Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
GREATER BAY BANCORP
AND
SJNB FINANCIAL CORP.
June 25, 2001
AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered
into as of the 25th day of June, 2001, by and between GREATER BAY BANCORP, a
California corporation ("GBB"), and SJNB FINANCIAL CORP., a California
corporation ("SJNB").
WHEREAS, the Boards of Directors of GBB and SJNB deem advisable and in the
best interests of their respective shareholders the merger of SJNB with and into
GBB (the "Merger") upon the terms and conditions set forth herein and in
accordance with the California General Corporation Law (the "CGCL") (GBB,
following the effectiveness of the Merger, being hereinafter sometimes referred
to as the "Surviving Corporation");
WHEREAS, the Boards of Directors of GBB and SJNB have approved this
Agreement and the Agreement of Merger by and between GBB and SJNB (the
"Agreement of Merger"), in substantially the form of Exhibit A attached hereto,
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pursuant to which SJNB has agreed to merge with and into GBB and each
outstanding share of SJNB common stock, no par value ("SJNB Stock"), excluding
any SJNB Perfected Dissenting Shares (as defined below), will be converted into
the right to receive a specified amount of GBB common stock, no par value ("GBB
Stock"), upon the terms and subject to the conditions set forth herein;
WHEREAS, as an inducement to GBB to enter into this Agreement, SJNB desires
to, and immediately after the execution and delivery hereof will, enter into a
stock option agreement (the "Stock Option Agreement") dated as of the date
hereof with GBB, pursuant to which SJNB shall grant to GBB an option to purchase
shares of SJNB Stock;
WHEREAS, it is the intention of the parties that, following the Merger,
SJNB's subsidiary, San Jose National Bank ("SJNBank"), shall remain a separate,
wholly owned subsidiary of GBB; and
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code") and to be accounted for on a pooling-of-
interests basis.
NOW, THEREFORE, on the basis of the foregoing recitals and in consideration
of the respective covenants, agreements, representations and warranties
contained herein, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
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Except as otherwise expressly provided for in this Agreement, or unless the
context otherwise requires, as used throughout this Agreement the following
terms shall have the respective meanings specified below:
"Affiliate" of, or a Person (as defined herein) "Affiliated" with, a
specific Person(s) is a Person that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person(s) specified.
"Affiliated Group" means, with respect to any entity, a group of entities
required or permitted to file consolidated, combined or unitary Tax Returns (as
defined herein).
"Agreement of Merger" has the meaning set forth in the second recital of
this Agreement.
"Average Closing Price" means the average of the daily closing price of a
share of GBB Stock reported on the Nasdaq National Market System (as defined
herein) during the 20 consecutive trading days (whether or not trades occurred
on those days) ending at the end of the third trading day immediately preceding
the Effective Time of the Merger (as defined herein), rounded to four decimal
places. The term "trading day" shall mean a day on which trading generally
takes place on the Nasdaq National Market System and on which trading in GBB
Stock has not been halted or suspended. In the event GBB pays, declares or
otherwise effects a stock split, reverse stock split, reclassification or stock
dividend or distribution with respect to GBB Stock between the date of this
Agreement and the Effective Time of the Merger, appropriate adjustments will be
made to the Average Closing Price of GBB Stock.
"Banks" means Bank of Petaluma, Bank of Santa Clara, Bay Area Bank, Bay
Bank of Commerce, Coast Commercial Bank, Cupertino National Bank, Golden Gate
Bank, Mid-Peninsula Bank, Mt. Diablo National Bank and Peninsula Bank of
Commerce, each a wholly owned subsidiary of GBB.
"Benefit Arrangements" has the meaning set forth in Section 4.20(b).
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on which
a bank chartered under the laws of the State of California is closed.
"Certificates" has the meaning set forth in Section 2.5(b).
"CFC" means California Financial Code.
"CGCL" has the meaning set forth in the first recital of this Agreement.
"Classified Credits" has the meaning set forth in Section 6.7.
"Closing" means the consummation of the Merger provided for in Article 2 of
this Agreement on the Closing Date (as defined herein) at the offices of Greater
Bay Bancorp, 400 Emerson Street, Palo Alto, California, or at such other place
as the parties may agree upon.
"Closing Date" means the date which is the first Friday which follows the
last to occur of (i) the approval of this Agreement and the transactions
contemplated hereby by the shareholders
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of SJNB and GBB, (ii) the receipt of all permits, authorizations, approvals and
consents specified in Section 9.3 hereof, (iii) the expiration of all applicable
waiting periods under the law, (iv) the expiration of the 30 day period
following the mailing by SJNB to its shareholders of a notice of approval of the
Merger by the outstanding shares pursuant to Section 1301 of the CGCL, if such
notice shall be required, or such other date as the parties may agree upon.
Notwithstanding the foregoing, if in the good faith judgment of GBB the Closing
would (a) interfere with or affect any financing, acquisition or other
significant transaction being contemplated by GBB, whether or not a final
determination has been made to undertake such transaction, or (b) GBB has a bona
fide business purpose for delaying the Closing, GBB will have the right to delay
the Closing for a period of not more than 30 days from the date which would
otherwise be the Closing Date as determined by the first sentence of this
paragraph, except that in no event shall the Closing Date occur after January
31, 2002, unless the parties hereto shall otherwise mutually agree. If GBB
exercises its right in the immediately preceding sentence, the conditions set
forth in Articles 9 and 11 to GBB's obligations shall be determined based on the
date which would otherwise be the Closing Date as determined by the first
sentence of this paragraph, except that the conditions in Sections 9.6 and 11.16
shall be as of the Closing Date determined in accordance with the immediately
preceding sentence.
"Code" has the meaning set forth in the fourth recital of this Agreement.
"Commissioner" means the Commissioner of Financial Institutions of the
State of California.
"Competing Transaction" has the meaning set forth in Section 6.1(n).
"Competing Transaction Notice" has the meaning set forth in Section
13.1(o).
"Conversion Ratio" has the meaning set forth in Section 2.2(a).
"Covered Parties" has the meaning set forth in Section 4.30.
"Dain Rauscher Agreement" means the letter agreement dated March 14, 2001
between SJNB and Dain Rauscher Wessels.
"Effective Time of the Merger" means the date upon which the Merger is
consummated and the Agreement of Merger is filed with the Secretary of State of
the State of California or at such time thereafter as shall be agreed to by the
parties and specified in the Agreement of Merger.
"Employee Plans" has the meaning set forth in Section 4.20(a).
"Encumbrance" shall mean any option, pledge, security interest, lien,
charge, encumbrance or restriction (whether on voting or disposition or
otherwise), whether imposed by agreement, understanding, law or otherwise.
"Environmental Regulations" has the meaning set forth in Section 4.12(b).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliates" has the meaning set forth in Section 4.20(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means Wells Fargo Bank Minnesota, N.A. or such other bank
or trust company as shall be mutually agreed to by the parties.
"Exchange Fund" has the meaning set forth in Section 2.5(a) hereof.
"Expenses" has the meaning set forth in Section 14.1(d).
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of GBB" means the audited consolidated financial
statements of GBB consisting of the consolidated balance sheets as of December
31, 1998, 1999 and 2000, the related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended and the related
notes thereto and related opinions thereon for the years then ended and GBB's
unaudited consolidated balance sheets and consolidated statements of operations,
shareholders' equity and cash flows as of and for the three month period ended
March 31, 2001.
"Financial Statements of SJNB" means the audited consolidated financial
statements of SJNB consisting of the consolidated balance sheets as of December
31, 1998, 1999 and 2000, the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended and related notes
thereto and related opinions thereon for the years then ended and SJNB's
unaudited consolidated balance sheet and consolidated statements of income,
shareholders' equity and cash flows as of and for the three month period ended
March 31, 2001.
"FRB" means the Board of Governors of the Federal Reserve System.
"GAAP" means United States generally accepted accounting principles
consistently applied during the periods involved, except in each case as
indicated in the financial statements or in the notes thereto or, in the case of
unaudited statements (subject to normal recurring and year-end audit
adjustments), as permitted by SEC Form 10-Q.
"GBB 401(k) Plan" means the Greater Bay Bancorp 401(k) Profit Sharing Plan.
"GBB Acquisition Transaction" has the meaning set forth in Section
2.2(a)(iv).
"GBB Disclosure Letter" means that letter designated as such which has been
delivered by GBB to SJNB concurrently with the execution and delivery of this
Agreement.
"GBB Dissenting Shares" means any shares of GBB Stock held by "dissenting
shareholders" within the meaning of Chapter 13 of the CGCL.
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"GBB Filings" has the meaning set forth in Section 5.4.
"GBB Perfected Dissenting Shares" means any GBB Dissenting Shares which the
holders thereof have not withdrawn or caused to lose their status as GBB
Dissenting Shares.
"GBB Shareholders' Meeting" means the meeting of GBB's shareholders
referred to in Section 7.12.
"GBB Stock" has the meaning set forth in the second recital of this
Agreement.
"GBB Stock Option Plan" means the Greater Bay Bancorp Amended and Restated
1996 Stock Option Plan.
"GBB Supplied Information" has the meaning set forth in Section 5.22.
"Governmental Entity" means any court or tribunal in any jurisdiction or
any United States federal, state, municipal, domestic, foreign or other
administrative authority or instrumentality.
"Hazardous Materials" has the meaning set forth in Section 4.12(b).
"Immediate Family" means a person's spouse, parents, in-laws, children and
siblings.
"Indemnified Parties" has the meaning set forth in Section 7.13(c).
"Investment Security" means any equity security or debt security as defined
in Statement of Financial Accounting Standards No. 115.
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement and Prospectus" means the Joint Proxy Statement and
Prospectus that is included as part of the Registration Statement on Form S-4
(as defined herein) and used to solicit proxies for the SJNB Shareholders'
Meeting and the GBB Shareholders' Meeting and to offer and sell the shares of
GBB Stock to be issued in connection with the Merger.
"KPMG" means KPMG LLP, SJNB's independent public accountants.
"Material Adverse Effect" means,
(A) with respect to SJNB, any material adverse effect on (1) the financial
condition, business, results of operations or prospects of SJNB and the SJNB
Subsidiaries, taken as a whole, or (2) the ability of SJNB to timely perform its
obligations under this Agreement or the Agreement of Merger or to consummate the
transactions contemplated hereby; and
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(B) with respect to GBB, any material adverse effect on (1) the financial
condition, business, results of operations or prospects of GBB and the Banks,
taken as a whole, or (2) the ability of GBB to timely perform its obligations
under this Agreement or the Agreement of Merger or to consummate the
transactions contemplated hereby;
provided, however, that in determining whether a Material Adverse Effect has
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occurred, there shall be excluded the effect of (i) changes in banking and other
laws or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (ii) changes in GAAP or regulatory
accounting requirements applicable to banks and their holding companies
generally, (iii) actions or omissions of a party to this Agreement taken with
the prior written consent of the other party to this Agreement, and (iv) changes
in prevailing interest rates, currency exchange rates or general economic
conditions, except to the extent that such changes, events or developments have,
or could reasonably be expected to have, an adverse effect on the party hereto
and its Subsidiaries taken as a whole that is materially greater than the
adverse effect on comparable entities.
"Merger" has the meaning set forth in the first recital of this Agreement.
"Merger Consideration" has the meaning set forth in Section 2.2(a).
"Nasdaq National Market System" means the National Market System of the
National Association of Securities Dealers Inc.
"OCC" means the Office of the Comptroller of the Currency.
"Operating Loss" has the meaning set forth in Section 4.24.
"Person" means any individual, corporation, association, partnership,
limited liability company, trust, joint venture, other entity, unincorporated
body, government or governmental department or agency.
"PwC" means PricewaterhouseCoopers LLP, GBB's independent public
accountants.
"Registration Statement on Form S-4" means the Registration Statement on
Form S-4, and such amendments thereto, that is filed with the SEC to register
the shares of GBB Stock to be issued in the Merger under the Securities Act (as
defined herein) and to clear use of the Joint Proxy Statement and Prospectus in
connection with the SJNB Shareholders' Meeting and the GBB Shareholders' Meeting
pursuant to the regulations promulgated under the Exchange Act.
"Related Group of Persons" means Affiliates, members of an Immediate Family
or Persons the obligations of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC (as defined herein).
"Representatives" has the meaning set forth in Section 6.1(n).
"Scheduled Contracts" has the meaning set forth in Section 4.16.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"SJNB 401(k) Plan" means the SJNB Cash or Deferred Profit Sharing Plan.
"SJNB Disclosure Letter" means that letter designated as such which has
been delivered by SJNB to GBB concurrently with the execution and delivery of
this Agreement.
"SJNB Dissenting Shares" means any shares of SJNB Stock held by "dissenting
shareholders" within the meaning of Chapter 13 of the CGCL.
"SJNB Filings" has the meaning set forth in Section 4.5.
"SJNB Fully Diluted Book Value" means the total stockholders' equity of
SJNB as reflected on the consolidated financial statements to be provided by
SJNB to GBB pursuant to Section 11.13, as adjusted (a) to eliminate all amounts
paid in connection with the exercise of any SJNB Stock Options (as defined
herein) since March 31, 2001, (b) to eliminate any amount related to accumulated
other comprehensive income and including instead on such financial statements
the amount of SJNB's consolidated accumulated other comprehensive income as of
March 31, 2001, (c) to deduct any dividends to be paid pursuant to Section
6.1(b) hereof after the date of such financial statements (to the extent not
previously accrued on such financial statements), (d) to add back any
transaction costs relating to this Agreement or the Merger, such as legal,
accounting and financial advisory costs, net of applicable taxes, to the extent
previously accrued or expensed on such financial statements, and (e) to add back
any costs or losses of the type referred to in Section 4.24 or Section 8.3, net
of the amount of insurance proceeds which GBB determines in its reasonable
judgment are payable in respect of such costs or losses pursuant to Section
2.2(a)(v), and only with respect to that portion of such costs or losses which
are over $1,000,000 and have been used in connection with the calculation of the
Conversion Ratio pursuant to Section 2.2(a)(v), to the extent such costs or
losses have been previously accrued or expensed on such financial statements.
"SJNB Investment Securities List" has the meaning set forth in Section
4.26.
"SJNB List" means any list required to be furnished by SJNB to GBB
herewith.
"SJNB Loan List" has the meaning set forth in Section 4.25.
"SJNB Offices List" has the meaning set forth in Section 4.23.
"SJNB Operating Losses List" has the meaning set forth in Section 4.24.
"SJNB Perfected Dissenting Shares" means any SJNB Dissenting Shares which
the holders thereof have not withdrawn or caused to lose their status as SJNB
Dissenting Shares.
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"SJNB Real Property List" has the meaning set forth in Section 4.9.
"SJNB Shareholders' Meeting" means the meeting of SJNB's shareholders
referred to in Section 6.6.
"SJNB Stock" has the meaning set forth in the second recital of this
Agreement.
"SJNB Stock Option" means any option issued pursuant to the SJNB Stock
Option Plans.
"SJNB Stock Option Plans" means, collectively, the SJNB Financial Corp.
1996 Stock Option Plan, as amended, and the Saratoga Bancorp 1994 Stock Option
Plan, as amended.
"SJNB Subsidiaries" means, collectively, SJNBank (as defined herein) and
Epic Funding Corporation, a California corporation.
"SJNB Supplied Information" has the meaning set forth in Section 4.34.
"SJNBank" has the meaning set forth in the fourth recital of this
Agreement.
"Stock Option Agreement" has the meaning set forth in the third recital of
this Agreement.
"Subsidiary" of a Person means any corporation, partnership, limited
liability company or other business entity of which 50% or more of the voting
power is owned or controlled by such Person.
"Superior Proposal" has the meaning set forth in Section 6.1(n).
"Surviving Corporation" has the meaning set forth in the first recital of
this Agreement.
"Tanks" has the meaning set forth in Section 4.12(b).
"Tax Returns" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"Taxes" means (i) all federal, state, local or foreign taxes, charges,
fees, imposts, levies or other assessments, including, without limitation, all
net income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, property, corporation and estimated taxes, custom duties, fees,
assessments and charges of any kind whatsoever; (ii) all interest, penalties,
fines, additions to tax or additional amounts imposed by any taxing authority in
connection with any item described in clause (i); and (iii) any transferred
liability in respect of any items described in clauses (i) and/or (ii).
"368 Reorganization" has the meaning set forth in Section 4.11(l).
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"Top Up Option" means, in the event that the Average Closing Price is less
than $21.1429, the option of GBB to elect to issue that number of shares of GBB
Stock so that the Conversion Ratio will be equal to the quotient obtained by
dividing $38.4801 by the Average Closing Price.
"Understanding" means any contract, agreement, understanding, commitment or
offer, whether oral or written, which may become a binding obligation if
accepted by another Person.
ARTICLE 2.
TERMS OF MERGER
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2.1. Effect of Merger and Surviving Corporation. At the Effective Time
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of the Merger, SJNB will be merged with and into GBB pursuant to the terms,
conditions and provisions of this Agreement and the Agreement of Merger and in
accordance with the applicable provisions of the CGCL. By virtue of the Merger,
all the rights, privileges, powers and franchises and all property and assets of
every kind and description of SJNB and GBB shall be vested in and be held and
enjoyed by the Surviving Corporation, without further act or deed, and all the
interests of every kind of SJNB and GBB, including all debts due to either of
them on whatever account, shall be the property of the Surviving Corporation as
they were of SJNB and GBB and the title to any interest in real property and any
interest in personal property vested by deed or otherwise in either SJNB or GBB
shall not revert or be in any way impaired by reason of the Merger; and all
rights of creditors and liens upon any property of SJNB and GBB shall be
preserved unimpaired and all debts, liabilities and duties of SJNB and GBB shall
be debts, liabilities and duties of the Surviving Corporation and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
2.2. Stock of SJNB. Subject to Section 2.4, each share of SJNB Stock
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issued and outstanding immediately prior to the Effective Time of the Merger
shall, without any further action on the part of SJNB or the holders of such
shares, be treated on the basis set forth herein.
(a) Conversion of SJNB Stock. At the Effective Time of the Merger,
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pursuant to the Agreement of Merger, each outstanding share of SJNB Stock
excluding any SJNB Perfected Dissenting Shares shall, without any further action
on the part of SJNB or the holders of any such shares, be automatically canceled
and cease to be an issued and outstanding share of SJNB Stock and be converted
into the right to receive per share consideration (the "Merger Consideration")
in the amount calculated as set forth below in the form of GBB Stock (the
"Conversion Ratio"), rounded to four decimal places, as follows:
(i) If the Average Closing Price is greater than or equal to $21.1429
or less than or equal to $31.0925, 1.82 shares of GBB Stock, subject to downward
adjustment as provided in Section 2.2(a)(v); or
(ii) If the Average Closing Price is greater than $31.0925, a number
of shares of GBB Stock equal to the quotient obtained by dividing (x) $56.5884
plus the product of 0.3333
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times the difference between the Average Closing Price and $31.0925, by (y) the
Average Closing Price, subject to downward adjustment as provided in Section
2.2(a)(v); or
(iii) If the Average Closing Price is less than $21.1429, SJNB may
give written notice to GBB within one Business Day of the calculation of the
Average Closing Price of its intention to terminate the Agreement pursuant to
Section 13.1(l); provided, however, that GBB may, but shall not be required to,
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exercise the Top Up Option by giving SJNB written notice, within one Business
Day from the date of receipt of written notice of SJNB's intention to terminate
the Agreement, of GBB's election to exercise the Top Up Option. If GBB
exercises the Top Up Option, the Conversion Ratio will equal that number of
shares of GBB Stock equal to the quotient obtained by dividing $38.4801 by the
Average Closing Price, subject to downward adjustment as provided in Section
2.2(a)(v).
