow and FHLB funding, (y) copies of monthly loan production reports, and (z)
copies of monthly reports regarding sales of securities products. The Company
shall promptly notify Parent of any material change in its business or
operations and of any complaints, investigations or hearings (or communications
indicating that the same may be contemplated) by any Governmental Entity, or
the institution of the threat of material litigation involving the Company or
its Subsidiaries, and shall keep Parent fully informed of all such events.
SECTION 5.03. Company Stockholders Meeting. The Company shall duly call,
give notice of, convene and hold the Company Stockholders Meeting for the
purpose of obtaining the Company Stockholder Approval as soon as practicable
after the date on which the definitive Proxy Statement has been mailed to the
Company's stockholders. In any event, the Company will use all reasonable
efforts to promptly cause the Stockholders Meeting to be held. The Company
will, through its Board of Directors, recommend to its stockholders that they
grant the Company Stockholder Approval, unless, as a result of an unsolicited
Acquisition Proposal, the board of directors determines in good faith after
consultation with independent counsel and Kaplan Associates, Inc. or an
investment banking firm of recognized standing, that to so recommend would
constitute a breach of the fiduciary obligations of the board of directors of
the Company to the stockholders of the Company.
SECTION 5.04. Legal Conditions to Merger. Subject to the terms and
conditions of this Agreement, each of the Company and Parent shall, and shall
cause its Subsidiaries to, use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including (a)
the obtaining of any necessary consent, authorization, order or approval of, or
any exemption by, any Governmental Entity and/or any other public or private
third party which is required to be obtained by such party or any of its
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement (including any subsequent merger or other
combination of the Company and NSB with and into Parent) and the Stock Option
Agreement and the making or obtaining of all necessary filings and
registrations with respect thereto, (b) the defending of any lawsuits or other
legal proceedings, whether judicial, administrative or regulatory, challenging
this Agreement or the Stock Option Agreement, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (c) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement and the Stock Option
Agreement; provided, however, that a party shall not be obligated to take any
action pursuant to the foregoing if the taking of such action or such
compliance or the obtaining of such consent, authorization, order, approval or
exemption would, in such party's reasonable opinion, (A) be materially
burdensome to such party and its Subsidiaries taken as a whole in the context
of the transactions contemplated by this Agreement or impact in such a
materially adverse manner the economic or business benefits of the transactions
contemplated by this Agreement as to render inadvisable the consummation of the
Merger or (B) result in the imposition of a condition or restriction on such
party or on the Surviving Corporation of the type referred to in Section
6.02(c). Each of the Company and Parent will promptly cooperate with and
furnish information to the other in connection with any such burden suffered
by, or requirement imposed upon, any of them or any of their Subsidiaries in
connection with the
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foregoing. The Company will use all commercially reasonable efforts to operate
the Company and the Subsidiaries and their respective businesses in a manner
designed to achieve satisfaction of all of the conditions precedent set forth
in Sections 6.01 and 6.02. In connection with and without limiting the
foregoing, the Company and its Board of Directors shall (x) take all action
necessary to ensure that any state takeover statute or similar statute or
regulation (including Section 203 of the DGCL) is not applicable to the Merger,
this Agreement, the Stock Option Agreement or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement and (y) if any
state takeover statute or similar statute or regulation becomes applicable to
the Merger, this Agreement, the Stock Option Agreement or any of the other
transactions contemplated by this Agreement or the Stock Option Agreement, take
all action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement, the Stock Option Agreement or any of the other
transactions contemplated by this Agreement or the Stock Option Agreement.
SECTION 5.05. Employee Matters. (a) Parent shall honor in accordance with
their terms the employment, salary continuation, severance and other contracts
to which employees of the Company are a party that are set forth on the Company
Disclosure Schedule and shall also honor the terms and provisions of the
Company's severance policy for its employees as heretofore furnished to Parent,
and shall honor all provisions for vested benefits and rights existing as of
the Effective Time under the Company Benefit Plans. Notwithstanding the
foregoing, Parent shall be obligated at the Effective Time to make payments
with respect to the separation from employment in connection with a change of
control of the Company under employment and severance contracts to the
following employees only in the respective amounts set forth in the Company
Disclosure Schedule -- Granville Stark, Greg Jahn, Bertha Balfour and Cathy
Simondi. In addition, notwithstanding the foregoing, Parent shall be obligated
at the Effective Time to make payments to Alfred Alys with respect to his
consulting and non-competition agreement and employment agreements only in the
amount set forth in the Company Disclosure Schedule. At the Effective Time,
Parent shall enter into a Consulting Agreement with Alfred Alys in
substantially the form heretofore agreed upon by the parties. Concurrently
with the execution and delivery of this Agreement, the Company has delivered to
Parent the written agreement of each of the individuals specified in the
preceding sentence that their maximum entitlement under such contracts is as
specified in the Company Disclosure Schedule.