(iv) Notwithstanding anything to the contrary stated in subsections
(a)(i), (a)(ii) and (a)(iii) of this Section 2.2, the Conversion Ratio shall be
1.82, subject to downward adjustment as provided in Section 2.2(a)(v), if the
Average Closing Price is greater than $31.0925 and on or prior to the Closing
Date, (A) GBB publicly announces the signing of a definitive agreement with a
third party with respect to a merger, consolidation, sale of all or
substantially all of its assets or similar business combination transaction
which if consummated would result in the GBB shareholders as of the date of such
announcement owning less than 66-2/3% of the outstanding shares of common stock
of the surviving corporation or any Person announces a tender or exchange offer
for a minimum of 25% or more of the outstanding common shares of GBB and (B) the
price to be paid to GBB shareholders in such transaction would exceed $31.0925
and such transaction is not terminated or abandoned prior to the Closing Date (a
"GBB Acquisition Transaction"). If such GBB Acquisition Transaction is
terminated or abandoned during the period for determining the Average Closing
Price, GBB may elect to proceed with the Closing hereunder on the Closing Date
(and the Conversion Ratio shall be 1.82 shares of GBB Stock, subject to downward
adjustment as provided in Section 2.2(a)(v)) or to delay the Closing Date, by
written notice to SJNB, for a period of 25 trading days from the date of the
public announcement of such termination or abandonment. To preserve the rights
of holders of shares of SJNB Stock pursuant to this Section 2.2(a)(iv), GBB and
SJNB agree to coordinate the closing of any GBB Acquisition Transaction with the
Closing and to cooperate with such third party in otherwise accomplishing the
purpose hereof.
(v) In the event that, as of the Closing Date, the representation and
warranty contained in Section 4.24 is not true and correct or the estimated
costs of remediation as determined by either consultant pursuant to Section 8.3
is in excess of $1,000,000, the Conversion Ratio shall be determined in
accordance with the following formula:
A-B, where
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C
A = the product obtained by multiplying (i) the Conversion Ratio calculated
pursuant to Section 2.2(a)(i), (ii), (iii) or (iv), as applicable, without
regard to this Section 2.2(c)(v), (ii) the number of shares of SJNB Stock
outstanding immediately prior to the Effective Time of the Merger and (iii)
the Average Closing Price.
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B = the sum of (i) the amount of Operating Losses in excess of $1,000,000 and
(ii) the estimated costs of remediation in excess of $1,000,000 (as
estimated by SJNB's consultant pursuant to Section 8.3 or, if applicable,
GBB's consultant pursuant to such section), net of any insurance proceeds
which GBB determines in its reasonable judgment are payable in respect of
such Operating Losses or such estimated costs of remediation.
C = the product obtained by multiplying (i) the Average Closing Price and (ii)
the number of shares of SJNB Stock outstanding immediately prior to the
Effective Time of the Merger.
(b) SJNB Perfected Dissenting Shares. SJNB Perfected Dissenting
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Shares shall not be converted into shares of GBB Stock, but shall, after the
Effective Time of the Merger, be entitled only to such rights as are granted
them by Chapter 13 of the CGCL. Each dissenting shareholder who is entitled to
payment for such shareholder's shares of SJNB Stock shall receive such payment
therefor from the Surviving Corporation in an amount as determined pursuant to
Chapter 13 of the CGCL.
(c) Dividends, Etc. If, prior to the Effective Time of the Merger,
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GBB shall declare a stock dividend or distribution upon or subdivide, split up,
reclassify or combine the GBB Stock, or make a distribution on the GBB Stock in
any security convertible into GBB Stock, with a record date prior to the
Effective Time of the Merger, appropriate adjustment or adjustments will be made
to the Conversion Ratio, with the result that the holders of SJNB Stock shall
receive the same economic benefit as is provided for in Section 2.2(a).
2.3. Effect on GBB Stock. At and after the Effective Time of the Merger,
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each outstanding share of GBB Stock shall remain an outstanding share of GBB
Stock and shall not be converted or otherwise affected by the Merger. GBB
Perfected Dissenting Shares shall, after the Effective Time of the Merger, be
entitled only to such rights as are granted them by Chapter 13 of the CGCL.
Each dissenting shareholder who is entitled to payment for his or her shares of
GBB Stock shall receive such payment therefor from the Surviving Corporation in
an amount as determined pursuant to Chapter 13 of the CGCL.
2.4. Fractional Shares. No fractional shares of GBB Stock shall be
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issued in the Merger. In lieu thereof, each holder of SJNB Stock who would
otherwise be entitled to receive a fractional share shall receive an amount in
cash equal to the product (calculated to the nearest cent) obtained by
multiplying (a) the closing price of GBB Stock reported on the Nasdaq National
Market System on the Business Day immediately preceding the Closing Date times
(b) the fraction of the share of GBB Stock to which such holder would otherwise
be entitled. No such holder shall be entitled to dividends or other rights in
respect of any such fractional share.
2.5 Exchange Procedures.
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(a) At the Effective Time of the Merger, GBB shall deposit with the
Exchange Agent for the benefit of the holders of shares of SJNB Stock, for
exchange in accordance with this Section 2.5 through the Exchange Agent,
certificates representing the shares of GBB Stock issuable pursuant to Section
2.2 in exchange for shares of SJNB Stock outstanding immediately prior to the
Effective Time of the Merger, and funds in an amount not less than the amount of
cash payable in lieu of fractional shares of GBB Stock pursuant to Section 2.4
of this Agreement (collectively, the "Exchange Fund").
(b) GBB shall direct the Exchange Agent to mail, promptly after the
Effective Time of the Merger, to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of SJNB Stock (the "Certificates") whose shares
were converted into the right to receive shares of GBB Stock pursuant to Section
2.2 hereof, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as GBB and SJNB may reasonably specify), and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of GBB Stock, both of which shall
be reasonably satisfactory to SJNB. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by GBB, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of GBB Stock and cash in
lieu of fractional shares which such holder has the right to receive pursuant to
Sections 2.2 and 2.4 hereof, and the Certificate so surrendered shall forthwith
be canceled. In the event a certificate is surrendered representing SJNB Stock,
the transfer of ownership of which is not registered in the transfer records of
SJNB, a certificate representing the proper number of shares of GBB Stock may be
issued to a transferee if the Certificate representing such SJNB Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.5, each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the right to receive upon such surrender
the certificate representing shares of GBB Stock and cash in lieu of any
fractional shares of stock as contemplated by this Section 2.5. Notwithstanding
anything to the contrary set forth herein, if any holder of shares of SJNB
should be unable to surrender the Certificates for such shares, because they
have been lost or destroyed, such holder may deliver in lieu thereof a bond in
form and substance and with surety reasonably satisfactory to GBB and shall be
entitled to receive the certificate representing the proper number of shares of
GBB Stock and cash in lieu of fractional shares in accordance with Sections 2.2
and 2.4 hereof.
(c) No dividends or other distributions declared or made with respect
to GBB Stock which are declared payable to shareholders of record of GBB Stock
after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of GBB Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.4 until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates
13
representing whole shares of GBB Common Stock issued in exchange thereof,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of GBB Stock to which such holder is
entitled pursuant to Section 2.4 and the amount of dividends or other
distributions with a record date after the Effective Time of the Merger
theretofore paid with respect to such whole shares of GBB Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time of the Merger but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole shares
of GBB Stock.
(d) All shares of GBB Stock issued upon the surrender for exchange of
SJNB Stock in accordance with the terms hereof (including any cash paid pursuant
to Section 2.4) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of SJNB Stock, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of SJNB Stock which were outstanding immediately prior
to the Effective Time of the Merger. If, after the Effective Time of the
Merger, Certificates are presented to GBB for any reason, they shall be canceled
and exchanged as provided in this Agreement.
(e) Any portion of the Exchange Fund which remains undistributed to
the shareholders of SJNB following the passage of six months after the Effective
Time of the Merger shall be delivered to GBB, upon demand, and any shareholders
of SJNB who have not theretofore complied with this Section 2.5 shall thereafter
look only to GBB for payment of their claim for GBB Stock, any cash in lieu of
fractional shares of GBB Stock and any dividends or distributions with respect
to GBB Stock.
(f) Neither GBB nor SJNB shall be liable to any holder of shares of
SJNB Stock for such shares (or dividends or distributions with respect thereto)
or cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of GBB Stock held by it from time
to time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares of GBB Stock for
the account of the Persons entitled thereto.
(h) Certificates surrendered for exchange by any Person constituting
an "Affiliate" of SJNB for purposes of Rule 145(c) under the Securities Act
shall not be exchanged for certificates representing whole shares of GBB Stock
until GBB has received a written agreement from such person as provided in
Section 6.9.
2.6. Directors of Surviving Corporation. Immediately after the Effective
-----------------------------------
Time of the Merger, the Board of Directors of the Surviving Corporation shall be
comprised of the persons serving as directors of GBB immediately prior to the
Effective Time of the Merger, plus two members of SJNB's Board of Directors
selected by GBB. Such persons shall serve until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified.
14
2.7 Directors of SJNBank. Immediately after the Effective Time of the
--------------------
Merger, SJNBank will operate as a wholly owned subsidiary of GBB, retaining its
name, charter and current Board of Directors; provided, however, David L.
Kalkbrenner, or such other person designated by GBB and reasonably acceptable to
SJNB, shall be appointed to the Board of Directors of SJNBank. GBB confirms
that it has no current plan or intention to combine SJNBank with or into any of
the Banks.
2.8 Executive Officers of Surviving Corporation. Immediately after the
--------------------------------------------
Effective Time of the Merger, the executive officers of the Surviving
Corporation shall be comprised of the persons serving as executive officers of
GBB immediately prior to the Effective Time of the Merger. Such persons shall
serve until the earlier of their resignation or termination.
ARTICLE 3.
THE CLOSING
-----------
3.1. Closing Date. The Closing shall take place on the Closing Date.
------------
3.2. Execution of Agreements. As soon as practicable after execution of
-----------------------
this Agreement, the Agreement of Merger together with all other agreements
necessary to consummate the transactions described herein shall be executed by
the parties thereto. On the Closing Date, the Agreement of Merger, together
with all requisite certificates, shall be duly filed with the Secretary of State
of the State of California as required by applicable law and regulations.
3.3 Further Assurances. At the Closing, the parties hereto shall
------------------
deliver, or cause to be delivered, such documents or certificates as may be
necessary in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement. From and after the
Effective Time of the Merger, each of the parties hereto covenants and agrees,
without the necessity of any further consideration whatsoever, to execute,
acknowledge and deliver any and all other documents and instruments and take any
and all such other action as may be reasonably necessary or desirable to more
effectively carry out the intent and purpose of this Agreement and the Agreement
of Merger.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SJNB
--------------------------------------
SJNB represents and warrants to GBB as follows, except as set forth in
the SJNB Disclosure Letter:
4.1. Incorporation, Standing and Power. SJNB has been duly organized, is
---------------------------------
validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. SJNBank is a national banking association duly organized, validly existing
and in good standing under the laws of the United
15
States of America and is authorized by the OCC to conduct a general banking
business. SJNBank's deposits are insured by the FDIC in the manner and to the
fullest extent provided by law. Epic Funding Corporation has been duly
organized, is validly existing and in good standing as a corporation under the
laws of the State of California. Each of the SJNB Subsidiaries has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted. Neither the scope of
the business of SJNB or the SJNB Subsidiaries nor the location of any of their
respective properties requires that either SJNB or the SJNB Subsidiaries be
licensed to do business in any jurisdiction other than the State of California
where the failure to be so licensed would, individually or in the aggregate,
have a Material Adverse Effect on SJNB. SJNB has delivered to GBB true and
correct copies of its and each of the SJNB Subsidiaries' Articles of
Incorporation or Association, as the case may be, and Bylaws, as amended, and in
effect as of the date hereof.
4.2. Capitalization.
--------------
(a) As of June 22, 2001, the authorized capital stock of SJNB consists of
20,000,000 shares of SJNB Stock, of which 3,808,402 shares are outstanding, and
5,000,000 shares of preferred stock, none of which are outstanding. All of the
outstanding shares of SJNB Stock are duly authorized, validly issued, fully paid
and nonassessable. Except for SJNB Stock Options covering 662,167 shares of SJNB
Stock granted pursuant to the SJNB Stock Option Plan, there are no outstanding
options, warrants or other rights in or with respect to the unissued shares of
SJNB Stock nor any securities convertible into such stock, and SJNB is not
obligated to issue any additional shares of its common stock or any additional
options, warrants or other rights in or with respect to the unissued shares of
such stock or any other securities convertible into such stock. SJNB has
furnished GBB a list (the "SJNB Option List") setting forth the name of each
holder of a SJNB Stock Option, the number of shares of SJNB Stock covered by
each such option, the vesting schedule of such option, the exercise price per
share and the expiration date of each such option.
(b) As of the date of this Agreement, the authorized capital stock of
SJNBank consists of 1,411,400 shares of common stock, $2.50 par value per share,
of which 1,067,207 shares are outstanding. All of the outstanding shares of such
common stock are duly authorized, validly issued, fully paid and nonassessable
(except to the extent provided in the National Bank Act) and are owned of record
and beneficially by SJNB. There are no outstanding options, warrants or other
rights in or with respect to the unissued shares of such common stock or any
other securities convertible into such stock, and SJNBank is not obligated to
issue any additional shares of its common stock or any options, warrants or
other rights in or with respect to the unissued shares of its common stock or
any other securities convertible into such stock.
(c) As of the date of this Agreement, the authorized capital stock of
Epic Funding Corporation consists of 100 shares of common stock, no par value,
of which 100 shares are outstanding. All of the outstanding shares of such
common stock are duly authorized, validly issued, fully paid and nonassessable
and are owned of record and beneficially by SJNBank. There are no outstanding
options, warrants or other rights in or with respect to the unissued shares of
such common stock or any other securities convertible into such stock, and Epic
Funding Corporation is not obligated to issue any additional shares of its
common stock or any
16
options, warrants or other rights in or with respect to the unissued shares of
its common stock or any other securities convertible into such stock.
4.3. Subsidiaries. Other than the SJNB Subsidiaries, SJNB does not own,
------------
directly or indirectly (except as a pledgee pursuant to loans or upon
acquisition in satisfaction of debt previously contracted), the outstanding
stock or equity or other voting interest in any Person.
4.4. Financial Statements. SJNB has previously furnished to GBB a copy
--------------------
of the Financial Statements of SJNB. The Financial Statements of SJNB: (a)
present fairly the consolidated financial condition of SJNB as of the respective
dates indicated and its consolidated statements of operations and changes in
shareholders' equity and cash flows, for the respective periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
recurring or end of period adjustments; (b) have been prepared in accordance
with generally accepted accounting principles consistently applied (except as
otherwise indicated therein); (c) set forth as of the respective dates indicated
adequate reserves for loan losses and other contingencies, in management's
judgment; and (d) are based upon the books and records of SJNB and the SJNB
Subsidiaries.
4.5. Reports and Filings. Since January 1, 1998, each of SJNB and the
-------------------
SJNB Subsidiaries has filed all reports, proxy statements, returns,
registrations and statements (collectively, "SJNB Filings"), together with any
amendments required to be made with respect thereto, that were required to be
filed with (a) the FDIC, (b) the OCC, (c) the FRB, (d) the SEC and (e) any other
applicable Governmental Entity, including taxing authorities, except where the
failure to file such reports, proxy statements, returns, registrations or
statements has not had and is not reasonably expected to have a Material Adverse
Effect on SJNB. No administrative actions have been taken or threatened or
orders issued in connection with such SJNB Filings. As of their respective
dates, each of such SJNB Filings (y) complied in all material respects with all
laws and regulations enforced or promulgated by the Governmental Entity with
which it was filed (or was amended so as to be in compliance promptly following
discovery of any such noncompliance); and (z) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statement contained in any of such SJNB Filings fairly presented the financial
position of SJNB on a consolidated basis, SJNB alone or each of the SJNB
Subsidiaries alone, as the case may be, and was prepared in accordance with GAAP
or banking regulations consistently applied, except as stated therein, during
the periods involved. SJNB has furnished or made available to GBB true and
correct copies of all SJNB Filings filed by SJNB since January 1, 1998.
4.6. Authority of SJNB. The execution and delivery by SJNB of this
-----------------
Agreement and the Agreement of Merger and, subject to the requisite approval of
the shareholders of SJNB of this Agreement and the transactions contemplated
hereby, the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of SJNB. This Agreement is, and the Agreement of Merger will be, upon due
execution and delivery by the respective parties thereto, a valid and binding
obligation of SJNB enforceable in accordance with their respective terms, except
as the enforceability thereof may be limited by bankruptcy, liquidation,
receivership, conservatorship, insolvency,
17
moratorium or other similar laws affecting the rights of creditors generally and
by general equitable principles. Neither the execution and delivery by SJNB of
this Agreement and the Agreement of Merger, the consummation of the transactions
contemplated herein or therein, nor compliance by SJNB with any of the
provisions hereof or thereof, will: (a) conflict with or result in a breach of
any provision of its or the SJNB Subsidiaries' Articles of Incorporation or
Association, as amended, or Bylaws, as amended; (b) constitute a breach of or
result in a default (or give rise to any rights of termination, cancellation or
acceleration, or any right to acquire any securities or assets) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
franchise, license, permit, agreement or other instrument or obligation to which
SJNB or either of the SJNB Subsidiaries is a party, or by which SJNB or either
of the SJNB Subsidiaries or any of their respective properties or assets are
bound; (c) result in the creation or imposition of any Encumbrance on any of the
properties or assets of SJNB or the SJNB Subsidiaries; or (d) violate any order,
writ, injunction, decree (as to each of the foregoing, of which SJNB has
notice), statute, rule or regulation applicable to SJNB or either of the SJNB
Subsidiaries or any of their respective properties or assets. No consent of,
approval of, notice to or filing with any Governmental Entity having
jurisdiction over any aspect of the business or assets of SJNB or the SJNB
Subsidiaries, and no consent of, approval of or notice to any other Person, is
required in connection with the execution and delivery by SJNB of this Agreement
and the Agreement of Merger or the consummation by SJNB of the Merger or the
transactions contemplated hereby or thereby, except (i) the approval of this
Agreement and the Agreement of Merger and the transactions contemplated hereby
and thereby by the shareholders of SJNB; (ii) such approvals as may be required
by the FRB and the OCC; (iii) the filing of the Joint Proxy Statement and
Prospectus and Registration Statement on Form S-4 with the SEC; and (iv) the
filing of the Agreement of Merger with the Secretary of State of the State of
California.
4.7. Insurance. Each of SJNB and the SJNB Subsidiaries has policies of
---------
insurance and bonds with respect to its assets and business against such
casualties and contingencies and in such amounts, types and forms as are
customarily appropriate for its business, operations, properties and assets.
All such insurance policies and bonds are in full force and effect. No insurer
under any such policy or bond has canceled or indicated an intention to cancel
or not to renew any such policy or bond or generally disclaimed liability
thereunder. Neither SJNB nor the SJNB Subsidiaries is in default under any such
policy or bond and all material claims thereunder have been filed in a timely
fashion. Set forth in the SJNB Disclosure Letter is a list, as of the date
hereof, of all policies of insurance carried and owned by either SJNB or the
SJNB Subsidiaries showing the name of the insurance company, the nature of the
coverage, the policy limit, the annual premiums and the expiration dates. There
has been delivered to GBB a copy of each such policy of insurance.
4.8. Personal Property. Each of SJNB and the SJNB Subsidiaries has good
-----------------
and marketable title to all its material properties and assets, other than real
property, owned or stated to be owned by SJNB or the SJNB Subsidiaries, free and
clear of all Encumbrances except: (a) as set forth in the Financial Statements
of SJNB; (b) for Encumbrances for current taxes not yet due; (c) for
Encumbrances incurred in the ordinary course of business; or (d) for
Encumbrances that are not substantial in character, amount or extent and that do
not materially detract from the value, or interfere with present use, of the
property subject thereto or affected thereby, or otherwise materially impair the
conduct of business of SJNB or the SJNB Subsidiaries.
18
4.9. Real Estate. SJNB has furnished GBB a list, as of the date hereof,
-----------
of real property, including leaseholds and all other interests in real property
(other than easements or security interests), owned by SJNB or the SJNB
Subsidiaries (the "SJNB Real Property List"). Each of SJNB and the SJNB
Subsidiaries has duly recorded or caused to be recorded, in the appropriate
county, all recordable interests in such real property, including leaseholds and
all other interests in such real property (other than easements or security
interests), owned by SJNB or the SJNB Subsidiaries. Either SJNB or the SJNB
Subsidiaries has good and marketable title to such real property, and valid
leasehold interests in such leaseholds, free and clear of all Encumbrances,
except (a) for rights of lessors, co-lessees or sublessees in such matters that
are reflected in the lease; (b) for current taxes not yet due and payable; (c)
for such Encumbrances, if any, as do not materially detract from the value of or
materially interfere with the present use of such property; and (d) as described
in the SJNB Filings. SJNB has furnished GBB with true and correct copies of all
leases evidencing leaseholds owned by SJNB or the SJNB Subsidiaries, all title
insurance policies and all documents evidencing recordation of all recordable
interests in such real property (other than easements or security interests)
owned by SJNB or the SJNB Subsidiaries.
4.10. Litigation. There is no private or governmental suit, claim,
----------
action or proceeding pending, nor to SJNB's knowledge threatened, against SJNB
or either of the SJNB Subsidiaries or against any of their respective
directors, officers or employees relating to the performance of their duties in
such capacities or against or affecting any properties of SJNB or the SJNB
Subsidiaries which, if adversely determined, would have, individually or in the
aggregate, a Material Adverse Effect on SJNB. Also, there are no material
judgments, decrees, stipulations or orders against SJNB or the SJNB Subsidiaries
or enjoining their respective directors, officers or employees in respect of, or
the effect of which is to prohibit, any business practice or the acquisition of
any property or the conduct of business in any area.
4.11. Taxes.
-----
(a) Except as set forth in the SJNB Disclosure Letter, (i) all Tax
Returns required to be filed by or on behalf of SJNB or the SJNB Subsidiaries or
the Affiliated Group(s) of which any of them is or was a member, have been duly
and timely filed with the appropriate taxing authorities in all jurisdictions in
which such Tax Returns are required to be filed (after giving effect to any
valid extensions of time in which to make such filings), and all such Tax
Returns were true, complete and correct in all material respects; (ii) all Taxes
due and payable by or on behalf of SJNB or the SJNB Subsidiaries, either
directly, as part of an Affiliated Group Tax Return, or otherwise, have been
fully and timely paid, except to the extent adequately reserved therefor in
accordance with GAAP and/or applicable regulatory accounting principles or
banking regulations consistently applied on the SJNB balance sheet, and adequate
reserves or accruals for Taxes have been provided in the SJNB balance sheet with
respect to any period through the date thereof for which Tax Returns have not
yet been filed or for which Taxes are not yet due and owing; and (iii) no
agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not limited to, any applicable statute of limitation) has been executed or
filed with any taxing authority by or on
19
behalf of SJNB, the SJNB Subsidiaries or any of their Subsidiaries, or any
Affiliated Group(s) of which any of them is or was a member.
(b) SJNB and the SJNB Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and have duly and timely withheld from employee
salaries, wages and other compensation and have paid over to the appropriate
taxing authorities all amounts required to be so withheld and paid over for all
periods under all applicable laws.
(c) GBB has received complete copies of (i) all income or franchise
Tax Returns of SJNB and the SJNB Subsidiaries relating to the taxable periods
since January 1, 1998 and (ii) any audit report issued within the last three
years relating to any Taxes due from or with respect to SJNB or the SJNB
Subsidiaries with respect to their respective income, assets or operations.
(d) No written claim has been made by a taxing authority in a
jurisdiction where SJNB or the SJNB Subsidiaries do not file an income or
franchise Tax Return such that SJNB or the SJNB Subsidiaries are or may be
subject to taxation by that jurisdiction.
(e) (i) All deficiencies asserted or assessments made as a result of
any examinations by any taxing authority of the Tax Returns of or covering or
including SJNB or the SJNB Subsidiaries have been fully paid, and, to the best
of SJNB's knowledge, there are no other audits or investigations by any taxing
authority in progress, nor have SJNB or the SJNB Subsidiaries received any
written notice from any taxing authority that it intends to conduct such an
audit or investigation; (ii) no requests for a ruling or a determination letter
are pending with any taxing authority; and (iii) no issue has been raised in
writing by any taxing authority in any current or prior examination which, by
application of the same or similar principles, could reasonably be expected to
result in a proposed deficiency against SJNB or the SJNB Subsidiaries for any
subsequent taxable period that could be material.
(f) Neither SJNB or the SJNB Subsidiaries nor any other Person on
behalf of SJNB or the SJNB Subsidiaries has (i) filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by SJNB or the SJNB Subsidiaries (ii) agreed to or
is required to make any adjustments pursuant to Section 481(a) of the Code or
any similar provision of state, local or foreign law by reason of a change in
accounting method initiated by SJNB or the SJNB Subsidiaries or has any
knowledge that the Internal Revenue Service has proposed in writing any such
adjustment or change in accounting method, or has any application pending with
any taxing authority requesting permission for any changes in accounting methods
that relate to the business or operations of SJNB or the SJNB Subsidiaries or
(iii) executed or entered into a closing agreement pursuant to Section 7121 of
the Code or any predecessor provision thereof or any similar provision of state,
local or foreign law with respect to SJNB or the SJNB Subsidiaries.
(g) No property owned by SJNB or the SJNB Subsidiaries is (i)
property required to be treated as being owned by another Person pursuant to
provisions of Section
20
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
constitutes "tax exempt use property" within the meaning of Section 168(h)(1) of
the Code or (iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code.
(h) Neither SJNB (except with the SJNB Subsidiaries) nor either of the
SJNB Subsidiaries (except with SJNB) is a party to any tax sharing agreement or
similar agreement or arrangement (whether written or not written) pursuant to
which it will have any obligation to make any payments after the Closing.
(i) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by SJNB or the SJNB Subsidiaries or their
respective affiliates by reason of Section 280G of the Code, or would constitute
compensation in excess of the limitation set forth in Section 162(m) of the
Code.
(j) There are no liens as a result of any due and unpaid Taxes upon
any of the assets of SJNB or the SJNB Subsidiaries.
(k) None of the members of SJNB's Affiliated Group has any net
operating loss carryovers.
(l) SJNB agrees, and agrees to cause the SJNB Subsidiaries, to
cooperate with tax counsel in furnishing reasonable and customary written tax
representations to tax counsel for purposes of supporting tax counsel's opinion
that the Merger qualifies as a tax-deferred reorganization within the meaning of
Section 368(a) of the Code (a "368 Reorganization") as contemplated in Section
11.16 hereof. SJNB acknowledges that its and the SJNB Subsidiaries' inability
or unwillingness to provide such reasonable and customary written
representations could preclude tax counsel from rendering such opinion, with
consequences specified elsewhere herein.
4.12. Compliance with Laws and Regulations.
------------------------------------
(a) Neither SJNB nor the SJNB Subsidiaries is in default under or in
breach or violation of (i) any provision its Articles of Incorporation or
Association, as amended, or Bylaws, as amended, or (ii) law, ordinance, rule or
regulation promulgated by any Governmental Entity, except, with respect to this
clause (ii), for such violations as would not have, individually or in the
aggregate, a Material Adverse Effect on SJNB.
(b) To SJNB's knowledge, (i) each of SJNB and the SJNB Subsidiaries is
in compliance with all Environmental Regulations; (ii) there are no Tanks on or
about SJNB Property; (iii) there are no Hazardous Materials on, below or above
the surface of, or migrating to or from SJNB Property; (iv) neither SJNB nor the
SJNB Subsidiaries has loans outstanding secured by real property that is not in
compliance with Environmental Regulations or which has a leaking Tank or upon
which there are Hazardous Materials on or migrating to or from; and (v) without
limiting Section 4.10 or the foregoing representations and warranties contained
in
21
clauses (i) through (iv), as of the date of this Agreement, there is no claim,
action, suit, or proceeding or notice thereof before any Governmental Entity
pending against SJNB or the SJNB Subsidiaries or concerning property securing
SJNB or SJNB Subsidiaries loans and there is no outstanding judgment, order,
writ, injunction, decree, or award against or affecting SJNB Property or
property securing SJNB or SJNB Subsidiaries loans, relating to the foregoing
representations (i) - (iv), in each case the noncompliance with which, or the
presence of which would have a Material Adverse Effect on SJNB. For purposes of
this Agreement, the term "Environmental Regulations" shall mean all applicable
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar items, of
all Governmental Entities and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of human
health or the environment, including, without limitation those pertaining to
reporting, licensing, permitting, investigation, and remediation of emissions,
discharges, releases, or threatened releases of Hazardous Materials, chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials or wastes whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
chemical substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature and all
requirements pertaining to the protection of the health and safety of employees
or the public. "SJNB Property" shall mean real estate currently owned, leased,
or otherwise used by SJNB or the SJNB Subsidiaries, or in which SJNB or the SJNB
Subsidiaries has an investment or security interest (by mortgage, deed of trust,
sale and lease-back or otherwise), including, without limitation, properties
under foreclosure and properties held by SJNB or the SJNB Subsidiaries in its
capacity as a trustee or otherwise. "Tank" shall mean treatment or storage
tanks, gas or oil wells and associated piping transportation devices. "Hazardous
Materials" shall mean any substance: (1) the presence of which requires
investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action, policy or common law; (2) which is defined
as a hazardous waste, hazardous substance, hazardous material, used oil,
pollutant or contaminant under any federal, state or local statute, regulation,
rule or ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601, et seq.); the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.); the Clean Air Act, as amended (42 U.S.C. Section 7401,
et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. Section
1251, et seq.); the Toxic Substances Control Act, as amended (15 U.S.C. Section
9601, et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C.
Section 651; the Emergency Planning and Community Right-to-Know Act of 1986 (42
U.S.C. Section 11001, et seq.); the Mine Safety and Health Act of 1977, as
amended (30 U.S.C. Section 801, et seq.); the Safe Drinking Water Act (42 U.S.C.
Section 300f, et seq.); and all comparable state and local laws, including
without limitation, the Carpenter-Presley-Tanner Hazardous Substance Account Act
(State Superfund), the Porter-Cologne Water Quality Control Act, Section 25140,
25501(j) and (k), 25501.1,25281 and 25250.1 of the California Health and Safety
Code and/or Article I of Title 22 of the California Code of Regulations,
Division 4, Chapter 30; (3) comparable laws of other jurisdictions or orders and
regulations thereunder; (4) the presence of which causes or threatens to cause a
nuisance, trespass or other common law tort upon real property or adjacent
properties or poses or threatens to pose a hazard to the health or safety of
persons or without limitation, which contains gasoline, diesel fuel or other
petroleum
22
hydrocarbons; or (5) polychlorinated biphenyls (PCBs), asbestos, lead-
containing paints or urea formaldehyde foam insulation.
(c) SJNB has provided to GBB phase I environmental assessments with
respect to each interest in real property owned by SJNB or the SJNB Subsidiaries
as to which such a phase I environmental investigation has been prepared by or
on behalf of SJNB or the SJNB Subsidiaries. The SJNB Real Property list shall
disclose each such property as to which such an assessment has not been prepared
on behalf of SJNB or the SJNB Subsidiaries.
4.13. Performance of Obligations. Each of SJNB and the SJNB
---------------------------
Subsidiaries has performed in all material respects all of the obligations
required to be performed by it to date and is not in default under or in breach
of any term or provision of any Scheduled Contract to which it is a party, is
subject or is otherwise bound, and no event has occurred that, with the giving
of notice or the passage of time or both, would constitute such default or
breach, where such default or breach would have, individually or in the
aggregate, a Material Adverse Effect on SJNB. Except for loans and leases made
by SJNB or the SJNB Subsidiaries in the ordinary course of business, to SJNB's
knowledge, no party to any Scheduled Contract is in default thereunder.
4.14. Employees. There are no controversies pending or, to the best of
---------
SJNB's knowledge, threatened between either SJNB or the SJNB Subsidiaries and
any of their respective employees that are likely to have a Material Adverse
Effect on SJNB. Neither SJNB nor the SJNB Subsidiaries is a party to any
collective bargaining agreement with respect to any of its employees or any
labor organization to which its employees or any of them belong.
4.15. Brokers and Finders. Except for the obligation to Dain Rauscher
-------------------
Wessels set forth in the Dain Rauscher Agreement, a copy of which has been
delivered to GBB, neither SJNB nor the SJNB Subsidiaries is a party to or
obligated under any agreement with any broker or finder relating to the
transactions contemplated hereby, and neither the execution of this Agreement
nor the consummation of the transactions provided for herein will result in any
liability to any broker or finder.
4.16. Material Contracts. Except as set forth in the SJNB Disclosure
------------------
Letter (each item listed or required to be listed in such SJNB Disclosure Letter
by this Section 4.16 being referred to herein as a "Scheduled Contract"),
neither SJNB nor the SJNB Subsidiaries is a party or otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract that (i) has a remaining term, as of the date of this Agreement, of
more than one year in length of obligation on the part of SJNB or the SJNB
Subsidiaries and is not terminable by SJNB or the SJNB Subsidiaries within one
year without penalty or (ii) requires payment by SJNB or the SJNB Subsidiaries
of $100,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by SJNB or
the SJNB Subsidiaries of $100,000 or more per annum;
23
(c) any contract or agreement that restricts SJNB or the SJNB
Subsidiaries (or would restrict any Affiliate of SJNB or the SJNB Subsidiaries
or the Surviving Corporation (including GBB and its Subsidiaries) after the
Effective Time of the Merger) from competing in any line of business with any
Person or using or employing the services of any Person;
(d) any lease of real or personal property providing for annual
lease payments by or to SJNB or the SJNB Subsidiaries in excess of $100,000 per
annum other than (A) financing leases entered into in the ordinary course of
business in which SJNB or the SJNB Subsidiaries is lessor and (B) leases of real
property presently used by the SJNB Subsidiaries as offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of SJNB or the SJNB Subsidiaries (other than as mortgagor or pledgor in the
ordinary course of its banking business, as mortgagee, secured party or deed of
trust beneficiary in the ordinary course of its banking business or as security
for deposits of Governmental Entities in the ordinary course of its banking
business ) in personal property having a value of $100,000 or more;
(f) other than as described in the SJNB Filings or as set forth in
the SJNB Disclosure Letter, any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or
former employees, officers or directors of SJNB or the SJNB Subsidiaries;
(g) any agreement to acquire equipment or any commitment to make
capital expenditures of $100,000 or more;
(h) other than agreements entered into in the ordinary course of
business, including sales of other real estate owned, any agreement for the sale
of any property or assets in which SJNB or the SJNB Subsidiaries has an
ownership interest or for the grant of any preferential right to purchase any
such property or asset;
(i) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of its banking
business and reflected in the financial records of SJNB or the SJNB
Subsidiaries);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by SJNB or the SJNB Subsidiaries (as lessee) that
materially restricts the use, transferability or value of such property;
(k) any guarantee or indemnification which involves the sum of
$100,000 or more, other than letters of credit or loan commitments issued in the
normal course of business, indemnification obligations set forth in the Bylaws
of SJNB or the SJNB Subsidiaries or in the SJNB Scheduled Contracts;
24
(l) any supply, facilities maintenance or landscape contracts not
terminable by SJNB or the SJNB Subsidiaries without penalty on 30 days' or less
notice and which provides for payments in excess of $100,000 per annum;
(m) any material agreement which would be terminable other than by
SJNB or the SJNB Subsidiaries as a result of the consummation of the
transactions contemplated by this Agreement;
(n) any contract of participation with any other bank in any loan in
excess of $100,000 or any sales of assets of SJNB or the SJNB Subsidiaries with
recourse of any kind to SJNB or the SJNB Subsidiaries except the sale of
mortgage loans, servicing rights, repurchase or reverse repurchase agreements,
securities or other financial transactions in the ordinary course of business;
(o) any agreement providing for the sale or servicing of any loan
or other asset which constitutes a "recourse arrangement" under applicable
regulation or policy promulgated by a Governmental Entity (except for agreements
for the sale of guaranteed portions of loans guaranteed in part by the U. S.
Small Business Administration and related servicing agreements);
(p) any contract relating to the provision of data processing
services to SJNB or the SJNB Subsidiaries which provides for payments in excess
of $100,000 per annum; or
(q) any other agreement of any other kind which involves future
payments or receipts or performances of services or delivery of items requiring
payment of $100,000 or more to or by SJNB or the SJNB Subsidiaries other than
payments made under or pursuant to loan agreements, participation agreements and
other agreements for the extension of credit in the ordinary course of their
business.
True copies of all SJNB Scheduled Contracts, including all amendments and
supplements thereto, have been delivered to GBB.
4.17. Certain Material Changes. Except as specifically required,
------------------------
permitted or effected by this Agreement or as disclosed in the SJNB Filings,
since March 31, 2001, there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated):
(a) any change in any of the assets, liabilities, permits, methods
of accounting or accounting practices, business, or manner of conducting
business, of SJNB or the SJNB Subsidiaries or any other event or development
that has had or may reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on SJNB;
(b) any damage, destruction or other casualty loss (whether or not
covered by insurance) that has had or may reasonably be expected to have a
Material Adverse Effect on SJNB;
25
(c) any amendment, modification or termination of any existing, or
entry into any new, material contract or permit that has had or may reasonably
be expected to have a Material Adverse Effect on SJNB;
(d) any disposition by SJNB or the SJNB Subsidiaries of an asset the
lack of which has had or may reasonably be expected to have a Material Adverse
Effect on SJNB; or
(e) any direct or indirect redemption, purchase or other acquisition
by SJNB or the SJNB Subsidiaries of any equity securities or any declaration,
setting aside or payment of any dividend or other distribution on or in respect
of SJNB Stock whether consisting of money, other personal property, real
property or other things of value (except for dividends permitted by Section
6.1(b)).
4.18. Licenses and Permits. Each of SJNB and the SJNB Subsidiaries has
--------------------
all material licenses and permits that are necessary for the conduct of its
business, and such licenses are in full force and effect, except for any failure
to be in full force and effect that would not, individually or in the aggregate,
have a Material Adverse Effect on SJNB. The respective properties, assets,
operations and businesses of SJNB and the SJNB Subsidiaries are and have been
maintained and conducted, in all material respects, in compliance with all
applicable (a) licenses and permits; and (b) laws and regulations.
4.19. Undisclosed Liabilities. Neither SJNB nor the SJNB Subsidiaries
-----------------------
has any liabilities or obligations, either accrued or contingent, that are
material to SJNB and that have not been: (a) reflected or disclosed in the
Financial Statements of SJNB; (b) incurred subsequent to December 31, 2000 in
the ordinary course of business consistent with past practices; or (c) disclosed
in the SJNB Disclosure Letter or on any other SJNB List. SJNB does not know of
any basis for the assertion against it or the SJNB Subsidiaries of any
liability, obligation or claim (including, without limitation, that of any
regulatory authority) that is likely to result in or cause a Material Adverse
Effect on SJNB that is not fairly reflected in the Financial Statements of SJNB
or otherwise disclosed in this Agreement.
4.20. Employee Benefit Plans.
----------------------
(a) SJNB has previously made available to GBB copies of each
"employee benefit plan," as defined in Section 3(3) of ERISA, of which SJNB or
any member of the same controlled group of corporations, trades or businesses as
SJNB within the meaning of Section 4001(a)(14) of ERISA ("ERISA Affiliates") is
a sponsor or participating employer or as to which SJNB or any of its ERISA
Affiliates makes contributions or is required to make contributions and which is
subject to any provision of ERISA and covers any employee, whether active or
retired, of SJNB or any of its ERISA Affiliates, together with all amendments
thereto, all currently effective and related summary plan descriptions, the
determination letter from the IRS, the annual reports for the most recent three
years (Form 5500 including, if applicable, Schedule B thereto) and a summary of
material modifications and all material employee communications prepared in
connection with any such plan. Such plans are hereinafter referred to
collectively as the "Employee Plans." SJNB does not participate in an employee
benefit pension plan that is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
26
Each Employee Plan which is intended to be qualified in form and operation under
Section 401(a) of the Code is so qualified and the associated trust for each
such Employee Plan is exempt from tax under Section 501(a) of the Code. No event
has occurred that will subject such Employee Plans to a material amount of tax
under Section 511 of the Code. All amendments required to bring each Employee
Plan into conformity with all of the applicable provisions of ERISA, the Code
and all other applicable laws have been made, except to the extent that such
amendments may be retroactively adopted under Section 401(b) of the Code and the
regulations issued thereunder. Except as disclosed in the SJNB Disclosure
Letter, all Employee Plans were in effect prior to January 1, 2001, and there
has been no material amendment thereof (other than amendments required to comply
with applicable law) or increase in the cost thereof or benefits thereunder on
or after January 1, 2001.