(b) Parent agrees to pay former employees of the Company and its
Subsidiaries who are retained following completion of the Merger by Parent
("Continuing Employees") at their base salaries (excluding bonus plans) in
effect on the Closing Date, subject to Parent's regular performance review
process applicable to Parent's employees generally. Nothing herein shall
create any obligation on the part of Parent to retain any such employees or to
refrain from reassigning any such employee as Parent shall determine is
necessary or appropriate.
(c) Continuing Employees will participate in the employee benefit, welfare
and related plans and programs of Parent and its Subsidiaries on the same basis
as other similarly situated employees of Parent and its Subsidiaries with the
Continuing Employees (i) receiving past service credit for their employment
with the Company and its Subsidiaries (and predecessors thereto) for
eligibility, participation and vesting in the plans, programs and arrangements
of Parent and its Subsidiaries including, but not limited to, qualified
retirement plans, vacation, sick time and leave, with past service credit
applicable to eligibility and vesting excluded from consideration for purposes
of benefit determination, and (ii) not being subject to any waiting period or
preexisting condition exclusion in connection with medical, dental, life and
disability coverage and receiving full credit for their prior co-payments and
deductibles.
(d) Notwithstanding any other provisions contained in this Agreement, the
Company may effect repayment prior to the Effective Time, in full or in part,
of the ESOP Debt, provided, however, that to the extent any ESOP Debt is
outstanding and not so repaid at the Effective Time, cash received by the ESOP
Trustee as a result of the Merger with respect to unallocated shares of Company
shall be applied by the trustee to the repayment of ESOP Debt
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and the balance of the cash received by the ESOP Trustee as a result of the
Merger with respect to unallocated shares of Company shall be allocated to the
accounts of all participants and beneficiaries in the ESOP who have accounts
under the ESOP in proportion to the account balances of such participants and
beneficiaries as they existed as of the Effective Time. Prior to the Effective
Time, the ESOP may be amended to provide for (i) full vesting of benefits by
participants and (ii) elimination of any requirement for a participant to be
employed on the last day of the Plan Year to receive an employer contribution
or other annual additions or allocations. Upon the making of all allocations
herein, the ESOP shall be terminated and the account balances therein will be
distributed to participants or their beneficiaries, with the right of tax-free
rollover, to the extent permitted by law, to an individual retirement account
or another tax-qualified plan of Parent that accepts such a rollover, at the
election of the distributee.
(e) Prior to the Effective Time, the Company may establish and fund for the
benefit of Alfred Alys a rabbi trust sufficient to fund fully the Company's
obligations under the Salary Continuation Agreement for Alfred Alys. Such
trust shall be established pursuant to the execution and delivery of a trust
agreement substantially in the form of Exhibit B hereto. Mr. Alys may
designate the trustee and depository for such trust.
SECTION 5.06. Stock Options and the ESOP; Profit Sharing Plan. (a) As soon
as practicable following the date of this Agreement, the Board of Directors of
the Company (or, if appropriate, any committee administering the Company Stock
Plans) shall adopt such resolutions or take such other actions as are required
to provide for the cancellation of all outstanding Company Employee Options
upon the Effective Time, in exchange for a cash payment by the Company of an
amount equal to (i) the excess, if any, of (x) the Merger Consideration per
share over (y) the exercise price per share of Company Common Stock subject to
such Company Employee Option, multiplied by (ii) the number of shares of
Company Common Stock subject to such Company Employee Option for which such
Company Employee Option shall not theretofore have been exercised, whether or
not then exercisable.
(b) All amounts payable pursuant to this Section 5.06 shall be subject to
any required withholding of taxes and shall be paid without interest.
(c) The Board of Directors of the Company (or, if appropriate, any committee
administering the Company Stock Plans) shall adopt such resolutions or take
such actions as are required to terminate the Company Stock Plans other than
the ESOP as of the Effective Time, to delete as of the Effective Time the
provision in any other Company Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in
respect of any capital stock of the Company and to ensure that following the
Effective Time no holder of a Company Stock Option or any participant in any
Company Stock Plan or other Company Benefit Plan shall have any right
thereunder to acquire any capital stock of the Company or the Surviving
Corporation.
(d) In addition, the 401(k) and profit sharing plan may be terminated
prior to the Effective Time and the account balances therein may be distributed
to participants or their beneficiaries, with the right of tax free rollover, to
the extent permitted by law, to an individual retirement account or another
tax-qualified plan of Parent that accepts such a rollover, at the election of
the distributee.
SECTION 5.07. Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expense, except that in the case of a
termination pursuant to Section 7.01(b)(ii), 7.01(c)(iv) or 7.01(c)(v), the
non-terminating party shall pay on demand to the terminating party in
immediately available funds all of the terminating party's out of pocket
expenses incurred in connection with the transactions contemplated by this
Agreement up to but not exceeding $250,000.