(b) SJNB has previously made available to GBB copies or descriptions
of each plan or arrangement maintained or otherwise contributed to by SJNB or
any of its ERISA Affiliates which is not an Employee Plan and which (exclusive
of base salary and base wages) provides for any form of current or deferred
compensation, bonus, stock option, stock awards, stock-based compensation or
other forms of incentive compensation or post-termination insurance, profit
sharing, benefit, retirement, group health or insurance, disability, workers'
compensation, welfare or similar plan or arrangement for the benefit of any
employee or class of employees, whether active or retired, of SJNB or any of its
ERISA Affiliates (such plans and arrangements being collectively referred to
herein as "Benefit Arrangements"). Except as disclosed in the SJNB Disclosure
Letter, all Benefit Arrangements which are in effect were commenced or in effect
prior to January 1, 2001. Except as disclosed in the SJNB Disclosure Letter,
there has been no material amendment thereof or increase in the cost thereof or
benefits payable thereunder since January 1, 2001. Except as set forth in the
SJNB Disclosure Letter, there has been no material increase in the compensation
of or benefits payable to any senior executive employee of SJNB since January 1,
2001, nor any employment, severance or similar contract entered into with any
such employee, nor any amendment to any such contract, since January 1, 2001.
(c) With respect to all Employee Plans and Benefit Arrangements,
SJNB and its ERISA Affiliates are in compliance (other than noncompliance the
cost or liability for which would not have a Material Adverse Effect on SJNB)
with the requirements prescribed by any and all statutes, governmental or court
orders, or governmental rules or regulations currently in effect, including but
not limited to ERISA and the Code, applicable to such plans or arrangements. All
government reports and filings required by law have been properly and timely
filed and all information required to be distributed to participants or
beneficiaries has been distributed with respect to each Employee Plan. SJNB and
its ERISA Affiliates have performed all of their obligations under all such
Employee Plans and Benefit Arrangements in all material aspects. There is no
pending or, to the best of SJNB's knowledge, threatened legal action, proceeding
or investigation against or involving any Employee Plan or Benefit Arrangement.
No condition exists that could constitute grounds for the termination of any
Employee Plan under Section 4042 of ERISA. No "prohibited transaction," as
defined in Section 406 of ERISA and Section 4975 of the Code, has occurred with
respect to any Employee Plan, or any other employee benefit plan maintained by
SJNB or any of its ERISA Affiliates which is covered by Title I of ERISA, which
could subject any person (other than a person for whom SJNB is not
27
directly or indirectly responsible) to liability under Title I of ERISA or to
the imposition of tax under Section 4975 of the Code (other than any such
transaction the cost or liability for which would not have a Material Adverse
Effect on SJNB). No Employee Plan subject to Part III of Subtitle B of Title I
of ERISA or Section 412 of the Code, or both, has incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code, whether or not
waived, nor has SJNB failed to make any contribution or pay any amount due and
owing as required by the terms of any Employee Plan or Benefit Arrangement. No
"reportable event" as defined in ERISA has occurred with respect to any of the
Employee Plans. Neither SJNB nor any of its ERISA Affiliates has incurred nor
expects to incur, directly or indirectly, any liability under Title IV of ERISA
arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA
which could constitute a liability of GBB or of any of its Affiliates (including
SJNB and the SJNB Subsidiaries) at or after the Effective Time of the Merger.
(d) Neither SJNB nor any of its ERISA Affiliates has provided or is
required to provide security to any Employee Plan pursuant to Section 401(a)(29)
of the Code. Each of the Employee Plans which is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination
letter from the IRS and neither SJNB nor the SJNB Subsidiaries knows of any fact
which reasonably could be expected to adversely affect the qualified status of
any such Employee Plan. All contributions required to be made to each of the
Employee Plans under the terms of the Employee Plan, ERISA, the Code or any
other applicable laws have been timely made. The Financial Statements of SJNB
properly reflect all amounts required to be accrued as liabilities to date under
each of the Employee Plans. The fair market value of the assets of each
Employee Plan and Benefit Arrangement that is funded, or required to be funded
under the terms of the Employee Plan or Benefit Arrangement, ERISA, the Code or
any other applicable law, equals or exceeds the liabilities, including the
present value of benefit obligations, of such Employee Plan or Benefit
Arrangement.
(e) Except for SJNB Scheduled Contracts or as set forth in the SJNB
Disclosure Letter, each Employee Plan or Benefit Arrangement and each personal
services contract, fringe benefit, consulting contract or similar arrangement
with or for the benefit of any officer, director, employee or other person can
be terminated by SJNB within a period of 30 days following the Effective Time of
the Merger, without payment of any specified material amount as a penalty,
bonus, premium, severance pay or other compensation for such termination.
(f) All group health plans of SJNB have been operated in compliance
with the group health plan continuation coverage requirements of Section 4980B
of the Code and with the group health plan portability, access and renewability
requirements of Sections 9801 through 9833 of the Code, and corresponding
provisions of ERISA, in all material respects.
(g) Except as set forth in the SJNB Disclosure Letter, neither SJNB
nor the SJNB Subsidiaries has used the services of (i) workers who have been
provided by a third party contract labor supplier for more than six months or
who may otherwise be eligible to participate in any of the Employee Plans or to
an extent that would reasonably be expected to result in the disqualification of
any of the Employee Plans or the imposition of penalties or excise taxes with
respect to the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation or any
28
other Governmental Entity; (ii) temporary employees who have worked for more
than six months or who may otherwise be eligible to participate in any of the
Employee Plans or to an extent that would reasonably be expected to result in
the disqualification of any of the Employee Plans or the imposition of penalties
or excise taxes with respect to the IRS, the Department of Labor, the Pension
Benefit Guaranty Corporation or any other Governmental Entity; (iii) individuals
who have provided services to SJNB or the SJNB Subsidiaries as independent
contractors for more than six months or who may otherwise be eligible to
participate in the Employee Plans or to an extent that would reasonably be
expected to result in the disqualification of any of the Employee Plans or the
imposition of penalties or excise taxes with respect to the IRS, the Department
of Labor, the Pension Benefit Guaranty Corporation or any other Governmental
Entity or (iv) leased employees, as that term is defined in section 414(n) of
the Code.
(h) Except as set forth in the SJNB Disclosure Letter, with respect
to each Employee Plan that is funded wholly or partially through an insurance
policy, there will be no material liability of SJNB or the SJNB Subsidiaries, as
of the Closing Date, under any such insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring prior to the Closing Date.
4.21. Corporate Records. The minute books of each of SJNB, SJNBank and
-----------------
Epic Funding Corporation (since May 22, 1998 with respect to Epic Funding
Corporation) accurately reflect all material corporate actions taken to this
date by the respective shareholders, board of directors and committees of each
of SJNB and the SJNB Subsidiaries.
4.22. Accounting Records. Each of SJNB and the SJNB Subsidiaries
------------------
maintains accounting records which fairly and accurately reflect, in all
material respects, its transactions and accounting controls exist sufficient to
provide reasonable assurances that such transactions are, in all material
respects, (i) executed in accordance with its management's general or specific
authorization, and (ii) recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting
principles. Such records, to the extent they contain important information
pertaining to SJNB or the SJNB Subsidiaries which is not easily and readily
available elsewhere, have been duplicated, and such duplicates are stored safely
and securely.
4.23. Offices and ATMs. SJNB has furnished to GBB a list (the "SJNB
----------------
Offices List") setting forth the headquarters of each of SJNB and the SJNB
Subsidiaries (identified as such) and each of the offices and automated teller
machines ("ATMs") maintained and operated by SJNB or the SJNB Subsidiaries
(including, without limitation, representative and loan production offices and
operations centers) and the location thereof. Except as set forth on the SJNB
Offices List, neither SJNB nor the SJNB Subsidiaries maintains any other office
or ATM or conducts business at any other location, and neither SJNB nor the SJNB
Subsidiaries has applied for or received permission to open any additional
branch or operate at any other location.
4.24. Operating Losses. SJNB has furnished to GBB a list (the "SJNB
----------------
Operating Losses List") setting forth any Operating Loss (as herein defined)
which has occurred at SJNB during the period after December 31, 2000 to the date
of this Agreement. To the best of SJNB's
29
knowledge, no action has been taken or omitted to be taken by any employee of
SJNB that has resulted in the incurrence by SJNB of an Operating Loss or that
might reasonably be expected to result in the incurrence of any individual
Operating Loss which would exceed $1,000,000 on an individual basis or in the
aggregate. For purposes of this section "Operating Loss" means any loss
resulting from cash shortages, lost or misposted items, disputed clerical and
accounting errors, forged checks, payment of checks over stop payment orders,
counterfeit money, wire transfers made in error, theft, robberies, defalcations,
check kiting, fraudulent use of credit cards or ATMs, civil money penalties,
fines, litigation, claims or other similar acts or occurrences.
4.25. Loan Portfolio. SJNB has furnished to GBB a list (the "SJNB Loan
--------------
List") that sets forth (a) as of May 31, 2001, a description of, by type and
classification, if any, each loan, lease, other extension of credit or
commitment to extend credit by SJNB or the SJNB Subsidiaries; (b) sets forth as
of May 31, 2001, by type and classification, all loans, leases, other extensions
and commitments to extend credit of SJNB or the SJNB Subsidiaries that have been
classified by its bank examiners or auditors (external or internal) as "Watch
List," "Substandard," "Doubtful," "Loss" or any comparable classification; and
(c) all consumer loans due to SJNB or the SJNB Subsidiaries as to which any
payment of principal, interest or any other amount is 90 days or more past due.
4.26. Investment Securities. SJNB has furnished to GBB a list (the
---------------------
"SJNB Investment Securities List") setting forth a description of each
Investment Security held by SJNB or the SJNB Subsidiaries on May 31, 2001. The
SJNB Investment Securities List sets forth, with respect to each such Investment
Security: (i) the issuer thereof; (ii) the outstanding balance or number of
shares; (iii) the maturity, if applicable; (iv) the title of issue; and (v) the
classification under SFAS No. 115. Neither SJNB nor the SJNB Subsidiaries has
any Investment Security classified as trading.
4.27. Power of Attorney. Neither SJNB nor the SJNB Subsidiaries has
-----------------
granted any Person a power of attorney or similar authorization that is
presently in effect or outstanding.
4.28. Facts Affecting Regulatory Approvals. To the best knowledge of
------------------------------------
SJNB, there is no fact, event or condition applicable to SJNB or the SJNB
Subsidiaries which will, or reasonably could be expected to, adversely affect
the likelihood of securing the requisite approvals or consents of any
Governmental Entity to the Merger and the transactions contemplated by this
Agreement.
4.29. Pooling; Tax Treatment.
----------------------
(a) SJNB intends that the Merger be accounted for under the "pooling-of-
interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board, and the
rules and regulations of the SEC.
30
(b) Neither SJNB nor any of its Affiliates has taken or agreed to take any
action or is aware of any fact or circumstance with respect to SJNB that would
prevent the Merger from qualifying (i) for "pooling-of-interests" accounting
treatment as described in (a) above or (ii) as a 368 Reorganization.
4.30. Indemnification. Other than pursuant to the provisions of their
---------------
respective Articles of Incorporation or Association, as the case may be, or
Bylaws, or as disclosed in the SJNB Disclosure Letter, the Dain Rauscher
Agreement or the Scheduled Contracts, neither SJNB nor the SJNB Subsidiaries is
a party to any indemnification agreement with any of its present officers,
directors, employees, agents or other persons who serve or served in any other
capacity with any other enterprise at the request of SJNB or the SJNB
Subsidiaries ("Covered Parties"), and to the best knowledge of SJNB, there are
no claims for which any Covered Person would be entitled to indemnification by
SJNB or the SJNB Subsidiaries if such provisions were deemed in effect, except
as set forth in a list furnished by SJNB to GBB (the "SJNB Indemnification
List").
4.31. Community Reinvestment Act. SJNBank has received rating of
--------------------------
"satisfactory" in its most recent examination or interim review with respect to
the Community Reinvestment Act. SJNBank has not been advised of any material
supervisory concerns regarding SJNBank's compliance with the Community
Reinvestment Act.
4.32. Derivative Transactions. Except as set forth in the SJNB
-----------------------
Disclosure Letter, neither SJNB nor the SJNB Subsidiaries is a party to or has
agreed to enter into an exchange traded or over-the-counter equity, interest
rate, foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is not included on the balance sheet and is a
derivative contract (including various combinations thereof) or owns securities
that are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes," or "capped floating rate mortgage
derivatives."
4.33. Trust Administration. Neither SJNB nor the SJNB Subsidiaries
--------------------
presently maintains trusts or exercises trust powers, including, but not limited
to, trust administration, and none of them nor any predecessor has maintained
any trusts or exercised such trust powers for a period of at least three years
prior to the date hereof. The term "trusts" as used in this Section 4.33
includes (i) any and all common law or other trusts between an individual,
corporation or other entities and SJNB or the SJNB Subsidiaries or any of their
predecessors, as trustee or co-trustee, including, without limitation, pension
or other qualified or nonqualified employee benefit plans, compensation,
testamentary, inter vivos, and charitable trust indentures; (ii) any and all
decedents' estates where SJNB or the SJNB Subsidiaries or any of their
predecessors is serving or has served as a co-executor or sole executor,
personal representative or administrator, administrator de bonis non,
administrator de bonis non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar positions
where SJNB or the SJNB Subsidiaries or any of their predecessors is serving or
has served as a co-grantor or a sole grantor or a conservator or co-conservator
of the estate, or any similar fiduciary capacity; and (iv) any and all agency
and/or custodial accounts and/or similar arrangements, including plan
administrator for employee benefit accounts, under which SJNB or the SJNB
31
Subsidiaries or any of their predecessors is serving or has served as an agent
or custodian for the owner or other party establishing the account with or
without investment authority.
4.34. Disclosure Documents and Applications. None of the information
-------------------------------------
supplied or to be supplied by or on behalf of SJNB ("SJNB Supplied Information")
for inclusion in (a) the Registration Statement on Form S-4 and the Joint Proxy
Statement and Prospectus and (b) any other documents to be filed with the SEC,
the FRB, the OCC or any other Governmental Entity in connection with the
transactions contemplated in this Agreement, will, at the respective times such
documents are filed or become effective, or with respect to the Joint Proxy
Statement and Prospectus when mailed, with respect to the SJNB Supplied
Information, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4.35. Intellectual Property. SJNB and the SJNB Subsidiaries own or
---------------------
possess valid and binding licenses and other rights to use without payment all
material patents, copyrights, trade secrets, trade names, service marks and
trademarks used in their respective businesses; and neither SJNB nor the SJNB
Subsidiaries has received any notice with respect thereto that asserts the
rights of others. SJNB and the SJNB Subsidiaries have in all material respects
performed all the obligations required to be performed by them, and are not in
default in any material respect under any license, contract, agreement,
arrangement or commitment relating to any of the foregoing.
4.36. Insider Loans; Other Transactions. SJNB has previously provided GBB
---------------------------------
or its agent with a listing, current as of May 31, 2001, of all outstanding
extensions of credit made by SJNB and the SJNB Subsidiaries to each of its
executive officers and directors and their related interests (all as defined
under FRB Regulation O), all of which have been made in compliance with
Regulation O, and Section 23B under the Federal Reserve Act which listing is
true, correct and complete in all material respects. Neither SJNB nor the SJNB
Subsidiaries owes any amount to, or has any contract or lease with or commitment
to, any of the present executive officers or directors of SJNB or the SJNB
Subsidiaries (other than for compensation for current services not yet due and
payable, reimbursement of expenses arising in the ordinary course of business,
options or awards available under the SJNB Stock Option Plans or any amounts due
pursuant to SJNB's Employee Plans).
4.37. Registration Obligation. Except as disclosed in the SJNB Disclosure
-----------------------
Letter, neither SJNB nor the SJNB Subsidiaries is under any obligation,
contingent or otherwise, to register any of their respective securities under
the Securities Act.
4.38. Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by SJNB hereby or in the SJNB Lists or
schedules hereto do not contain any untrue statement of a material fact or omit
to state any material fact which is necessary under the circumstances under
which they were made to prevent the statements contained herein or in such
schedules from being misleading.
32
4.39 Opinion of Financial Advisor. SJNB has received the opinion of
----------------------------
Dain Rauscher Wessels to the effect that, asof the date of such opinion, the
Conversion Ratio is fair from a financial point of view to the holders of the
SJNB Stock, and as of the date hereof such opinion has not been withdrawn.
4.40 Pooling Letter. SJNB has received a letter from KPMG dated as of
--------------
June 22, 2001 and addressed to SJNB, a copy of which has been delivered to GBB,
stating that KPMG concurs with SJNB management's conclusion that, as of June 22,
2001, SJNB is eligible to participate in a transaction accounted for as a
"pooling-of-interests" under Opinion 16 (Business Combination) of the Accounting
Principles Board of the American Institute of Certified Public Accountants, and
the rules and regulations of the SEC.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF GBB
-------------------------------------
GBB represents and warrants to SJNB as follows, except as set forth in the
GBB Disclosure Letter:
5.1. Incorporation, Standing and Power. GBB has been duly organized, is
---------------------------------
validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. GBB has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. GBB is duly qualified and in good standing as a foreign corporation,
and is authorized to do business, in all states or other jurisdictions in which
such qualification or authorization is necessary, except where the failure to be
so qualified or authorized would not, individually or in the aggregate, have a
Material Adverse Effect on GBB. True and correct copies of the Articles of
Incorporation and Bylaws of GBB have been delivered to SJNB. Such Articles of
Incorporation and Bylaws are in full force and effect as of the date hereof.
5.2. Capitalization. As of the date of this Agreement, the authorized
--------------
capital stock of GBB consists of 80,000,000 shares of common stock, of which
42,707,679 shares are outstanding as of June 22, 2001, and 4,000,000 shares of
preferred stock, no par value, of which no shares are outstanding. All of the
outstanding shares of GBB Stock are duly authorized, validly issued, fully paid
and nonassessable. The GBB Stock to be issued in the Merger will be duly
authorized, validly issued, fully paid and nonassessable. GBB has entered into
a Rights Agreement, dated as of November 17, 1998, with Wells Fargo Bank
Minnesota, N.A., pursuant to which GBB has issued rights to purchase shares of
GBB's preferred stock upon the occurrence of certain events. Neither the
execution and delivery of this Agreement, the Merger nor the issuance of GBB
Stock in connection therewith will constitute an event triggering the
exercisability of such rights.
5.3. Financial Statements. GBB has previously furnished to SJNB a copy
--------------------
of the Financial Statements of GBB. The Financial Statements of GBB: (a)
present fairly and accurately the consolidated financial condition of GBB as of
the respective dates indicated and its consolidated results of operations and
changes in shareholders' equity and cash flows, as
33
applicable, for the respective periods then ended, subject, in the case of the
unaudited consolidated interim financial statements, to normal recurring
adjustments; (b) have been prepared in accordance with generally accepted
accounting principles consistently applied (except as otherwise indicated
therein); (c) set forth as of the respective dates indicated adequate reserves
for loan losses and other contingencies; and (d) are based upon the books and
records of GBB and its Subsidiaries.
5.4. Reports and Filings. Since January 1, 1998, GBB and each of the
-------------------
Banks have filed all reports, returns, registrations and statements
(collectively, "GBB Filings"), together with any amendments required to be made
with respect thereto, that were required to be filed with (a) the SEC, (b) the
FRB, (c) the DFI, (d) the FDIC, (e) the OCC and (f) any other applicable
Governmental Entity, including taxing authorities, except where the failure to
file such reports, returns, registrations or statements has not had and is not
reasonably expected to have a Material Adverse Effect on GBB. No administrative
actions have been taken or threatened or orders issued in connection with such
GBB Filings. As of their respective dates, each of such GBB Filings (y)
complied in all material respects with all laws and regulations enforced or
promulgated by the Governmental Entity with which it was filed (or was amended
so as to be in such compliance promptly following discovery of any such
noncompliance); and (z) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Any financial statement contained in any of such GBB
Filings that was intended to present the financial position of GBB on a
consolidated basis fairly presented the financial position of GBB on a
consolidated basis and was prepared in accordance with generally accepted
accounting principles or banking regulations consistently applied, except as
stated therein, during the periods involved.