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SECTION 5.08. Indemnification, Exculpation and Insurance. (a) Parent and
Sub agree that, for a period of six years (or the period of the applicable
statute of limitations, if longer) from the Effective Time, all rights to
indemnification and exculpation from liability for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or
former directors or officers of the Company and its subsidiaries (such persons,
"Indemnified Persons") as provided in their respective certificate or articles
of incorporation (or similar constitutive documents) or by-laws or otherwise
shall survive the Merger and shall not be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of any
such Indemnified Persons. Parent will cause to be maintained for a period of
six years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy (a copy of which has heretofore
been delivered to Parent) to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") for all persons who
are directors and officers of the Company or its Subsidiaries on the date of
this Agreement, so long as the aggregate premium therefor would not exceed
$75,000 over said six year period (the "Maximum Aggregate Premium") provided,
however, that Parent may, in lieu of maintaining such existing D&O Insurance as
provided above, cause comparable coverage to be provided under any policy
maintained for the benefit of Parent or any of its subsidiaries, so long as the
material terms thereof are no less advantageous than the existing D&O
Insurance. If the existing D&O Insurance expires, is terminated or canceled
during such six-year period, Parent will use all commercially reasonable
efforts to cause to be obtained as much D&O Insurance as can be obtained for
the remainder of such period for an annualized premium not in excess of the
Maximum Aggregate Premium, on terms and conditions no less advantageous than
the existing D&O Insurance.
(b) The provisions of this Section 5.08 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and each Indemnified
Party's heirs and representatives.
SECTION 5.09. Company Accruals and Reserves. Prior to the Closing Date, at
the request of Parent, the Company shall review and, to the extent consistent
with GAAP and the accounting rules, regulations and interpretations of the SEC
and its staff, modify and change its loan, accrual and reserve policies and
practices (including loan classifications and levels of reserves and accruals)
to (a) reflect the Surviving Corporation's and Parent's plans with respect to
the conduct of the Company's business following the Merger and (b) make
adequate provision for the costs and expenses relating thereto.
Notwithstanding the foregoing, the Company shall not be obligated to take in
any respect any such action pursuant to this Section 5.09 unless and until
Parent acknowledges that all conditions to its obligation to consummate the
Merger have been satisfied.
SECTION 5.10. Letters of Accountants to the Company. The Company shall use
all reasonable efforts to cause to be delivered to Parent letters of KPMG Peat
Marwick LLP ("PM"), the Company's independent auditors, dated a date within two
business days (as defined in Section 8.03(c)) before the date on which the
Proxy Statement relating to the Company Stockholders Meeting is mailed to the
stockholders of the Company and two business days before the Closing Date, and
addressed to Parent, in form and substance reasonably satisfactory to Parent,
and in scope and substance consistent with applicable professional standards
for letters delivered by independent public accountants in connection with
proxy statements similar to the Proxy Statement sent to the Company's
stockholders in connection with the transactions contemplated hereby.
SECTION 5.11. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of the Company or Parent, the proper officers and directors of each
party to this Agreement shall take all such necessary action.
SECTION 5.12. Parent Covenants; Other Actions. Parent shall not, nor shall
it permit any of its Subsidiaries to, take any action that would, or reasonably
could be expected to, result in any of its representations and warranties set
forth in this Agreement that are qualified as to
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materiality being or becoming untrue, any of such representations and
warranties that are not so qualified being or becoming untrue in any material
respect, any of the conditions to the Merger set forth in Article VI not being
satisfied or a material Violation of any provision of the Stock Option
Agreement, or (unless such action is required by applicable law or sound
banking or thrift industry practice) which could reasonably be expected to
adversely affect or delay the ability of any of Parent, Sub or the Company or
their Subsidiaries to obtain any of the Requisite Regulatory Approvals without
imposition of a condition or restriction of the type referred to in Section
6.02(c).
SECTION 5.13 Joint Implementation Team. Promptly following the execution of
this Agreement, Parent and the Company shall each identify a selected group of
their respective personnel that shall constitute a "Joint Implementation Team"
who shall be available to Parent and the Company, respectively, at reasonable
times (limited to normal operating hours) to provide information and assistance
in connection with Parent's investigation of matters relating to the Company
and the Subsidiaries, as well as consultation regarding the combined operations
of the parties following the Closing.
SECTION 5.14 Employee Training. Not later than 30 days prior to the Closing
Date, the Company shall permit Parent to train and conduct orientation sessions
for the employees of the Company and the Subsidiaries in respect of Parent's
systems, policies and procedures and the Company shall, as scheduled by Parent
for reasonable periods of time and subject to the Company's reasonable
approval, such that the Company's ongoing operations shall not be materially
disrupted, excuse such employees from their duties for the purpose of training
and orientation by Parent.
SECTION 5.15 Environmental, ADA and Seismic Investigations. Promptly
following the execution of this Agreement, the Company shall (a) provide Parent
and Parent's consultants with access to each of the properties of the Company
and the Subsidiaries, including all real property and the improvements thereon
(the "Properties") and to pertinent information, records or documents within
the possession, custody or control of the Company or the Subsidiaries, at times
reasonably satisfactory to the Company, (b) permit Parent's consultants to
investigate the Properties in order to prepare Preliminary Environmental
Assessment Reports of a scope reasonably satisfactory to Parent (and such
additional environmental reports as Parent may reasonably request in light of
the findings in the Preliminary Environmental Assessment Reports) regarding
each of the Properties owned by the Company or the Subsidiaries, (b) permit
Parent and its consultants to conduct an investigation of each of the
Properties as to the compliance thereof with the Americans With Disabilities
Act of 1990 and applicable regulations promulgated in accordance therewith (the
"ADA"), and (c) permit Parent and its consultants to conduct an investigation
of each of the Properties as to the compliance thereof with applicable seismic
guidelines, standards, laws and regulations. The first $20,000 of the cost of
the investigations and reports contemplated by this Section 5.15 shall be borne
equally by the Company and Parent, with the excess over $20,000 being borne
solely by Parent. Parent will provide the Company with copies of any reports
it receives pursuant to this Section.
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SECTION 5.16. Certificates re Financial Data. The Company shall deliver to
Parent, no later than 15 days after the end of the month to which each such
certificate relates, certificates in form, substance and detail reasonably
satisfactory to Parent, dated as of the last day of each month after the date
hereof to the Effective Time (and, for delivery on the Closing Date, a
certificate dated as of the Closing Date), each signed on behalf of the Company
by its Chairman or Chief Executive Officer and its Chief Financial Officer or
other executive officer performing duties equivalent to those of a "chief
financial officer" certifying reasonably and in good faith as of such dates (i)
the Company Net Worth (as defined in Section 8.03(c)(v)) and (ii) the Deposit
Balance (as defined in Section 7.01(c)(iv)).
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Effective Time of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval shall
have been obtained.
(b) Other Approvals. Other than the filing provided for by Section 1.03,
all authorizations, consents, orders or approvals of, or declarations or
filings with, and all expirations of waiting periods imposed by, any
Governmental Entity (all the foregoing, "Consents") which are necessary for the
consummation of the Merger, other than Consents the failure to obtain which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Surviving Corporation or Parent or which would not, individually or in the
aggregate, materially adversely affect the consummation of the transactions
contemplated hereby, shall have been filed, occurred or been obtained (all such
Consents and the lapse of all such waiting periods being referred to as the
"Requisite Regulatory Approvals"), and all such Requisite Regulatory Approvals
shall be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order or decree issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that each of the parties shall have used reasonable efforts to prevent
the entry of any such injunction or other order or restraint and to appeal as
promptly as possible any injunction or other order or restraint that may be
entered. There shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal.
SECTION 6.02. Conditions to Obligations of Parent. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Parent and Sub:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct (subject to
Section 3.00) in all material respects both as of the date of this Agreement
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Agreement, and Parent shall have
received a certificate signed on behalf of the Company by its Chairman or Chief
Executive Officer and its Chief Financial Officer or other executive officer
performing duties equivalent to those of a "chief financial officer" to such
effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the
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Company by its Chairman or Chief Executive Officer and its Chief Financial
Officer or other executive officer performing duties equivalent to these of a
"chief financial officer" to such effect.
(c) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which, in connection with
the grant of a Requisite Regulatory Approval, imposes any requirement upon
Parent, the Company or the Surviving Corporation or their Affiliates which,
individually or in the aggregate, would (i) result in a Material Adverse Effect
on Parent, the Surviving Corporation or their Affiliates, or (ii) would reduce
the benefits of the transactions contemplated by this Agreement to Parent in so
significant a manner that Parent, in its reasonable good faith judgment, would
not have entered into this Agreement had such condition or requirement been
known at the time hereof.
(d) Company Stock Options and Company Stock Plans. The Company shall have
duly effected, as of the Effective Time, the cancellation of all outstanding
Company Stock Options, whether vested or not, the termination of the Company
Stock Plans and the deletion of any provision in any other Company Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any subsidiary of the Company or any interest in respect of any
capital stock of the Company or any Subsidiary of the Company.
(e) Letter of the Company's Independent Accountants; Results of Audit.
Parent shall have received in accordance with the terms hereof the duly
executed letters of PM, prepared pursuant to the provisions of Section 5.10.
(f) Opinion of Counsel. Parent shall have received the duly executed
opinion of Silver, Freedman & Taff, or other counsel to the Company, dated the
Closing Date, covering the matters set forth in Exhibit C hereto and reasonably
satisfactory to Parent and such other customary closing documents for
transactions of this type as Parent shall reasonably request.
(g) Litigation, Etc. There shall be no pending or threatened material
actions or proceedings by any person against the Parent, the Sub, the Company,
or any Subsidiary of the Company, or any director, officer or employee of any
of the foregoing challenging or in any way or in any manner seeking to restrict
or prohibit the transactions contemplated hereby or seeking to obtain any
damages against any person as a result of the transactions contemplated hereby.