5.5. Authority. The execution and delivery by GBB of this Agreement and
---------
the Agreement of Merger, and, subject to the approval of the shareholders of GBB
of this Agreement and the transactions contemplated hereby, the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of GBB. This Agreement
is, and the Agreement of Merger will be, upon due execution and delivery by the
respective parties hereto, valid and binding obligations of GBB enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, liquidation, receivership, conservatorship,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general equitable principles. Neither the execution and
delivery by GBB of this Agreement or the Agreement of Merger, the consummation
of the transactions contemplated herein or therein, nor compliance by GBB with
any of the provisions hereof or thereof, will: (a) conflict with or result in a
breach of any provision of its Articles of Incorporation, as amended, or
Bylaws, as amended; (b) constitute a breach of or result in a default (or give
rise to any rights of termination, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which GBB or any subsidiary of
GBB is a party, or by which GBB or any subsidiary of GBB or any of its
properties or assets is bound; (c) result in the creation or imposition of any
Encumbrance on any of the respective properties or assets of GBB or any
subsidiary; or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable
34
to GBB or any subsidiary of GBB or any of its respective properties or assets.
No consent of, approval of, notice to or filing with any Governmental Entity
having jurisdiction over any aspect of the business or assets of GBB or any of
its Subsidiaries, and no consent of, approval of or notice to any other Person,
is required in connection with the execution and delivery by GBB of this
Agreement or the Agreement of Merger, or the consummation by GBB of the Merger
or the transactions contemplated hereby or thereby, except (i) such approvals as
may be required by the FRB; (ii) the filing of the Joint Proxy Statement and
Prospectus and Registration Statement on Form S-4 with the SEC and the issuance
by the SEC of an order declaring the Registration Statement on Form S-4
effective; (iii) the approval of this Agreement and the transactions
contemplated hereby by the shareholders of GBB; (iv) the filing of the Agreement
of Merger with the Secretary of State of the State of California; and (v) such
approvals as may be required to approve for inclusion on the Nasdaq National
Market System of the GBB Stock to be issued in the Merger.
5.6 Insurance. Each of GBB and the Banks has policies of insurance and
---------
bonds with respect to its assets and business against such casualties and
contingencies and in such amounts, types and forms as are customarily
appropriate for its business, operations, properties and assets. All such
insurance policies and bonds are in full force and effect. No insurer under any
such policy or bond has canceled or indicated an intention to cancel or not to
renew any such policy or bond or generally disclaimed liability thereunder.
Neither GBB nor the Banks is in default under any such policy or bond and all
material claims thereunder have been filed in a timely fashion.
5.7 Subsidiaries. As of the date of this Agreement, GBB owns 100% of
------------
the outstanding stock of each of the Banks, Matsco Lease Finance, Inc. II,
Matsco Lease Finance, Inc. III, Pacific Business Funding Corporation, Peninsula
Real Estate Corporation and GBBK Corp. As of the date of this Agreement, and
except for its investments in the entities listed in the preceding sentence,
GBB Capital I, GBB Capital II, GBB Capital III, GBB Capital IV and GBB Capital
V, GBB does not own, directly or indirectly (except as a pledgee pursuant to
loans or upon acquisition in satisfaction of debt previously contracted), the
outstanding stock or equity or other voting interest in any other Person.
5.8 Litigation. There is no private or governmental suit, claim, action
----------
or proceeding pending, nor to GBB's knowledge threatened, against GBB or any of
the Banks or against any of their respective directors, officers or employees
relating to the performance of their duties in such capacities or against or
affecting any properties of GBB or the Banks which, if adversely determined,
would have, individually or in the aggregate, a Material Adverse Effect on GBB.
Also, there are no material judgments, decrees, stipulations or orders against
GBB or the Banks or enjoining their respective directors, officers or employees
in respect of, or the effect of which is to prohibit, any business practice or
the acquisition of any property or the conduct of business in any area.
5.9 Taxes.
-----
(a) (i) All Tax Returns required to be filed by or on behalf of GBB or the
Banks or the Affiliated Group(s) of which any of them is or was a member, have
been duly and timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are
35
required to be filed (after giving effect to any valid extensions of time in
which to make such filings), and all such Tax Returns were true, complete and
correct in all material respects; (ii) all Taxes due and payable by or on behalf
of GBB or the Banks, either directly, as part of an Affiliated Group Tax Return,
or otherwise, have been fully and timely paid, except to the extent adequately
reserved therefor in accordance with GAAP and/or applicable regulatory
accounting principles or banking regulations consistently applied on the GBB
balance sheet, and adequate reserves or accruals for Taxes have been provided in
the GBB balance sheet with respect to any period through the date thereof for
which Tax Returns have not yet been filed or for which Taxes are not yet due and
owing; and (iii) no agreement, waiver or other document or arrangement extending
or having the effect of extending the period for assessment or collection of
Taxes (including, but not limited to, any applicable statute of limitation) has
been executed or filed with any taxing authority by or on behalf of GBB, the
Banks or any of their Subsidiaries, or any Affiliated Group(s) of which any of
them is or was a member.
(b) GBB and the Banks have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and have duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws.
(c) No written claim has been made by a taxing authority in a jurisdiction
where GBB or the Banks do not file an income or franchise Tax Return such that
GBB or the Banks are or may be subject to taxation by that jurisdiction.
(d) (i) All deficiencies asserted or assessments made as a result of any
examinations by any taxing authority of the Tax Returns of or covering or
including GBB or the Banks have been fully paid, and, to the best of GBB's
knowledge, there are no other audits or investigations by any taxing authority
in progress, nor have GBB or the Banks received any written notice from any
taxing authority that it intends to conduct such an audit or investigation; (ii)
no requests for a ruling or a determination letter are pending with any taxing
authority; and (iii) no issue has been raised in writing by any taxing authority
in any current or prior examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed deficiency
against GBB or the Banks for any subsequent taxable period that could be
material.
(e) There are no liens as a result of any due and unpaid Taxes upon any of
the assets of GBB or the Banks.
(f) GBB agrees, and agrees to cause the Banks, to cooperate with tax
counsel in furnishing reasonable and customary written tax representations to
tax counsel for purposes of supporting tax counsel's opinion that the Merger
qualifies as a 368 Reorganization as contemplated by Section 10.6. GBB
acknowledges that its and the Banks' inability or unwillingness to provide such
reasonable and customary written representations could preclude tax counsel from
rendering such opinion, with consequences specified elsewhere herein.
36
5.10 Compliance with Laws and Regulations. Neither GBB nor the Banks is
------------------------------------
in default under or in breach or violation of (i) any provision its Articles of
Incorporation or Association, as amended, or Bylaws, as amended, or (ii) any
law, ordinance, rule or regulation promulgated by any Governmental Entity,
except, with respect to this clause (ii), for such violations as would not have,
individually or in the aggregate, a Material Adverse Effect on GBB.
5.11 Performance of Obligations. Each of GBB and the Banks has performed
--------------------------
in all material respects all of the obligations required to be performed by it
to date and is not in default under or in breach of any term or provision of any
material contract included in the GBB Filings to which it is a party, is subject
or is otherwise bound, and no event has occurred that, with the giving of notice
or the passage of time or both, would constitute such default or breach, where
such default or breach would have, individually or in the aggregate, a Material
Adverse Effect on GBB. Except for loans and leases made by GBB or the Banks in
the ordinary course of business, to GBB's knowledge, no party with whom GBB or
the Banks has an agreement that is of material importance to the business of GBB
on a consolidated basis is in default thereunder.
5.12 Brokers and Finders. Except for the obligation to Sandler O'Neill &
-------------------
Partners, L.P., GBB is not a party to or obligated under any agreement with any
broker or finder relating to the transactions contemplated hereby, and neither
the execution of this Agreement nor the consummation of the transactions
provided for herein will result in any liability to any broker or finder.
5.13 Certain Material Changes. Except as specifically required,
------------------------
permitted or effected by this Agreement or as disclosed in the GBB Filings,
since March 31, 2001, there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated):
(a) any change in any of the assets, liabilities, permits, methods of
accounting or accounting practices, business, or manner or conducting business,
of GBB or its Subsidiaries or any other event or development that has had or may
reasonably be expected to have a Material Adverse Effect on GBB;
(b) any damage, destruction or other casualty loss (whether or not
covered by insurance) that has had or may reasonably be expected to have a
Material Adverse Effect on GBB;
(c) any amendment, modification or termination of any existing, or
entry into any new, material contract or permit that has had or may reasonably
be expected to have a Material Adverse Effect on GBB; or
(d) any disposition by GBB or any of its Subsidiaries of an asset the
lack of which has had or may reasonably be expected to have a Material Adverse
Effect on GBB.
5.14 Licenses and Permits. GBB and each subsidiary of GBB have all
--------------------
material licenses and permits that are necessary for the conduct of their
respective businesses, and such licenses are in full force and effect, except
for any failure to be in full force and effect that would
37
not, individually or in the aggregate, have a Material Adverse Effect on GBB.
The properties, assets, operations and businesses of GBB and each subsidiary of
GBB are and have been maintained and conducted, in all material respects, in
compliance with all applicable licenses and permits. The properties and
operations of GBB and each subsidiary of GBB are and have been maintained and
conducted, in all material respects, in compliance with all applicable laws and
regulations.
5.15 Undisclosed Liabilities. Neither GBB nor the Banks has any
-----------------------
liabilities or obligations, either accrued or contingent, that are material to
GBB and that have not been: (a) reflected or disclosed in the Financial
Statements of GBB; (b) incurred subsequent to December 31, 2000 in the ordinary
course of business consistent with past practices; or (c) disclosed in the GBB
Disclosure Letter. GBB does not know of any basis for the assertion against it
or the Banks of any liability, obligation or claim (including, without
limitation, that of any regulatory authority) that is likely to result in or
cause a Material Adverse Effect on GBB that is not fairly reflected in the
Financial Statements of GBB or otherwise disclosed in this Agreement.
5.16 Employee Benefit Plans.
(a) All material Employee Plans of which GBB or any of its ERISA Affiliates
is a sponsor or participating employer or as to which GBB or any of its ERISA
Affiliates makes contributions or is required to make contributions are
reflected in the GBB Filings. Each Employee Plan which is intended to be
qualified in form and operation under Section 401(a) of the Code is so qualified
and the associated trust for each such Employee Plan is exempt from tax under
Section 501(a) of the Code. No event has occurred that will subject such
Employee Plans to a material amount of tax under Section 511 of the Code. All
amendments required to bring each Employee Plan into substantial conformity with
all of the applicable provisions of ERISA, the Code and all other applicable
laws have been made, except to the extent that such amendments may be
retroactively adopted under Section 401(b) of the Code and the regulations
issued thereunder. All Employee Plans were in effect prior to January 1, 2001,
and there has been no material amendment thereof (other than amendments required
to comply with applicable law) or increase in the cost thereof or benefits
thereunder since January 1, 2001.
38
(b) With respect to all Employee Plans and Benefit Arrangements, GBB and
its ERISA Affiliates are in compliance (other than noncompliance the cost or
liability for which would not have a Material Adverse Effect on GBB) with the
requirements prescribed by any and all statutes, governmental or court orders,
or governmental rules or regulations currently in effect, including but not
limited to ERISA and the Code, applicable to such plans or arrangements. All
government reports and filings required by law have been properly and timely
filed and all information required to be distributed to participants or
beneficiaries has been distributed with respect to each Employee Plan. GBB and
its ERISA Affiliates have performed all of their obligations under all such
Employee Plans and Benefit Arrangements in all material aspects. There is no
pending or, to GBB's knowledge, threatened legal action, proceeding or
investigation against or involving any Employee Plan or Benefit Arrangement. No
condition exists that could constitute grounds for the termination of any
Employee Plan under Section 4042 of ERISA. No "prohibited transaction," as
defined in Section 406 of ERISA and Section 4975 of the Code (other than any
such transaction the cost or liability for which would not have a Material
Adverse Effect on GBB), has occurred with respect to any Employee Plan, or any
other employee benefit plan maintained by GBB or any of its ERISA Affiliates
which is covered by Title I of ERISA, which could subject any person (other than
a person for whom GBB is not directly or indirectly responsible) to liability
under Title I of ERISA or to the imposition of tax under Section 4975 of the
Code. No Employee Plan subject to Part III of Subtitle B of Title I of ERISA or
Section 412 of the Code, or both, has incurred any "accumulated funding
deficiency," as defined in Section 412 of the Code, whether or not waived, nor
has GBB failed to make any contribution or pay any amount due and owing as
required by the terms of any Employee Plan or Benefit Arrangement. No
"reportable event" as defined in ERISA has occurred with respect to any of the
Employee Plans. Neither GBB nor any of its ERISA Affiliates has incurred nor
expects to incur, directly or indirectly, any liability under Title IV of ERISA
arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA
which could constitute a liability of SJNB or of any of its Affiliates
(including GBB and the Banks) at or after the Effective Time of the Merger.
(c) Neither GBB nor any of its ERISA Affiliates has provided or is required
to provide security to any Employee Plan pursuant to Section 401(a)(29) of the
Code. Each of the Employee Plans which is intended to be a qualified plan under
Section 401(a) of the Code has received a favorable determination letter from
the IRS and neither GBB nor the Banks knows of any fact which reasonably could
be expected to adversely affect the qualified status of any such Employee Plan.
All contributions required to be made to each of the Employee Plans under the
terms of the Employee Plan, ERISA, the Code or any other applicable laws have
been timely made. The Financial Statements of GBB properly reflect all amounts
required to be accrued as liabilities to date under each of the Employee Plans.
To GBB's knowledge, the fair market value of the assets of each Employee Plan
and Benefit Arrangement that is funded, or required to be funded under the terms
of the Employee Plan or Benefit Arrangement, ERISA, the Code or any other
applicable law, equals or exceeds the liabilities, including the present value
of benefit obligations, of such Employee Plan or Benefit Arrangement.
39
5.17 Corporate Records. The minute books of GBB and each of its
-----------------
Subsidiaries reflect all material actions taken to this date by its
shareholders, boards of directors and committees.
5.18. Accounting Records. GBB and its Subsidiaries maintain accounting
------------------
records which fairly and accurately reflect, in all material respects, their
transactions and accounting controls exist sufficient to provide reasonable
assurances that such transactions are, in all material respects, (i) executed in
accordance with their management's general or specific authorization, and (ii)
recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles. Such records, to the
extent they contain important information pertaining to GBB and its Subsidiaries
which is not easily and readily available elsewhere, have been duplicated, and
such duplicates are stored safely and securely.
5.19. Facts Affecting Regulatory Approvals. To the best knowledge of
------------------------------------
GBB, there is no fact, event or condition applicable to GBB or any of its
Subsidiaries which will, or reasonably could be expected to, adversely affect
the likelihood of securing the requisite approvals or consents of any
Governmental Entity to the Merger and the transactions contemplated by this
Agreement.
5.20 Pooling; Tax Treatment.
----------------------
(a) GBB intends that the Merger be accounted for as a "pooling-of-
interests" as described in Section 4.29.
(b) Neither GBB nor any of its Affiliates has taken or agreed to take any
action or is aware of any fact or circumstance that would prevent the Merger
from qualifying (i) for "pooling-of-interests" accounting treatment as described
in Section 4.29 or (ii) as a 368 Reorganization.
5.21 Community Reinvestment Act. Each of the Banks has received a
--------------------------
rating of at least "satisfactory" in its most recent examination or interim
review with respect to the Community Reinvestment Act. None of the Banks has
been advised of any supervisory concerns regarding any of the Banks' compliance
with the Community Reinvestment Act.
5.22 Disclosure Documents and Applications. None of the information
-------------------------------------
supplied or to be supplied by or on behalf of GBB or any of its Subsidiaries
("GBB Supplied Information") for inclusion in (a) the Registration Statement on
Form S-4 and the Joint Proxy Statement and Prospectus to be mailed to the
shareholders of GBB and SJNB in connection with obtaining the approval of the
shareholders of GBB and SJNB of this Agreement, the Merger and the other
transactions contemplated hereby, and (b) any other documents to be filed with
the SEC, the FRB or any other Governmental Entity in connection with the
transactions contemplated in this Agreement, will, at the respective times such
documents are filed or become effective, or with respect to the Joint Proxy
Statement and Prospectus when mailed, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
40
5.23 Nasdaq Listing. As of the date hereof, GBB Stock is listed on the
--------------
Nasdaq National Market System.
5.24. Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by GBB hereby or in the GBB Disclosure
Letter do not contain any untrue statement of material fact or omit to state any
material fact which is necessary under the circumstances under which they were
made to prevent the statements contained herein or in such schedules from being
misleading.
5.25 Opinion of Financial Advisor. GBB has received the opinion of
----------------------------
Sandler O'Neill & Partners, L.P. to the effect that, as of the date of such
opinion, the consideration to be paid by GBB in the Merger is fair, from a
financial point of view, to GBB, and, as of the date hereof, such opinion has
not been withdrawn.
5.26 Pooling Letter. GBB has received a letter from PwC dated as of
--------------
June 25, 2001 and addressed to GBB, a copy of which has been delivered to SJNB,
stating that PwC concurs with GBB management's conclusion that, as of June 25,
2001, no conditions exist that would preclude GBB's accounting for the Merger as
a pooling-of-interests as described in Section 4.29, and such letter has not
been withdrawn or modified in any material respect as of the date hereof.
ARTICLE 6.
COVENANTS OF SJNB
------------------
PENDING EFFECTIVE TIME OF THE MERGER
------------------------------------
SJNB covenants and agrees with GBB as follows:
6.1. Limitation on Conduct Prior to Effective Time of the Merger.
-----------------------------------------------------------
Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and
regulation, SJNB agrees to conduct its business (and to cause the SJNB
Subsidiaries to conduct their respective businesses) in the ordinary course in
substantially the manner heretofore conducted and in accordance with sound
banking practices, and SJNB and the SJNB Subsidiaries shall not, without the
prior written consent of GBB, which consent GBB shall not unreasonably withhold
or delay:
(a) issue, sell or grant any SJNB Stock (except pursuant to the
exercise of SJNB Stock Options outstanding as of the date hereof), any other
securities (including long term debt) of SJNB or the SJNB Subsidiaries, or any
rights, stock appreciation rights, options or securities to acquire any SJNB
Stock, or any other securities (including long term debt) of SJNB
41
or the SJNB Subsidiaries, other than SJNB Stock Options to newly hired employees
of SJNB or the SJNB Subsidiaries consistent with past practice;
(b) declare, set aside or pay any dividend or make any other
distribution upon or split, combine or reclassify any shares of capital stock or
other securities of SJNB or the SJNB Subsidiaries, provided, however, that
subject to Section 6.10, SJNB may pay to its shareholders its regular cash
dividend in amounts and in a manner consistent with past practices;
(c) purchase, redeem or otherwise acquire any capital stock or other
securities of SJNB or the SJNB Subsidiaries or any rights, options, or
securities to acquire any capital stock or other securities of SJNB or the SJNB
Subsidiaries;
(d) except as may be required to effect the transactions contemplated
herein, amend its Articles of Incorporation or Association, as the case may be,
or Bylaws;
(e) grant any general or uniform increase in the rate of pay of
employees or employee benefits;
(f) grant any increase in salary, incentive compensation or employee
benefits or pay any bonus to any Person or voluntarily accelerate the vesting of
any employee benefits, other than payments of bonuses consistent with past
practice pursuant to plans in effect on the date hereof and disclosed in the
SJNB Disclosure Letter and increases in salary consistent with past practice to
Persons eligible for such salary increases on the anniversary dates of their
employment, provided that the percentage increase in salaries for all such
Persons shall not exceed 4% on average;
(g) make any capital expenditure or commitments with respect thereto
in excess of $50,000 in the aggregate, except for ordinary repairs, renewals and
replacements;
(h) compromise or otherwise settle or adjust any assertion or claim
of a deficiency in taxes (or interest thereon or penalties in connection
therewith), extend the statute of limitations with any tax authority or file any
pleading in court in any tax litigation or any appeal from an asserted
deficiency, or file or amend any federal, foreign, state or local tax return, or
make any tax election that is inconsistent with SJNB's current tax election
practices;
(i) grant or commit to grant any extension of credit if such
extension of credit, together with all other credit then outstanding to the same
Person and all Affiliated Persons, would exceed $2,000,000, except that the
grant, renewal or commitment to grant or renew any Classified Credits (as
defined herein) shall be subject to GBB's prior written consent, which will not
be unreasonably withheld or delayed (consent shall be deemed granted if within
two Business Days of written notice, together with all relevant documents,
delivered to GBB's Chief Credit Officer, written notice of objection is not
received by SJNB);
(j) change its tax or accounting policies and procedures or any
method or period of accounting unless required by generally accepted accounting
principles or a Governmental Entity;
42
(k) grant or commit to grant any extension of credit or amend the
terms of any such credit outstanding on the date hereof to any executive
officer, director or holder of 10% or more of the outstanding SJNB Stock, or any
Affiliate of such Person;
(l) close any offices at which business is conducted or open any new
offices;
(m) adopt or enter into any new employment agreement or other
employee benefit plan or arrangement or amend or modify any employment agreement
or employee benefit plan or arrangement of any such type except for such
amendments as are required by law;
(n) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as such term is defined below),
or negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize any of its or the SJNB Subsidiaries' officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or any other
representative retained by it or any of its Affiliates (the "Representatives")
to take any such action, and SJNB will use its commercially reasonable efforts
to cause the Representatives not to take any such action, and SJNB shall
promptly notify GBB (orally and in writing) of all of the relevant details
relating to all inquiries and proposals which it may receive relating to any of
such matters. For purposes of this Agreement, "Competing Transaction" shall
mean any of the following involving SJNB or the SJNB Subsidiaries: any merger,
consolidation, share exchange or other business combination; a sale, lease,
exchange, mortgage, pledge, transfer or other disposition of assets of SJNB or
the SJNB Subsidiaries representing 25% or more of the consolidated assets of
SJNB; a sale of shares of capital stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing, the right to acquire capital stock), representing 25% or more of the
voting power of SJNB or the SJNB Subsidiaries; a tender offer or exchange offer
for at least 25% of the outstanding shares of SJNB; or a public announcement of
an unsolicited bona fide proposal, plan, or intention to do any of the
foregoing. SJNB and the SJNB Subsidiaries will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
parties (other than GBB) conducted heretofore with respect to any of the
foregoing. SJNB and the SJNB Subsidiaries shall take the necessary steps to
inform promptly the appropriate individuals or entities referred to above of the
obligations undertaken in this Section. SJNB shall notify GBB within one
Business Day of the receipt of any such inquiries, proposals or offers, the
request for any such information, or the initiation or continuation of any such
negotiations or discussions with SJNB and the SJNB Subsidiaries. SJNB shall
promptly request each other person, other than GBB, that has, since April 5,
2001, executed a confidentiality agreement in connection with its consideration
of entering into a business combination with SJNB and the SJNB Subsidiaries to
return all confidential information heretofore furnished to such person by or on
behalf of SJNB and the SJNB Subsidiaries and enforce any such confidentiality
agreements. Notwithstanding any other provision in this Section 6.1(n), nothing
in this Agreement shall prevent SJNB from (i) engaging in any discussions or
negotiations with, or providing any information to, any Person in response to an
unsolicited bona fide written proposal concerning a Competing Transaction by any
such Person or (ii) recommending such an
43
unsolicited bona fide written proposal concerning a Competing Transaction to the
holders of SJNB Stock if and only if, prior to participating in any of the
foregoing, (A) the Board of Directors of SJNB concludes in good faith that the
Competing Transaction, if consummated, would result, or has a reasonable
likelihood of resulting, in a transaction more favorable to holders of SJNB
Stock than the transaction contemplated by this Agreement (any such more
favorable Competing Transaction being referred to in this Agreement as a
"Superior Proposal"); (B) the Board of Directors of SJNB determines in good
faith (following consultation with outside counsel) that failure to do so is, or
would be reasonably likely to be, inconsistent with its fiduciary duties under
applicable law; and (C) at least forty-eight (48) hours prior to providing any
information or data to any person or entering into discussions or negotiations
with any Person, the Board of Directors of SJNB notifies GBB of such inquiries,
proposals or offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued with SJNB
and the SJNB Subsidiaries. Nothing in this Section 6.1(n) shall prohibit SJNB or
its Board of Directors from taking and disclosing to the SJNB shareholders a
position with respect to a Competing Transaction to the extent required under
the Exchange Act or from making such disclosure to the SJNB shareholders which,
after consultation with outside counsel, the Board determines is otherwise
required under applicable law;
(o) change any basic policies and practices with respect to liquidity
management and cash flow planning, marketing, deposit origination, lending,
budgeting, profit and tax planning, personnel practices or any other material
aspect of SJNB's or the SJNB Subsidiaries' business or operations, except such
changes as may be required in the opinion of SJNB's or the SJNB Subsidiaries'
management to respond to economic or market conditions or as may be required by
any Governmental Entity;
(p) grant any Person a power of attorney or similar authority;
(q) make any investment by purchase of stock or securities (including
an Investment Security), contributions to capital, property transfers or
otherwise in any other Person, except for federal funds, obligations of the
United States Treasury or an agency of the United States Government the
obligations of which are entitled to or implied to have the full faith and
credit of the United States government and which have an original maturity not
in excess of one year, bank qualified investment grade municipal bonds, in any
case, in the ordinary course of business consistent with past practices and
which are not designated as trading (consent shall be deemed granted if within
three Business Days of written notice together with all relevant documents
delivered to GBB's Chief Financial Officer or Controller, written notice of
objection is not received by SJNB);
(r) amend or modify any Scheduled Contract or enter into any
agreement or contract that would be a Scheduled Contract under Section 4.16;
(s) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or release or waive any claim, except in the ordinary course of business
and consistent with past practices;
44
(t) take any action which would or is reasonably likely to (i)
adversely affect the ability of GBB or SJNB to obtain any necessary approval of
any Governmental Entity required for the transactions contemplated hereby; (ii)
adversely affect SJNB's ability to perform its covenants and agreements under
this Agreement; or (iii) result in any of the conditions to the performance of
GBB's or SJNB's obligations hereunder, as set forth in Articles 9, 10 or 11
herein not being satisfied;
(u) make any special or extraordinary distributions to any Person;
(v) reclassify any Investment Security from held-to-maturity or
available for sale to trading, unless required by changes in GAAP or regulatory
accounting requirements applicable to banks and their holding companies
generally;
(w) sell any security other than in the ordinary course of business,
or engage in gains trading;
(x) take title to any real property without conducting prior thereto
an environmental investigation, which investigation shall disclose the absence
of any suspected environmental contamination;
(y) take or cause to be taken any action which would disqualify the
Merger as a 368 Reorganization or prevent GBB from accounting for the business
combination to be effected by the Merger as a pooling-of-interests;
(z) settle any material claim, action or proceeding involving any
material liability for monetary damages or enter into any settlement agreement
containing material obligations;
(aa) make, acquire a participation in, or reacquire an interest in a
participation sold of, any loan that is not in compliance with its normal credit
underwriting standards, policies and procedures as in effect on December 31,
2000; or renew, extend the maturity of, or alter any of the material terms of
any such loan for a period of greater than six months;
(bb) incur any indebtedness for borrowed money or assume, guaranty,
endorse or otherwise as an accommodation become responsible for the obligations
of any other person, except for (i) in connection with banking transactions with
banking customers in the ordinary course of business, or (ii) short-term
borrowings made at prevailing market rates and terms; or
(cc) agree or make any commitment to take any actions prohibited by
this Section 6.1.
6.2 Affirmative Conduct Prior to Effective Time of the Merger. Between
---------------------------------------------------------
the date hereof and the Effective Time of the Merger, SJNB shall (and shall
cause the SJNB Subsidiaries to):
45
(a) use its commercially reasonable efforts consistent with this
Agreement to maintain and preserve intact its present business organization and
to maintain and preserve its relationships and goodwill with account holders,
borrowers, employees and others having business relationships with SJNB or the
SJNB Subsidiaries;
(b) use its commercially reasonable efforts to keep in full force and
effect all of the existing material permits and licenses of SJNB and the SJNB
Subsidiaries;
(c) use its commercially reasonable efforts to maintain insurance
coverage at least equal to that now in effect on all properties which it owns or
leases and on its business operations;
(d) perform its material contractual obligations and not become in
material default on any such obligations;
(e) duly observe and conform in all material respects to all lawful
requirements applicable to its business;
(f) maintain its assets and properties in good condition and repair,
normal wear and tear excepted;
(g) promptly upon learning of such information, advise GBB in writing
of any event or any other transaction within its knowledge whereby any Person or
Related Group of Persons acquires, directly or indirectly, record or beneficial
ownership or control (as defined in Rule 13d-3 promulgated by the SEC under the
Exchange Act) of 5% or more of the outstanding SJNB Stock prior to the record
date fixed for the SJNB Shareholders' Meeting or any adjourned meeting thereof
to approve this Agreement and the transactions contemplated herein;
(h) promptly notify GBB regarding receipt from any tax authority of
any notification of the commencement of an audit, any request to extend the
statute of limitations, any statutory notice of deficiency, any revenue agent's
report, any notice of proposed assessment, or any other similar notification of
potential adjustments to the tax liabilities of SJNB, or any actual or
threatened collection enforcement activity by any tax authority with respect to
tax liabilities of SJNB;
(i) make available to GBB monthly unaudited balance sheets and income
statements of SJNB within 25 days after the close of each calendar month;
(j) not later than the 30th day of each calendar month, amend or
supplement the SJNB Disclosure Letter and the SJNB Lists prepared and delivered
pursuant to Article 4 to ensure that the information set forth in the SJNB
Disclosure Letter and the SJNB Lists accurately reflects the then-current status
of SJNB and the SJNB Subsidiaries;
(k) use its commercially reasonable efforts to obtain any third party
consent with respect to any contract, agreement, lease, license, arrangement,
permit or release that is material to the business of SJNB and the SJNB
Subsidiaries on a consolidated basis or that is
46
contemplated in this Agreement as required in connection with the Merger;
provided, however, that no such third party consent need be obtained if a
- -------- -------
material amount of monetary consideration is required;
(l) maintain an allowance for loan and lease losses consistent with
practices and methodology as in effect on the date of the execution of this
Agreement; and
(m) furnish to Manatt, Phelps & Phillips, LLP promptly upon its
written request written representations and certificates as deemed reasonably
necessary or appropriate for purposes of enabling Manatt, Phelps & Phillips, LLP
to render the tax opinion referred to in Section 11.16 hereof.
6.3 Access to Information .
---------------------
(a) SJNB will afford, upon reasonable notice, to GBB and its
representatives, counsel, accountants, agents and employees reasonable access
during normal business hours to all of their business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
GBB and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, business, assets and
properties of SJNB and the SJNB Subsidiaries and the condition thereof and to
update such examination at such intervals as GBB shall deem appropriate. Such
examination shall be conducted in cooperation with the officers of SJNB and the
SJNB Subsidiaries and in such a manner as to minimize any disruption of, or
interference with, the normal business operations of SJNB and the SJNB
Subsidiaries. Upon the request of GBB, SJNB will request KPMG to provide
reasonable access to representatives of PwC working on behalf of GBB to
auditors' work papers with respect to the business and properties of SJNB and
the SJNB Subsidiaries, including tax accrual work papers prepared for SJNB and
the SJNB Subsidiaries during the preceding 60 months, other than (a) books,
records and documents covered by the attorney-client privilege, or that are
attorneys' work product, and (b) books, records and documents that SJNB or the
SJNB Subsidiaries are legally obligated to keep confidential. No examination or
review conducted under this section shall constitute a waiver or relinquishment
on the part of GBB of the right to rely upon the representations and warranties
made by SJNB herein; provided, that GBB shall disclose to SJNB any fact or
circumstance it may discover which GBB believes renders any representation or
warranty made by SJNB hereunder incorrect in any respect. GBB covenants and
agrees that it, its Subsidiaries, and their respective representatives, counsel,
accountants, agents and employees will hold in strict confidence all documents
and information concerning SJNB and the SJNB Subsidiaries so obtained from any
of them (except to the extent that such documents or information are a matter of
public record or require disclosure in the Joint Proxy Statement and Prospectus
or any of the public information of any applications required to be filed with
any Governmental Entity to obtain the approvals and consents required to effect
the transactions contemplated hereby), and if the transactions contemplated
herein are not consummated, such confidence shall be maintained and all such
documents shall be returned to SJNB.
(b) A representative of GBB, selected by GBB in its sole discretion,
shall be authorized and permitted to review each loan, lease, or other credit
funded or renewed by SJNB
47
or the SJNB Subsidiaries after the date hereof, and all information associated
with such loan, lease or other credit, such review to take place, if possible,
on SJNB's premises.
(c) A representative of GBB, selected by GBB in its sole discretion,
shall be permitted by SJNB and the SJNB Subsidiaries to attend all regular and
special Board of Directors and committee meetings of SJNB and the SJNB
Subsidiaries from the date hereof until the Effective Time of the Merger;
provided, however, that the attendance of such representative shall not be
permitted (i) at any meeting, or portion thereof, for the sole purpose of
discussing the transactions contemplated by this Agreement or the obligations of
SJNB under this Agreement or (ii) during the course of any meeting upon the
determination of the Board of Directors (following consultation with outside
counsel) that such attendance would be inappropriate or in violation of the
directors' fiduciary duties.
6.4 Filings. SJNB agrees that through the Effective Time of the Merger,
-------
each of SJNB's or the SJNB Subsidiary's reports, registrations, statements and
other filings required to be filed with any applicable Governmental Entity will
comply in all material respects with all the applicable statutes, rules and
regulations enforced or promulgated by the Governmental Entity with which it
will be filed and none will contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Any financial statement contained in any such report,
registration, statement or other filing that is intended to present the
financial position of the entity to which it relates will fairly present the
financial position of such entity and will be prepared in accordance with
generally accepted accounting principles or applicable banking regulations
consistently applied during the periods involved.
6.5 Notices; Reports. SJNB will promptly notify GBB of any event of
----------------
which SJNB obtains knowledge which has had or may have a Material Adverse Effect
on SJNB, or in the event that SJNB determines that it is unable to fulfill any
of the conditions to the performance of GBB's obligations hereunder, as set
forth in Articles 9 or 11 herein, and SJNB will furnish GBB (i) as soon as
available, and in any event within one Business Day after it is mailed or
delivered to the Board of Directors of SJNB or the SJNB Subsidiaries or
committees thereof, any report by SJNB or the SJNB Subsidiaries for submission
to the Board of Directors of SJNB or the SJNB Subsidiaries or committees
thereof, provided, however, that SJNB need not furnish to GBB communications of
SJNB's legal counsel regarding SJNB's rights and obligations under this
Agreement or the transactions contemplated hereby, or books, records and
documents covered by confidentiality agreements or the attorney-client
privilege, or which are attorneys' work product, (ii) as soon as available, all
proxy statements, information statements, financial statements, reports, letters
and communications sent by SJNB to its shareholders or other security holders,
and all reports filed by SJNB or the SJNB Subsidiaries with the SEC, FRB or the
OCC, and (iii) such other existing reports as GBB may reasonably request
relating to SJNB or the SJNB Subsidiaries.
6.6 SJNB Shareholders' Meeting. Subject to the provisions of Section
--------------------------
6.1(n) and 13.1, as promptly as practicable after the execution of this
Agreement, SJNB will take action necessary in accordance with applicable law and
its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the
48
transactions contemplated hereby so as to permit the consummation of the
transactions contemplated hereby. The Board of Directors of SJNB shall recommend
that its shareholders approve this Agreement and the transactions contemplated
hereby; provided, however, that the Board of Directors may withdraw, modify or
-------- -------
change its recommendation to the shareholders if the Board determines in good
faith, following consultation with its outside counsel as to legal matters, that
failure to do so would be reasonably likely to constitute or result in a breach
of its fiduciary duties. Subject to the proviso of the immediately preceding
sentence, SJNB will use commercially reasonable efforts to obtain the requisite
affirmative vote of the holders of the outstanding SJNB Stock for the approval
of this Agreement and the Merger.
6.7 Certain Loans and Other Extensions of Credit. SJNB will promptly
--------------------------------------------
inform GBB of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any bank regulatory authority
(and so advised to SJNB by such authority) or by any unit of SJNB or the SJNB
Subsidiaries or by any other Person as "Criticized," "Specially Mentioned,"
"Substandard," "Doubtful," "Loss" or any comparable classification ("Classified
Credits"). SJNB will furnish GBB, as soon as practicable, and in any event
within 20 days after the end of each calendar month, schedules including the
following: (a) Classified Credits (including with respect to each credit its
classification category and the originating unit); (b) nonaccrual credits
(including the originating unit); (c) accrual exception credits that are
delinquent 90 or more days and have not been placed on nonaccrual status
(including its originating unit); (d) credits delinquent as to payment of
principal or interest (including its originating unit), including an aging into
current-to-29, 30-59, 60-89, and 90+ day categories; (e) participating loans and
leases, stating, with respect to each, whether it is purchased or sold and the
originating unit; (f) loans or leases (including any commitments) by SJNB or the
SJNB Subsidiaries to any SJNB or the SJNB Subsidiaries director, officer at or
above the senior vice president level, or shareholder holding 10% or more of the
capital stock of SJNB, including with respect to each such loan or lease the
identity and, to the knowledge of SJNB, the relation of the borrower to SJNB or
the SJNB Subsidiaries, and the outstanding and undrawn amounts; (g) letters of
credit (including the originating unit); (h) loans or leases wholly or partially
charged off during the previous month (including with respect to each loan or
lease, the originating amount, the write-off amount and its originating unit);
and (i) other real estate or assets acquired in satisfaction of debt.
6.8 Applications. Subject to Section 7.5, SJNB will promptly prepare or
------------
cause to be prepared the portions of the Joint Proxy Statement and Prospectus as
it pertains to SJNB or the SJNB Subsidiaries and any other applications
necessary to consummate the transactions contemplated hereby, and further agrees
to provide any information requested by GBB for the preparation of any
applications necessary to consummate the transactions contemplated hereby. SJNB
shall afford GBB a reasonable opportunity to review the portions of the Joint
Proxy Statement and Prospectus pertaining to SJNB or the SJNB Subsidiaries and
all such applications and all amendments and supplements thereto before the
filing thereof. SJNB covenants and agrees that, with respect to the information
relating to SJNB or the SJNB Subsidiaries, the Joint Proxy Statement and
Prospectus will comply in all material respects with the provisions of
applicable law, and will not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading. SJNB will use its
49
commercially reasonable efforts to obtain all approvals or consents of
Governmental Entities necessary to effect the Merger and the transactions
contemplated herein.
6.9 Affiliate Agreements. Concurrently with the execution of this
--------------------
Agreement, (a) SJNB shall deliver to GBB a letter identifying all persons who
are then "affiliates" of SJNB for purposes of ASR 130 and 135 and Rule 145 under
the Securities Act and (b) SJNB shall advise the persons identified in such
letter of the resale restrictions imposed by applicable securities laws and
shall use its commercially reasonable efforts to obtain from each person
identified in such letter a written agreement substantially in the form attached
hereto as Exhibit B. SJNB shall use its commercially reasonable efforts to
---------
obtain from any person who becomes an affiliate of SJNB after SJNB's delivery of
the letter referred to above, and on or prior to the date of the SJNB
Shareholders' Meeting to approve this Agreement, a written agreement
substantially in the form attached as Exhibit B hereto as soon as practicable
---------
after such person attains such status.
6.10 Coordination of Dividends. SJNB shall coordinate with GBB the
-------------------------
declaration of any dividends that may be allowed pursuant to Section 6.1(b)
hereof, and the record date and the payment dates relating thereto, it being the
intention of the parties that holders of SJNB Stock shall not receive two
dividends, or fail to receive one dividend, for any applicable dividend period
with respect to their shares of SJNB Stock and any shares of GBB Stock any such
holder will receive in exchange therefor in the Merger.
ARTICLE 7.
COVENANTS OF GBB
-----------------
PENDING EFFECTIVE TIME OF THE MERGER
------------------------------------
GBB covenants and agrees with SJNB as follows:
7.1. Limitation on Conduct Prior to Effective Time of the Merger.
-----------------------------------------------------------
Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and regulation
generally applicable to bank holding companies and banks, each of GBB and its
Subsidiaries shall not, without the prior written consent of SJNB, which consent
SJNB shall not unreasonably withhold or delay:
(a) take any action which would or is reasonably likely to (i)
adversely affect the ability of GBB to obtain any necessary approvals of any
Governmental Entity required for the transactions contemplated hereby; (ii)
adversely affect GBB's ability to perform its covenants and agreements under
this Agreement; or (iii) result in any of the conditions to the performance of
GBB's or SJNB's obligations hereunder, as set forth in Articles 9, 10 or 11
herein not being satisfied;
(b) take or cause to be taken any action which would disqualify the
Merger as a "reorganization" within the meaning of Section 368 of the Code or
prevent GBB from accounting for the business combination to be effected by the
Merger as a pooling-of-interests;
50
(c) amend its articles of incorporation in any respect which would
materially and adversely affect the rights and privileges attendant to the GBB
Stock; or
(d) agree or make any commitment to take any actions prohibited by
this Section 7.1.