(h) No Material Adverse Effect. Since the date of this Agreement, there
shall have occurred no Material Adverse Effect with respect to the Company.
(i) Certain Expense Reports. At least two business days prior to the
Effective Time, all attorneys, accountants, investment bankers and other
advisors and agents of the Company and its Subsidiaries shall have submitted to
the Company (with a copy to the Parent) estimates of their fees and expense for
all services rendered in any respect in connection with the transactions
contemplated hereby to the extent not already paid, and based on such
estimates, the Company shall have prepared and submitted to Parent a summary of
such fees and expenses with respect to the transactions contemplated hereby.
At the Effective Time, such advisors shall have submitted their final bills for
such fees and expenses to the Company and its Subsidiaries for services
rendered, with a copy delivered to Parent, and based on such summary, the
Company shall have prepared and submitted to Parent a final calculation of such
fees and expenses.
(j) Contingent Liabilities. Except for matters described in the Company
Disclosure Schedule (and as to such matters only to the extent of facts made
available to Parent on or prior to the date of this Agreement), the Company, at
the time of the Closing, shall not be subject to any suit, action or
proceeding, or any investigation or inquiry by any Government Entity (such
suits, actions or proceedings, or any such investigations or inquiries, being
collectively referred to herein as "proceedings"), which shall be pending or,
to the knowledge of the Company, threatened, against or affecting the Company
or any Subsidiary of the Company, nor shall there
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by any potential unasserted claim or liability not heretofore disclosed in the
Company Disclosure Schedule (whether or not such claim or liability is required
to be accrued or disclosed under SFAS Nos. 5) unless Parent shall have
determined, in the exercise of its reasonable business judgment, that each
proceeding, claim or liability likely would not have either individually or in
the aggregate with all other such proceedings, claims or liabilities, a
Material Adverse Effect on the Company.
(k) Certain Other Approvals. Parent shall have received the approval of the
FDIC under 12 U.S.C. Section 1815(d)(3), or under any successor provision, (the
"Oakar" statute) so that the "exit fee" provided for therein shall not be
applicable to the transactions contemplated hereby or to any subsequent merger
or other combination of NSB with and into Parent and shall also have received
all requisite approvals from the California State Banking Department, the FDIC
and the OTS and any other Governmental Entities having jurisdiction for the
merger or other combination of the Company and NSB with and into Parent
promptly following the Effective Time.
(l) Non-Competition Agreements. Parent shall have received duly executed
non-competition agreements, in substantially the form heretofore agreed to
between Parent and the Company, from those individuals listed on Exhibit D
hereto.
(m) Consents Under Agreements. The consent, approval or waiver of each
person (other than Governmental Entities) whose consent or approval shall be
required in order to permit the succession by Parent and the Surviving
Corporation in connection with the Merger (and any subsequent merger or other
combination of NSB with and into Parent) to any material obligation, right or
interest of the Company and its Subsidiaries under any material loan or credit
agreement, note, mortgage, indenture, lease (and all branch leases shall be
deemed to be material for purposes of this Section), license or other agreement
or instrument shall have been obtained.
(n) Headquarters and Administrative Offices. The existing leases of the
Company's properties at (i) 20 Petaluma Boulevard South, Petaluma, California,
(ii) 450 Center Street, Healdsburg, California, and (iii) 6301 State Farm
Drive, Rohnert Park, California shall be amended on terms satisfactory to
Parent to implement the modifications set forth in the letter agreement of even
date herewith between the Company and the lessors of such properties.
(o) Certificates re Financial Data. Parent shall have received certificates
dated as of the last day of each month after the date hereof to the Effective
Time and a certificate, dated as of the Closing Date, signed on behalf of the
Company by its Chairman or Chief Executive Officer and its Chief Financial
Officer or other executive officer performing duties equivalent to those of a
"chief financial officer" certifying as of such dates (i) the Company Net Worth
(as defined in Section 8.03(c)(v)) and (ii) the Deposit Balance (as defined in
Section 7.01(c)(iv)). The monthly certificates shall be received no later than
10 days after the end of the month to which each such certificate relates.
SECTION 6.03. Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger are subject to the satisfaction of the
following conditions unless waived by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub set forth in this Agreement that are qualified as to materiality
shall be true and correct (subject to Section 3.00) in all material respects,
both as of the date of this Agreement and (except to the extent such
representations speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except as otherwise contemplated by this
Agreement, and the Company shall have received a certificate signed on behalf
of Parent and Sub by their respective Chairman or Chief Executive Officers and
their respective Chief Financial Officers or other executive officers
performing duties equivalent to these of a "chief financial officer" to such
effect.
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(b) Performance of Obligations of Parent and Sub. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement and the Stock Option Agreement at or prior to the
Closing Date, and the Company shall have received a certificate signed on
behalf of Parent and Sub by their respective Chairman or Chief Executive
Officers and their respective Chief Financial Officers or other executive
officers performing duties equivalent to these of a "chief financial officer"
to such effect.