7.2. Affirmative Conduct of GBB and Subsidiaries Prior to Effective Time of
----------------------------------------------------------------------
the Merger. Between the date hereof and the Effective Time of the Merger, GBB
- ----------
shall (and shall cause its Subsidiaries to):
(a) duly observe and conform in all material respects to all lawful
requirements applicable to the business of GBB or any subsidiary of GBB;
(b) use its commercially reasonable efforts to obtain any third party
consent with respect to any contract, agreement, lease, license, arrangement,
permit or release that is material to the business of GBB on a consolidated
basis or that is contemplated in this Agreement as required in connection with
the Merger;
(c) not later than the 20th day of each calendar month, amend or
supplement the GBB Lists prepared and delivered pursuant to Article 5 to ensure
that the information set forth in the GBB Lists accurately reflects the then-
current status of GBB and its Subsidiaries. GBB shall further amend or
supplement the GBB Disclosure Letter as of the Closing Date if necessary to
reflect any additional information that needs to be included in the GBB
Disclosure Letter; and
(d) furnish to Pillsbury Winthrop LLP promptly upon its written
request written representations and certificates as deemed reasonably necessary
or appropriate for purposes of enabling Pillsbury Winthrop LLP to render the tax
opinion referred to in Section 10.6
7.3. Access to Information. Upon reasonable request by SJNB, GBB shall
---------------------
(i) make its Chief Executive Officer, Chief Administrative Officer/Chief
Financial Officer, Chief Credit Officer and Controller available to discuss with
SJNB and its representatives GBB's operations; and (ii) shall provide SJNB with
written information which is (a) similar to the written information that SJNB
reviewed in connection with this Agreement, and (b) related to GBB's business
condition, operations and prospects on a consolidated basis. No examination or
review conducted under this section shall constitute a waiver or relinquishment
on the part of SJNB of the right to rely upon the representations and warranties
made by GBB herein; provided, that SJNB shall disclose to GBB any fact or
circumstance it may discover which SJNB believes renders any representation or
warranty made by GBB hereunder incorrect in any respect. SJNB covenants and
agrees that it and its representatives, counsel, accountants, agents and
employees will hold in strict confidence all documents and information
concerning GBB so obtained (except to the extent that such documents or
information are a matter of public record or require disclosure in the Joint
Proxy Statement and Prospectus or any of the public information of any
applications required to be filed with any Governmental Entity to obtain the
approvals and consents required to effect the transactions contemplated hereby),
and if the transactions
51
contemplated herein are not consummated, such confidence shall be maintained and
all such documents shall be returned to GBB.
7.4. Filings. GBB agrees that through the Effective Time of the Merger,
-------
each of its reports, registrations, statements and other filings required to be
filed with any applicable Governmental Entity will comply in all material
respects with all the applicable statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it will be filed and none will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Any
financial statement contained in any such report, registration, statement or
other filing that is intended to present the financial position of the entities
or entity to which it relates will fairly present the financial position of such
entities or entity and will be prepared in accordance with generally accepted
accounting principles or applicable banking regulations consistently applied
during the periods involved.
7.5. Applications. GBB will, as promptly as practicable, prepare and
------------
file or cause to be prepared and filed (i) an application for approval of the
Merger with the FRB; (ii) in conjunction with SJNB, the Registration Statement
on Form S-4 and the Joint Proxy Statement and Prospectus as it pertains to GBB;
and (iii) any other applications necessary to consummate the transactions
contemplated hereby. GBB shall afford SJNB a reasonable opportunity to review
the Joint Proxy Statement and Prospectus and all such applications and all
amendments and supplements thereto before the filing thereof. GBB shall use its
commercially reasonable efforts to have the SEC declare the Registration
Statement on Form S-4 effective as soon as possible after it is filed with the
SEC. GBB covenants and agrees that the Registration Statement on Form S-4 and
the Joint Proxy Statement and Prospectus and all applications to the appropriate
regulatory agencies for approval or consent to the Merger, with respect to
information relating to GBB or its Subsidiaries, will comply in all material
respects with the provisions of applicable law, and will not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. GBB will use
its commercially reasonable efforts to obtain all approvals or consents of
Governmental Entities necessary to effect the Merger.
7.6. Blue Sky. GBB agrees to use commercially reasonable efforts to have
--------
the shares of GBB Stock to be issued in connection with the Merger qualified or
registered for offer and sale, to the extent required, under the securities laws
of each jurisdiction in which shareholders of SJNB reside.
7.7. Notices; Reports. GBB will promptly notify SJNB of any event of
----------------
which GBB obtains knowledge which has had or may have a material adverse affect
on the financial condition, operations, business or prospects of GBB on a
consolidated basis or in the event that GBB determines that it is unable to
fulfill any of the conditions to the performance of SJNB's obligations
hereunder, as set forth in Articles 9 or 10 herein.
7.8. Removal of Conditions. In the event of the imposition of a
---------------------
condition to any approvals of Governmental Entities which GBB deems to
materially adversely affect it or to be
52
materially burdensome, GBB shall use its commercially reasonable efforts to
obtain the removal of such condition.
7.9. Stock Options.
-------------
(a) At and as of the Effective Time of the Merger, each SJNB Stock
Option that is outstanding and unexercised shall be assumed by GBB and converted
into an option to purchase such number of shares of GBB Stock at an exercise
price determined as provided below (and otherwise having the same duration and
other terms as the SJNB Stock Option pursuant to the SJNB Stock Option Plan).
Each SJNB Stock Option shall be exercisable for that number of whole shares of
GBB Stock equal to the product of (A) the number of shares of SJNB Stock that
were purchasable under such SJNB Stock Option immediately prior to the Effective
Time of the Merger multiplied by (B) the Conversion Ratio, with such product
rounded down to the nearest whole number of shares of GBB Stock; and (ii) the
per share exercise price for the shares of GBB Stock issuable upon exercise of
such SJNB Stock Option shall be equal to the quotient determined by dividing (A)
the exercise price per share of SJNB Stock at which such SJNB Stock Option was
exercisable immediately prior to the Effective Time of the Merger by (B) the
Conversion Ratio, with such quotient rounded up to the nearest cent. After the
Effective Time of the Merger, GBB shall issue to each holder of an outstanding
SJNB Stock Option a document evidencing the assumption of such SJNB Stock Option
by GBB pursuant to this Section 7.9.
(b) GBB shall comply with the terms of the SJNB Stock Option Plan and
cause, to the extent required by, and subject to the provisions of, such Plan
and the Code, the SJNB Stock Options which qualify as incentive stock options
prior to the Effective Time of the Merger to continue to qualify as incentive
stock options of GBB after the Effective Time of the Merger.
(c) At or prior to the Effective Time of the Merger, GBB shall take
all corporate action necessary to reserve for issuance a sufficient number of
shares of GBB Stock for delivery upon exercise of SJNB Stock Options assumed by
it in accordance with this Section 7.9. At the Effective Time of the Merger, or
as soon as practicable thereafter, GBB shall, if necessary, file a registration
statement on Form S-8 (or any successor or other appropriate form) with respect
to the shares of GBB Stock subject to such options and shall use all reasonable
efforts to maintain the effectiveness of such registration statement (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
7.10 Reservation, Issuance and Registration of GBB Stock. GBB shall
---------------------------------------------------
reserve and make available for issuance in connection with the Merger and in
accordance with the terms and conditions of this Agreement such number of shares
of GBB Stock to be issued to the shareholders of SJNB in the Merger pursuant to
Article 2 hereof.
7.11 Nasdaq Listing. GBB shall use its commercially reasonable efforts to
--------------
cause the shares of GBB Stock to be issued in the Merger to be approved for
listing on the Nasdaq National Market System, subject to official notice of
issuance, prior to the Effective Time of the Merger.
53
7.12 GBB Shareholders' Meeting. As promptly as practicable after the
-------------------------
execution of this Agreement, GBB will take action necessary in accordance with
applicable law and its Articles of Incorporation and Bylaws to convene a meeting
of its shareholders to consider and vote upon this Agreement and the
transactions contemplated hereby. The Board of Directors of GBB shall, subject
to its fiduciary duties, recommend that its shareholders approve this Agreement
and the transactions contemplated hereby. The Board of Directors of GBB shall,
subject to its fiduciary duties, use its commercially reasonable efforts to
obtain the requisite affirmative vote of the holders of the outstanding GBB
Stock for the approval of this Agreement, the Merger and the transactions
contemplated hereby.
7.13 Indemnification and Insurance.
-----------------------------
(a) GBB shall, for six years from and after the Effective Time of the
Merger, maintain, as continuing obligations of GBB for the benefit of the
individuals who on or at any time prior to the Effective Time of the Merger were
entitled to rights thereunder with respect to matters occurring prior to the
Effective Time of the Merger, the indemnification, expense advancement and
exculpation obligations set forth in SJNB's or any SJNB Subsidiary's Articles of
Incorporation or Association and By-Laws, as amended, in each case as of the
date of this Agreement, irrespective of any amendment, repeal or modification
thereof after the Effective Time of the Merger. In addition, GBB agrees that
the indemnification and advancement obligations of SJNB or any SJNB Subsidiary
as set forth in indemnification agreements to which it is a party shall be
continuing obligations of GBB and shall not be amended, repealed, or otherwise
modified after the Effective Time of the Merger, except as permitted by the
terms and provisions of those agreements.
(b) GBB shall maintain in effect, for six years from and after the
Effective Time of the Merger, directors' and officers' liability insurance
policies covering the Covered Parties under SJNB's current directors' and
officers' policies and on terms not materially less favorable than the existing
insurance coverage with respect to matters occurring at or prior to the
Effective Time of the Merger; provided, however, in the event the annual premium
for such coverage exceeds an amount equal to 300% of the last annual premium
paid immediately prior to the date hereof by SJNB for such coverage, GBB shall
obtain as much comparable insurance as possible for an annual premium equal to
300% of the last annual premium paid immediately prior to the date hereof by
SJNB. The provisions of the immediately preceding sentence shall be deemed to
have been satisfied if prepaid policies have been obtained by SJNB prior to the
Closing for purposes of this Section 7.13(b), which policies provide such
directors and officers with coverage for an aggregate period of six years with
respect to claims arising from facts or events that occurred on or before the
Effective Time of the Merger, including, without limitation, in respect of the
transactions contemplated by this Agreement; provided, that SJNB shall not
purchase any such policies if the cost thereof would exceed the amount specified
in the preceding sentence and shall consult with GBB prior to purchasing any
such policy in order to determine the most cost-effective and efficient means of
obtaining such coverage. If such prepaid policies have been obtained by SJNB
prior to the Closing, GBB shall maintain such policies in full force and effect,
and continue to honor SJNB's obligations thereunder. If GBB or any of its
successors and assigns (i) consolidates with or merges with or into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or
54
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of GBB assume the obligations set forth
in this Section 7.13.
(c) In addition to, and not in lieu of the foregoing, GBB shall indemnify,
defend (with mutually acceptable counsel) and hold harmless all current and
former officers and directors of SJNB and any SJNB Subsidiary (the "Indemnified
Parties") to the fullest extent permitted by the CGCL, as amended from time to
time, from and against all liabilities (including amounts paid in settlement;
provided GBB has approved such settlement), costs, expenses and claims
(including without limitation reasonable legal fees and disbursements).
(d) In the event that any action, suit, proceeding or investigation
relating thereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Effective Time of the Merger, the parties
hereto agree to cooperate and use their respective commercially reasonable
efforts to vigorously defend against and respond thereto.
(e) The provisions of this Section 7.13 are intended to be for the benefit
of, and shall be enforceable by, each Covered Party and Indemnified Party, and
their respective heirs and representatives.
ARTICLE 8.
ADDITIONAL COVENANTS
--------------------
The parties hereto hereby mutually covenant and agree with each other as
follows:
8.1. Commercially Reasonable Efforts. Subject to the terms and
-------------------------------
conditions of this Agreement, each party will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement as
promptly as practical.
8.2. Public Announcements. No press release or other public disclosure
--------------------
of matters related to this Agreement or any of the transactions contemplated
hereby shall be made by GBB or SJNB unless the other party shall have provided
its prior consent to the form and substance thereof; provided, however, that
nothing herein shall be deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations imposed by law, including without limitation
such disclosure as is required by Regulation FD of the SEC.
8.3. Environmental Assessment and Remediation. GBB may cause to be
----------------------------------------
prepared at GBB's sole cost and expense within 45 days of the date of this
Agreement one or more phase I environmental investigations with respect to the
Real Property set forth on the SJNB Real Property List. In the event any such
phase I environmental investigation report, or any such report which SJNB or the
SJNB Subsidiaries has already obtained on any of the Real Property set forth on
SJNB's Real Property List, discloses facts which, in the sole discretion of GBB,
55
warrant further investigation, GBB shall provide written notice to SJNB, and
SJNB shall be required to cause to be completed within 60 days of such written
notice, at the sole cost and expense of GBB, a phase II environmental
investigation and report with respect to such property. The consultant engaged
by SJNB to conduct such investigation and provide such report shall be
reasonably acceptable to GBB. GBB shall have 10 days from the receipt of such
investigation report to reasonably object thereto, which objection shall be by
written notice. In the event of any such objection, GBB shall engage an
environmental consultant reasonably satisfactory to SJNB who shall provide an
estimate of the cost of taking any remedial action recommended or suggested in
such phase II environmental investigation report, or which is required by law,
or which is determined to be prudent by GBB, in its reasonable judgment. The
parties will consult in good faith with one another regarding the nature and
scope of any required remediation. If the estimated cost of such remediation is
more than $100,000 but less than $1,000,000, SJNB shall immediately commence
such remediation, all at the sole cost and expense of SJNB; provided that such
remediation shall not be required with respect to any asbestos contamination,
lead-containing paint or urea formaldehyde foam insulation which is not required
by law to be remediated at such time and the presence of asbestos or such
materials which is not so required to be remediated shall not be a failure of
condition to GBB's obligations to close hereunder. In the event either of the
environmental consultants determines that the estimated cost of such remediation
is in excess of $1,000,000, the Conversion Ratio shall be determined as set
forth in Section 2.2(a)(v).
GBB agrees to keep confidential and not to disclose any nonpublic
information obtained in the course of such environmental investigation relating
to environmental contamination or suspected contamination of any property on the
SJNB Real Property List, except as required by law.
8.4 Appointment of Director. GBB agrees to take all necessary action to
-----------------------
appoint as contemplated by Section 2.6 hereof two members of SJNB's Board of
Directors to the Board of Directors of GBB effective at the Effective Time of
the Merger.
ARTICLE 9.
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
The obligations of each of the parties hereto to consummate the
transactions contemplated herein are subject to the satisfaction, on or before
the Closing Date, of the following conditions:
9.1. Shareholder Approval. The Agreement and the transactions
--------------------
contemplated hereby shall have received all requisite approvals of the
shareholders of SJNB and GBB.
9.2. No Judgments or Orders. No judgment, decree, injunction, order or
----------------------
proceeding shall be outstanding or threatened by any Governmental Entity which
prohibits or restricts the effectuation of, or threatens to invalidate or set
aside, the Merger substantially in the form contemplated by this Agreement.
56
9.3. Regulatory Approvals. To the extent required by applicable law or
--------------------
regulation, all approvals or consents of any Governmental Entity, including,
without limitation, those of the FRB, shall have been obtained or granted for
the Merger and the transactions contemplated hereby and the applicable waiting
period under all laws shall have expired. All other statutory or regulatory
requirements for the valid completion of the transactions contemplated hereby
shall have been satisfied.
9.4. Securities Laws. The Registration Statement on Form S-4 shall have
---------------
been declared effective by the SEC and shall not be the subject of any stop
order or proceedings seeking or threatening a stop order.
9.5 Listing. The GBB Stock issuable in the Merger shall have been
-------
included for listing on the Nasdaq National Market System.
9.6 Pooling of Interests. Prior to the Effective Time of the Merger,
--------------------
GBB shall have received from PwC a written confirmation, dated as of the Closing
Date, that the Merger will qualify for pooling-of-interests accounting
treatment. Additionally, prior to the Effective Time of the Merger, KPMG shall
have delivered a letter to SJNB, dated as of the Closing Date, to the effect
that, as of the Effective Time of the Merger, no conditions exist with respect
to either SJNB or the SJNB Subsidiaries that would preclude accounting for the
Merger as a pooling-of-interests. In making their determinations that the
Merger will qualify for such treatment, PwC and KPMG shall be entitled to assume
that cash will be paid with respect to all shares held of record by any holder
of Dissenting Shares and with respect to fractional shares in accordance with
Section 2.4.
ARTICLE 10.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SJNB
-----------------------------------------------
All of the obligations of SJNB to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by SJNB:
10.1 Representations and Warranties; Performance of Covenants. All the
--------------------------------------------------------
covenants, terms and conditions of this Agreement to be complied with and
performed by GBB on or before the Closing Date shall have been complied with and
performed in all material respects. Each of the representations and warranties
of GBB contained in Article 5 hereof shall have been true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects) on and as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date or for changes expressly contemplated by this Agreement) on and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of the Closing Date. It is understood and acknowledged
that the representations being made on and as of the Closing Date shall be made
without giving effect to any update with respect to the GBB Disclosure Letter
and the GBB Lists in accordance with Section 7.2(c).
57
10.2 Authorization of Merger. All actions necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement and the Agreement of
Merger by GBB and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors of GBB,
as required by applicable law, and GBB shall have full power and right to merge
pursuant to the Agreement of Merger.
10.3 Absence of Certain Changes. Between the date of this Agreement and
--------------------------
the Effective Time of the Merger, there shall not have occurred any event that
has had or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on GBB, whether or not such event, change
or effect is reflected in the GBB Disclosure Letter as amended or supplemented
after the date of this Agreement.
10.4 Third Party Consents. GBB shall have obtained all consents of other
--------------------
parties to their respective mortgages, notes, leases, franchises, agreements,
licenses and permits as may be necessary to permit the Merger and the
transactions contemplated herein to be consummated without a material default,
acceleration, breach or loss of rights or benefits thereunder.
10.5 Officers' Certificate. There shall have been delivered to SJNB on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of GBB certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 10.1, 10.2, 10.3 and 10.4.
10.6 Tax Opinion. SJNB shall have received from Pillsbury Winthrop LLP an
-----------
opinion, dated as of or prior to the date of the Joint Proxy Statement and
Prospectus, reasonably satisfactory to SJNB to the effect that the Merger shall
not result in the recognition of gain or loss for federal income tax purposes to
SJNB, nor shall the issuance of the GBB Stock result in the recognition of gain
or loss by the holders of SJNB Stock who receive such stock, nor shall the
substitution of options under Section 7.9 result in any income or gain to the
option holder or disqualify any such options as incentive stock options in
connection with the Merger, and such opinion shall not have been withdrawn or
modified in any material respect.
ARTICLE 11.
CONDITIONS PRECEDENT TO OBLIGATIONS OF GBB
-------------------------------------------
All of the obligations of GBB to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by GBB:
11.1 Representations and Warranties; Performance of Covenants. All the
--------------------------------------------------------
covenants, terms and conditions of this Agreement to be complied with and
performed by SJNB at or before
58
the Closing Date shall have been complied with and performed in all material
respects. Each of the representations and warranties of SJNB contained in
Article 4 hereof shall have been true and correct in all material respects
(except that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and correct in
all respects) on and as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date or for changes
expressly contemplated by this Agreement) on and as of the Closing Date, with
the same effect as though such representations and warranties had been made on
and as of the Closing Date. It is understood and acknowledged that the
representations being made on and as of the Closing Date shall be made without
giving effect to any update with respect to the SJNB Disclosure Letter and the
SJNB Lists in accordance with Section 6.2(j).
11.2 Authorization of Merger. All actions necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement and the Agreement of
Merger by SJNB and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors and
shareholders of SJNB, as required by applicable law, and SJNB shall have full
power and right to merge pursuant to the Agreement of Merger.
11.3 Third Party Consents. SJNB shall have obtained all consents of
--------------------
other parties to their respective mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the Merger and
the transactions contemplated herein to be consummated without a material
default, acceleration, breach or loss of rights or benefits thereunder with
respect to any such item which is material to SJNB and the SJNB Subsidiaries
taken as a whole.