(c) Opinion of Counsel. The Company shall have received the duly executed
opinion of Pillsbury Madison & Sutro, counsel to Parent, dated the Closing
Date, substantially in the form of Exhibit E hereto.
ARTICLE VII
Termination and Amendment
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval is received:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company upon written notice to the other party:
(i) if (1) the OTS, or any other Governmental Entity the approval of
which is required to permit consummation of the Merger or the other
transactions contemplated hereby shall have issued an order denying approval
of the Merger or such other transactions or (2) any Governmental Entity of
competent jurisdiction shall have issued a final permanent order enjoining or
otherwise prohibiting the consummation of the Merger or the other
transactions contemplated hereby and in any such case under either clause (1)
or (2) the time for appeal or petition for reconsideration of such order
shall have expired without such appeal or petition being granted;
(ii) if the Company, on the one hand, or Parent or Sub, on the other
hand, materially breaches any of its covenants and obligations or
representations and warranties hereunder or under the Stock Option Agreement
and such breach is not cured after 30 days' written notice thereof is given
to the party committing such breach by the other party; provided, however,
that neither party shall have the right to terminate this Agreement pursuant
to this Section 7.01(b)(ii) unless the breach of covenant, obligation,
representation or warranty, together with all other such breaches, would
entitle the party other than the party bound by such covenant or obligation
not to consummate the transactions contemplated hereby or the party receiving
such representation or warranty not to consummate the transactions
contemplated hereby under Section 6.02(a) (in the case of a breach of
representation or warranty by the Company) or Section 6.03(a) (in the case of
a breach of representation or warranty by Parent and Sub);
(iii) if the Merger shall not have been consummated on or before
August 31, 1996, unless the failure to consummate the Merger is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement; or
(iv) if, upon a vote at a duly held Company Stockholders Meeting,
the Company Stockholder Approval shall not have been obtained;
(c) by either Parent or Sub upon written notice to the Company:
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(i) if, prior to the Company Stockholders Meeting, a takeover
proposal is commenced, publicly proposed, publicly disclosed or communicated
to the Company (or the willingness of any person to make a takeover proposal
is publicly disclosed or communicated to the Company) and (A) the Company
Stockholder Approval is not obtained at the Company Stockholders Meeting, (B)
the Company Stockholders Meeting does not occur prior to June 30, 1996 or (C)
the Board of Directors of the Company shall have withdrawn or modified its
approval or recommendation of the Merger or this Agreement, or approved or
recommended any takeover proposal;
(ii) if (A) the FDIC shall have issued an order denying approval of
the application of Parent for an order under the Oakar statute with respect
to any subsequent merger or other combination of NSB with and into Parent,
(B) any repeal or change to the Oakar statute occurs which has the effect of
making the exit fee provided therein or any comparable fee applicable to the
transactions contemplated hereby or to any subsequent merger or other
combination of NSB with and into Parent, (C) the California State Banking
Department or the OTS or the FDIC or any other Governmental Entity having
jurisdiction shall have issued an order under any other applicable statute or
regulation denying approval of any such merger or other combination of NSB
with and into Parent promptly following consummation of the transactions
contemplated hereby, or (D) the FRB shall have refused to grant the waiver
contemplated by Section 3.02(b)(iii)(G);
(iii) if, after the date hereof, there has occurred any Material
Adverse Effect (or any development or circumstance that might reasonably be
expected to result in a Material Adverse Effect) with respect to the Company,
provided that Parent shall have given 30 days' written notice of such
termination to the Company and the Company shall not have remedied such event
by the end of such 30 day period;
(iv) if, as of the Closing Date the principal balance of all deposit
liabilities, including, accounts accessible by negotiable orders of
withdrawal, demand deposits, passbook accounts, certificates of deposit, but
excluding all brokered deposits and depository accounts with balances greater
than U.S.$100,000, of the Company and its Subsidiaries ("Deposit Balance")
shall be less than U.S.$230,000,000; or
(v) if, as of the Closing Date, Company Net Worth shall be less than
U.S.$34,000,000.
SECTION 7.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, and there shall be no
liability or obligation on the part of Parent, Sub, the Company or their
respective officers or directors, except that any such termination shall be
without prejudice to the rights of any party hereto arising out of the willful
breach by any other party of any covenant or obligation or willful breach of
any warranty or representation contained in this Agreement, and except (a) with
respect to Section 3.01(r), Section 3.02(e), Section 5.07, this Section 7.02
and Section 8.05, and (b) with respect to the representations and warranties
contained in Sections 3.01 and 3.02 insofar as such representations and
warranties relate to the Stock Option Agreement (but only until the termination
of the Stock Option Agreement).