11.4 Absence of Certain Changes. Between the date of this Agreement and
--------------------------
the Effective Time of the Merger, there shall not have occurred any event that
has had or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on SJNB, whether or not such event, change
or effect is reflected in the SJNB Disclosure Letter as amended or supplemented
after the date of this Agreement.
11.5 Reserved.
11.6. Officers' Certificate. There shall have been delivered to GBB on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of SJNB certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 11.1, 11.2, 11.3 and 11.4.
11.7. Shareholder's Agreements. Concurrently with the execution of this
------------------------
Agreement, each director of SJNB and the SJNB Subsidiaries shall have executed
and delivered to GBB agreements substantially in the form of Exhibit D hereto.
---------
11.8. Agreements Not to Compete. Concurrently with the execution of
-------------------------
this Agreement, the directors of SJNB and the SJNB Subsidiaries shall have
executed and delivered to GBB agreements substantially in the form of Exhibit C
---------
hereto.
59
11.9. Affiliates Agreements. Concurrently with the execution of this
---------------------
Agreement, GBB shall have received from each person named in the letter or
otherwise referred to in Section 6.9 an executed copy of an agreement
substantially in the form of Exhibit B hereto.
---------
11.10. Employee Benefit Plans. GBB shall have received satisfactory
----------------------
evidence that all of SJNB's employee benefit plans, programs and arrangements,
including, without limitation, the SJNB 401(k) Plan, have been treated as
provided in Article 12 of this Agreement.
11.11. Dissenting Shares. The number of shares of SJNB Stock and GBB
-----------------
Stock for which demand is made to be SJNB Perfected Dissenting Shares and GBB
Perfected Dissenting Shares shall not exceed an amount which, when combined with
other amounts payable in connection with the Merger, would result in the Merger
being disqualified from pooling of interest accounting treatment.
11.12. Reserved.
11.13. SJNB Adjusted Book Value. At least five Business Days prior to
------------------------
the Effective Time of the Merger, SJNB shall provide GBB with SJNB's
consolidated financial statements as of the close of business on the last day of
the month prior to the Effective Time of the Merger. Such financial statements
shall have been prepared in all material respects in accordance with generally
accepted accounting principles and other applicable legal and accounting
requirements, and reflect all period-end accruals and other adjustments. At the
close of business on the last day of the month preceding the Effective Time of
the Merger, the SJNB Adjusted Book Value, as determined in accordance with such
financial statements, shall be not less than:
(a) $69,642,389 if the Closing Date occurs in October 2001;
(b) $69,611,147 if the Closing Date occurs in November 2001;
(c) $70,323,372 if the Closing Date occurs in December 2001; or
(d) $71,066,331 if the Closing Date occurs in January 2002.
11.14 Allowance for Loan Losses. SJNB's allowance for loan and lease
-------------------------
losses, as reflected on the consolidated financial statements referred to in
Section 11.13, shall equal at least 1.60% of SJNB's total gross loans; provided,
--------
however, that for purposes of this Section 11.14, the loan loss provision shall
- -------
be greater than zero in each month between the date of this Agreement and the
Closing Date, unless GBB otherwise agrees.
11.15 Regulatory Approvals. Any and all approvals or consents of any
--------------------
Governmental Entity which are necessary to consummate the Merger and the
transactions contemplated hereby shall have been granted without the imposition
of any conditions which GBB deems, in its sole and absolute opinion, to
materially adversely affect it or be materially burdensome.
11.16 Tax Opinion. GBB shall have received from Manatt, Phelps &
-----------
Phillips, LLP an opinion, dated as of or prior to the date of the Joint Proxy
Statement and Prospectus, reasonably
60
satisfactory to GBB to the effect that the Merger shall not result in the
recognition of gain or loss for federal income tax purposes to GBB, and such
opinion shall not have been withdrawn or modified in any material respect.
ARTICLE 12.
EMPLOYEE BENEFITS
-----------------
12.1 Employee Benefits. GBB in its sole discretion, may elect to
-----------------
terminate the SJNB 401(k) Plan or to discontinue contributions to the SJNB
401(k) Plan following the Effective Time of the Merger, to cause SJNB to
terminate the SJNB 401(k) Plan or to discontinue contributions to the SJNB
401(k) Plan prior to the Effective Time of the Merger, or to merge the SJNB
401(k) Plan with and into the GBB 401(k) Plan after the Effective Time of the
Merger. In no event shall the SJNB 401(k) Plan be merged with and into the GBB
401(k) Plan, however, unless GBB determines, in its reasonable judgment, that:
(i) the SJNB 401(k) Plan is a qualified plan under Section 401(a) of the Code,
both as to the form of the SJNB 401(k) Plan and as to its operation; and (ii)
there are no facts in existence that would be reasonably likely to adversely
affect the qualified status of the SJNB 401(k) Plan. If GBB determines in its
sole discretion not to merge the SJNB 401(k) Plan into the GBB 401(k) Plan and
that the SJNB 401(k) Plan should be terminated prior to the Effective Time of
the Merger, SJNB agrees to use its commercially reasonable efforts to have the
SJNB 401(k) Plan terminated prior to the Effective Time of the Merger and to
obtain an IRS determination that the SJNB 401(k) Plan continues to be qualified
upon termination.
As soon as practicable after the Effective Time of the Merger, all other
Employee Plans will be discontinued or merged into GBB plans, in the discretion
of GBB, and employees of SJNB and the SJNB Subsidiaries shall become eligible
for the employee benefit plans of GBB on the same terms as such plans and
benefits are generally offered from time to time to employees of GBB and its
Subsidiaries in comparable positions with GBB or its Subsidiaries. For purposes
of determining such employment eligibility and vesting under the employee
benefit plans of GBB, GBB shall recognize such employees' years of service with
SJNB or the SJNB Subsidiaries beginning on the date such employees commenced
employment with SJNB or the SJNB Subsidiaries through the Effective Time of the
Merger.
ARTICLE 13.
TERMINATION
-----------
13.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time of the Merger upon the occurrence of any of the following:
(a) By mutual agreement of the parties, in writing;
(b) By SJNB (unless SJNB's Board of Directors shall have withdrawn or
modified in a manner adverse to GBB in any respect its recommendation of the
Merger to the holders of SJNB Stock) or GBB (unless GBB's Board of Directors
shall have withdrawn or
61
modified in a manner adverse to SJNB in any respect its recommendation of the
Merger to the holders of GBB Stock) upon the failure of the shareholders of SJNB
or GBB to give the requisite approval of this Agreement;
(c) By SJNB promptly following the expiration of 30 days from
delivery of written notice by SJNB to GBB of GBB's breach of or failure to
satisfy any condition, covenant or agreement contained herein resulting in a
material impairment of the benefit reasonably expected to be derived by SJNB
from the performance or satisfaction of such condition, covenant or agreement
(provided that such breach has not been waived by SJNB or cured by GBB prior to
expiration of such 30 day period);
(d) By GBB promptly following the expiration of 30 days from delivery
of written notice by GBB to SJNB of SJNB's breach of or failure to satisfy any
condition, covenant or agreement contained herein resulting in a material
impairment of the benefit reasonably expected to be derived by GBB from the
performance or satisfaction of such condition, covenant or agreement (provided
that such breach has not been waived by GBB or cured by SJNB prior to expiration
of such 30 day period);
(e) By SJNB or GBB if any Governmental Entity which must grant a
regulatory approval required for consummation of the Merger has denied such
approval and such denial has become final and nonappealable or any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable order
permanently enjoining or prohibiting the Merger; provided, however, that such
right to terminate this Agreement under this Section 13.1(e) shall not be
available to SJNB or GBB if either such party's failure to comply with Section
6.8 or 7.5, respectively, was a cause of such action;
(f) By SJNB or GBB if any conditions set forth in Article 9 shall not
have been met by January 31, 2002, or such earlier time as it becomes apparent
that such condition shall not be met; provided, however, that this Agreement
shall not be terminated pursuant to this Section 13.1(f) if the relevant
condition shall have failed to occur as a result of any act or omission of the
party seeking to terminate;
(g) By SJNB if any of the conditions set forth in Article 10 shall
not have been met by January 31, 2002, or such earlier time as it becomes
apparent that such condition shall not be met, provided, however, that this
Agreement shall not be terminated pursuant to this Section 13.1(g) if the
relevant condition shall have failed to occur as a result of any act or omission
of SJNB;
(h) By GBB if any of the conditions set forth in Article 11 shall not
have been met by January 31, 2002, or such earlier time as it becomes apparent
that such condition shall not be met, provided, however, that this Agreement
shall not be terminated pursuant to this Section 13.1(h) if the relevant
condition shall have failed to occur as a result of any act or omission of GBB;
(i) By GBB if SJNB or the SJNB Subsidiaries shall have breached any
of their obligations contained in Section 6.1(n);
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(j) By GBB, if (i) SJNB shall have exercised a right specified in the
penultimate sentence of Section 6.1(n) with respect to any Superior Proposal and
shall, directly or through agents or representatives, continue any discussions
with any third party concerning such Superior Proposal for more than fifteen
(15) Business Days following the later to occur of (x) the tenth day following
the date of this Agreement or (y) the date of receipt of such Superior Proposal;
or (ii) SJNB shall have exercised a right specified in the penultimate sentence
of Section 6.1(n) with respect to a Superior Proposal which constitutes a tender
or exchange offer that has been commenced, publicly proposed or communicated to
SJNB, such Superior Proposal contains a proposal as to price (without regard to
the specificity of such price proposal) and SJNB shall not have rejected such
proposal within fifteen (15) Business Days following the later to occur of (x)
the tenth day following the date of this Agreement or (y) the date of its
receipt or the date its existence first becomes publicly disclosed, if earlier;
(k) Reserved.
(l) By SJNB if the Average Closing Price is less than $21.1429,
subject to GBB's right to exercise the Top Up Option;
(m) By SJNB if the Board of Directors of GBB shall have withdrawn or
modified in a manner adverse to SJNB its favorable recommendation of this
Agreement;
(n) By GBB if the Board of Directors of SJNB shall have withdrawn or
modified in a manner adverse to GBB its favorable recommendation of this
Agreement or recommended any Competing Transaction to the shareholders of SJNB;
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(o) By SJNB if the Board of Directors of SJNB shall concurrently with
such termination authorize SJNB to enter into an agreement with respect to a
Competing Transaction; provided, however, that SJNB may only exercise its right
to terminate this Agreement pursuant to this Section 13.1(o) if (i) SJNB is not
in material breach of any of the terms of this Agreement; (ii) the shareholders
of SJNB have not yet approved this Agreement; (iii) SJNB shall have complied in
all material respects with Section 6.1(n); (iv) the Board of Directors of SJNB,
after consultation with its financial advisor, determines in good faith that
such Competing Transaction is a Superior Proposal; (v) at least ten Business
Days shall have passed since GBB has received written notice from SJNB (the
"Competing Transaction Notice") advising GBB that the Board of Directors of SJNB
is prepared to accept such Competing Transaction, which notice shall specify the
identity of the other Person to the Competing Transaction and the material terms
and conditions of such Competing Transaction, and include a copy of the
definitive agreement and all other documentation relating thereto, and if by the
end of such tenth Business Day, GBB shall not have made an offer to increase the
Merger Consideration and/or revise the other terms of this Agreement so that the
Merger Consideration and such terms, taken together as so revised, are, in the
good faith judgment of the Board of Directors of SJNB, at least as favorable to
the consideration and terms of such Competing Transaction, such that the latter
is no longer a Superior Proposal; and (v) simultaneously with such termination,
SJNB shall make a payment to GBB in the amount of $6,000,000 which shall be
credited against any amounts owing to GBB under the Stock Option Agreement.
Without limiting the foregoing, SJNB agrees and acknowledges that it cannot
terminate this Agreement pursuant to this Section 13.1(o) in order to enter into
a written agreement referred to in this Section 13.1(o) until at least ten (10)
Business Days after receipt by GBB of the Competing Transaction Notice and to
notify GBB promptly in writing if its intention to enter into a written
agreement referred to in the Competing Transaction Notice shall change at any
time after giving such notification; or
(p) By SJNB if GBB shall have entered into a GBB Acquisition
Transaction that includes as a condition precedent to such GBB Acquisition
Transaction that GBB terminate this Agreement.
13.2. Effect of Termination. In the event of termination of this
---------------------
Agreement by either SJNB or GBB as provided in Section 13.1, neither SJNB nor
GBB shall have any further obligation or liability to the other party except (a)
with respect to the last sentences of each of Section 6.3(a), Section 7.3 and
Section 8.3, and Section 13.1(o) and this Section 13.2, (b) with respect to
Section 14.1; (c) to the extent such termination results from a party's willful
and material breach of the warranties and representations made by it, or willful
and material failure in performance of any of its covenants, agreements or
obligations hereunder; and (d) as provided in the Stock Option Agreement, the
form of which is attached hereto as Exhibit E and which is governed by its own
terms as to termination.
13.3. Force Majeure. SJNB and GBB agree that, notwithstanding anything
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to the contrary in this Agreement, in the event this Agreement is terminated as
a result of a failure of a condition, which failure is due to a natural disaster
or other act of God, or an act of war, and provided neither party has materially
failed to observe the obligations of such party under this
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Agreement, neither party shall be obligated to pay to the other party to this
Agreement any expenses or otherwise be liable hereunder.
ARTICLE 14.
MISCELLANEOUS
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14.1. Expenses.
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(a) GBB hereby agrees that if this Agreement is terminated by SJNB
pursuant to Section 13.1(b) with respect to the failure of GBB shareholders to
approve the Agreement and the transactions contemplated hereby, or pursuant to
Section 13.1(c), 13.1(m) or 13.1(p), GBB shall promptly and in any event within
10 days after such termination pay SJNB all Expenses (as defined in Section
14.1(d) below) of SJNB, but not to exceed $250,000.
(b) SJNB hereby agrees that if the Agreement is terminated by GBB
or SJNB pursuant to Section 13.1(b) with respect to the failure of SJNB
shareholders to approve the Agreement and the transactions contemplated hereby,
or by GBB pursuant to Section 13.1(d), 13.1(i), 13.1(j) or 13.1(n), SJNB shall
promptly and in any event within 10 days after such termination pay GBB all
Expenses of GBB, but not to exceed $375,000.
(c) Except as otherwise provided herein, all Expenses incurred by
GBB and SJNB in connection with or related to the authorization, preparation and
execution of this Agreement, the solicitation of shareholder approvals and all
other matters related to the closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by either
such party or its Affiliates, shall be borne solely and entirely by the party
which has incurred the same. Notwithstanding the foregoing, GBB and SJNB shall
share equally the cost of printing the Joint Proxy Statement and Prospectus.
(d) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of attorneys,
accountants, investment bankers, experts and consultants to the party and its
Affiliates) incurred by the party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
(e) As an inducement to SJNB to enter into this Agreement, in the
event this Agreement is terminated by SJNB pursuant to Section 13.1(p) or
13.1(m) (where GBB's Board has withdrawn or modified in a manner adverse to SJNB
its favorable recommendation of this Agreement due to a proposal for a GBB
Acquisition Transaction), GBB shall wire to SJNB within three Business Days of
the date of such termination $6,000,000, which amount the parties acknowledge as
representing (i) SJNB's Expenses incurred in negotiating and undertaking to
carry out the transactions contemplated by this Agreement, including SJNB's
management time devoted to negotiation and preparation for the transactions
contemplated by this Agreement; (ii) SJNB's indirect expenses incurred in
connection with the transactions contemplated by this Agreement; and (iii)
SJNB's loss as a result of the transactions contemplated by this Agreement not
being consummated. Any payment previously made by GBB pursuant to Section
14.1(a)
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hereof shall be credited against any amount due under this Section 14.1(e). If
any payment is made to SJNB pursuant to this Section 14.1(e), GBB shall have no
further obligation to make any payment pursuant to Section 14.1(a).
14.2 Notices. Any notice, request, instruction or other document to be
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given hereunder by any party hereto to another shall be in writing and delivered
personally or by confirmed facsimile transmission or sent by a recognized
overnight courier service or by registered or certified mail, postage prepaid,
with return receipt requested, addressed as follows:
To GBB: Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Attention: Steven C. Smith
Facsimile Number: (415) 494-9220
With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To SJNB: SJNB Financial Corp.
One North Market Street
San Jose, California 95113
Attention: James R. Kenny
Facsimile Number: (408) 298-5657
With a copy to: Pillsbury Winthrop LLP
50 Fremont Street
San Francisco, California 94105
Attention: Rodney R. Peck, Esq.
Patricia F. Young, Esq.
Facsimile Number: (415) 983-1200
Any such notice, request, instruction or other document shall be deemed
received (i) on the date delivered personally or delivered by confirmed
facsimile transmission, (ii) on the next Business Day after it was sent by
overnight courier, postage prepaid; or (iii) on the third Business Day after it
was sent by registered or certified mail, postage prepaid. Any of the persons
shown above may change its address for purposes of this section by giving notice
in accordance herewith.
14.3. Successors and Assigns. All terms and conditions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and permitted assigns;
provided, however, that this Agreement and all rights, privileges, duties and
obligations of the parties hereto may not be assigned or delegated by any party
hereto and any such attempted assignment or delegation shall be null and void.
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14.4. Counterparts. This Agreement and any exhibit hereto may be
------------
executed in one or more counterparts, all of which, taken together, shall
constitute one original document and shall become effective when one or more
counterparts have been signed by the appropriate parties and delivered to each
party hereto.
14.5. Effect of Representations and Warranties. The representations and
----------------------------------------
warranties contained in this Agreement or in any List shall terminate
immediately after the Effective Time of the Merger.
14.6. Third Parties. Each party hereto intends that this Agreement
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shall not benefit or create any right or cause of action to any person other
than parties hereto, except as provided in Section 7.13(e). As used in this
Agreement the term "parties" shall refer only to GBB and SJNB as the context may
require.
14.7. Lists; Exhibits; Integration. Each List, exhibit and letter
----------------------------
delivered pursuant to this Agreement shall be in writing and shall constitute a
part of the Agreement, although Lists and letters need not be attached to each
copy of this Agreement. This Agreement, together with such Lists, exhibits and
letters, constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
14.8. Knowledge. Whenever any statement herein or in any list,
---------
certificate or other document delivered to any party pursuant to this Agreement
is made "to the knowledge" or "to the best knowledge" of any party or another
Person, such party or other Person shall make such statement only after
conducting an investigation reasonable under the circumstances of the subject
matter thereof, and each such statement shall constitute a representation that
such investigation has been conducted.
14.9 Governing Law. This Agreement is made and entered into in the State
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of California, except to the extent that the provisions of federal law are
mandatorily applicable, and the laws of the State of California shall govern the
validity and interpretation hereof and the performance of the parties hereto of
their respective duties and obligations hereunder.
14.10. Captions. The captions contained in this Agreement are for
--------
convenience of reference only and do not form a part of this Agreement and shall
not affect the interpretation hereof.
14.11. Severability. If any portion of this Agreement shall be deemed
------------
by a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms hereof shall provide for the consummation of
the transactions contemplated herein in substantially the same manner as
originally set forth at the date this Agreement was executed.
14.12. Waiver and Modification; Amendment. No waiver of any term,
----------------------------------
provision or condition of this Agreement, whether by conduct or otherwise, in
any one or more instances,
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shall be deemed to be or construed as a further or continuing waiver of any such
term, provision or condition of this Agreement. Except as otherwise required by
law, this Agreement and the Agreement of Merger, when executed and delivered,
may be modified or amended by action of the Boards of Directors of GBB and SJNB
without action by their respective shareholders. This Agreement may be modified
or amended only by an instrument of equal formality signed by the parties or
their duly authorized agents.
14.13 Attorneys' Fees. If any legal action or any arbitration upon
---------------
mutual agreement is brought for the enforcement of this Agreement or because of
an alleged dispute, controversy, breach, or default in connection with this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and all other reasonable costs and expenses incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed this
Agreement as of the day and year first above written.
ATTEST: GREATER BAY BANCORP
/s/ Linda M. Iannone By: /s/ David L. Kalkbrenner
- -------------------- ------------------------
Secretary David L. Kalkbrenner
President and Chief Executive Officer
ATTEST: SJNB FINANCIAL CORP.
/s/ Eugene E. Blakeslee By: /s/ James R. Kenny
- ----------------------- ------------------
Executive Vice President James R. Kenny
President and Chief Executive Officer
69