SECTION 7.03. Amendment. This Agreement may be amended by the parties
hereto at any time before or after the Company Stockholder Approval is
received, but, after receipt of the Company Stockholder Approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that, notwithstanding anything to the contrary contained in this
Section
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7.03, Parent may from time to time without the consent of the Company increase
the amount (but not change the nature) of the Merger Consideration, and any
provisions inconsistent with such right herein or in any agreement referred to
herein are hereby deemed superseded to the extent of such inconsistency.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) subject
to the proviso of Section 7.03, waive compliance with any of the covenants,
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require, in the case of Parent,
Sub or the Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.02. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Bank of the West
180 Montgomery Street
San Francisco, CA 94104
Attention: President
Facsimile: (415) 837-1405
with copies to:
Rodney R. Peck, Esq.
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Facsimile: (415) 983-1200
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(b) if to the Company, to:
Northbay Financial Corporation
1360 Redwood Way
Petaluma, California 94954
Attention: Mr. Alfred A. Alys
President and Chief Executive Officer
Facsimile: (707) 792-7406
with a copy to:
Robert Lipsher, Esq.
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor
Washington, D.C. 20005
Facsimile: (202) 682-0354
SECTION 8.03. Definitions; Interpretation. (a) As used in this Agreement,
(i) any reference to any event, change or effect being "material" with respect
to any entity means an event, change or effect which is material in relation to
the businesses, assets, properties, liabilities, results of operations,
financial condition or prospects of such entity and its Subsidiaries, taken as
a whole, (ii) the term "Material Adverse Effect" means, with respect to the
Company, Parent or Sub, a material adverse effect (whether or not required to
be accrued or disclosed under SFAS No. 5) on the Condition of such party and
its Subsidiaries, taken as a whole, or on the ability of such party to perform
its obligations hereunder or to consummate the transactions hereby contemplated
by June 30, 1996 or, except for purposes of determining satisfaction of the
conditions set forth in Section 6.02, under the other agreements contemplated
hereby (provided that in determining whether a Material Adverse Effect shall
have occurred, (A) the Transaction Costs and the Company Accruals and Reserves
(each as defined in Section 8.03(c)) shall be disregarded and (B) there shall
be excluded any effect the cause of which may result or shall have resulted
from changes to laws and regulations, generally accepted accounting principles
or regulatory accounting principles or changes in interest rates or economic
conditions applicable to depository institutions generally, or costs and
expenses relating to the transactions contemplated by this Agreement, the
impact on the Company's financial statements of the change in control,
severance, salary continuation and other benefits specified in Section 5.05 and
set forth in the Company Disclosure Schedule, any recapture of the Company's
tax bad debt reserve, any special assessment imposed on SAIF-insured
institutions after the date hereof), and (iii) the term "person" means an
individual, corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
(b) When a reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article, Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined herein.
The definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
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(c) As used elsewhere in this Agreement, the following terms shall have
the meaning set forth below:
(i) "Affiliate" shall mean, with respect to any person, any person that,
directly or indirectly, controls or is controlled by or is under common control
with such person.
(ii) "Business Day" shall mean any day, other than Saturday or Sunday or any
other day on which commercial banks in the State of California are authorized
or required by law to be closed.
(iii) "Company Accruals and Reserves" shall mean any accruals and reserves
adopted by the Company pursuant to the request of Parent under the terms of
Section 5.09 or otherwise relating to the Merger or required pursuant to this
Agreement.
(iv) "Company Net Income after April 30, 1996" shall mean the consolidated
net income of the Company earned after April 30, 1996 and up to the day next
preceding the Effective Time as appearing on the financial statements of the
Company after April 30, 1996, determined in accordance with GAAP, provided that
in determining the amount of such net income, the amount of the Transaction
Costs, any special assessment imposed on SAIF-insured institutions, any
recapture of NSB's tax bad debt reserve, any costs or expenses relating to the
change in control, severance, salary continuation and other benefits specified
in Section 5.05 and any Company Accruals and Reserves shall be disregarded.
(v) "Company Net Worth" shall mean the sum of the Company Common Stock,
paid-in capital and retained earnings accounts as such accounts would appear on
a balance sheet of the Company prepared in accordance with GAAP, provided that
in determining the amount of such net worth, the amount of the Transaction
Costs, any special assessment imposed on SAIF-insured institutions, any
recapture of NSB's tax bad debt reserve, any costs or expenses relating to the
change in control, severance, salary continuation and other benefits specified
by Section 5.05 and any Company Accruals and Reserves shall be disregarded.
(vi) "Condition" shall mean the financial condition, assets, businesses,
results of operations or prospects of any party hereto.
(vii) "GAAP" shall mean generally accepted accounting principles in the
United States.
(viii) "Net Worth Floor" shall mean:
U.S.$35,000,000 in the event the Closing occurs on or after April
30, 1996;
U.S.$34,850,000 in the event the Closing occurs between March 31,
1996 and April 29, 1996 (dates inclusive);
U.S.$34,700,000 in the event the Closing occurs between February 29,
1996 and March 30, 1996 (dates inclusive);
U.S.$34,550,000 in the event the Closing occurs between January 31,
1996 and February 28, 1996 (dates inclusive); and
U.S.$34,400,000 in the event the Closing occurs between December 31,
1995 and January 30, 1996 (dates inclusive).
(ix) "Subsidiary" shall mean, in the case of either Parent or the Company,
any corporation, association or other entity in which it owns or controls,
directly or indirectly, 25% or more of the outstanding voting securities or 25%
or more of the total equity interest.
(x) "Transaction Costs" shall mean the amount of the out-of-pocket
expenses incurred by the Company and its Subsidiaries in connection with the
transactions hereby contemplated (but not to exceed, for purposes of this
definition, U.S.$827,000.)
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SECTION 8.04. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
SECTION 8.05. Entire Agreement; No Third-Party Beneficiaries; Rights of
Ownership. Except for the Confidentiality Agreement and the letter agreement
dated October 17, 1995 between Parent and the Company, this Agreement
(including the documents and the instruments referred to herein, including the
Stock Option Agreement, the Confidentiality Agreement, and any other agreement
among the parties entered into contemporaneously herewith) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and of the Confidentiality Agreement, provided that the Confidentiality
Agreement shall survive the execution and delivery of this Agreement, and,
except to the extent specified in Sections 5.05, 5.06, 5.08 and 8.12, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. The parties hereby acknowledge that, except as otherwise
specifically provided in the Stock Option Agreement or as hereinafter agreed to
in writing, neither Parent nor Sub shall have the right to acquire or shall be
deemed to have acquired shares of Company Common Stock pursuant to the Merger
until consummation thereof.
SECTION 8.06. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of California, without regard to any
applicable principles of conflicts of law, except that the Merger and the
effect thereof shall be governed by the DGCL.
SECTION 8.07. Limitations on Remedies. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or the
Stock Option Agreement or part hereof or thereof to be null, void or
unenforceable, or order any party to take any action inconsistent herewith or
not to take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or thereof or to any
other remedy, including money damages, for breach hereof or thereof or of any
other provision of this Agreement or the Stock Option Agreement or part hereof
or thereof as a result of such holding or order. This provision is not
intended to render null or unenforceable any obligation hereunder that would be
valid and enforceable if this provision were not in this Agreement.
SECTION 8.08. Publicity. Except as otherwise required by law or the rules
of the American Stock Exchange, so long as this Agreement is in effect, neither
the Company nor Parent shall, or shall permit any of its subsidiaries to, issue
or cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement or the Stock Option
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.
SECTION 8.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, and any such assignment that is
not so consented to shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
SECTION 8.10. Enforcement. Subject to Section 8.07, the parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, subject to Section 8.07,
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any Federal court located in the State of California or in
any California state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of
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any Federal court located in the State of California or any California state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court.
SECTION 8.11. Certain Proxies. Concurrently with the execution and delivery
of this Agreement, Parent has received irrevocable proxies from the directors
and executive officers of the Company listed on Exhibit F hereto authorizing
the voting by Parent or its designee of their shares of common stock of the
Company at the Company Stockholders' Meeting in favor of the transactions
contemplated hereby.
SECTION 8.12. Director Health Coverage. Parent and Sub agree that, for a
period of two years following the Effective Time, Parent will make or cause to
be made monthly payments in respect of the health insurance premiums for
medical, dental and vision care coverage for each of the directors of the
Company (and their spouses) in office at the time this Agreement is executed
and delivered, provided, however, that the maximum amount required to be paid
by Parent for all such directors and their spouses in any month during such
two-year
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period shall not exceed $3,000. At the end of such two year period, such
directors and their spouses will each be entitled to participate, at their own
expense for life, in the group health plan of Parent.
SECTION 8.13. Employee Retention. To the extent practicable, Parent will
give consideration to the retention after the Closing of employees of the
Company and its Subsidiaries in their current or comparable positions within
the Surviving Corporation, provided however, that, notwithstanding the
foregoing or any other provision hereof, it shall have no legal obligation to
retain or offer new employment to any such employees.
SECTION 8.14. Subsequent Mergers. The parties contemplate that, immediately
following the merger of Sub with and into the Company at the Effective Time as
contemplated by Section 1.01, the Surviving Corporation shall be merged with
and into the Parent, followed immediately by the merger of NSB with and into
the Parent. In each case, the Parent shall succeed to and assume all the
rights and obligations of the Surviving Corporation and NSB, respectively, in
accordance with merger agreements substantially in the forms attached as
Exhibits G and H hereto, respectively.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first above written.
BANK OF THE WEST
by
/s/ Don J. McGrath
Name: Don J. McGrath
Title: President and Chief
Operating Officer
NF ACQUISITION CO.,
by
/s/ Douglas C. Grigsby
Name: Douglas C. Grigsby
Title: Treasurer
NORTHBAY FINANCIAL CORPORATION,
by
/s/ Alfred A. Alys
Name: Alfred A. Alys
Title: President and Chief
Executive Officer
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