EXHIBIT 10.4
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CONFIDENTIAL
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[LETTERHEAD OF SUTRO & CO.]
Investment Professionals Since 1858
May 10, 1996
The Board of Directors
Cupertino National Bancorp
20230 Stevens Creek Boulevard
Cupertino, California 95104
Gentlemen:
1. This letter is to confirm our understanding that Cupertino National Bancorp
("Cupertino" or the "Company"), through its Board of Directors, has engaged
Sutro & Co. Incorporated ("Sutro") to render an opinion (the "Opinion") to
the Company and its Board of Directors as to the fairness, from a financial
point of view, of the consideration to be received by the Company and its
shareholders in connection with the proposed merger (the "Transaction")
between Cupertino and Mid-Peninsula Bancorp ("Mid-Peninsula"). The nature
and scope of our assignment as well as the scope, form and substance of our
Opinion shall be such as we consider appropriate and shall include the
following:
(i) review and analyze certain financial statements and other financial
information relating to Cupertino and Mid-Peninsula;
(ii) review and analyze certain operating data concerning Cupertino and
Mid-Peninsula prepared by the management of each bank;
(iii) review and analyze certain financial forecasts and projections for
Cupertino and Mid-Peninsula prepared by management of each bank;
(iv) discuss the past and current operations and financial condition and
the prospects of Cupertino and Mid-Peninsula with management;
(v) compare certain financial data of Cupertino and Mid-Peninsula with
that of various other comparable companies whose securities are
publicly traded; and
(vi) review the financial terms, to the extent publicly available, of
certain comparable transactions.
2. The management of the Company will furnish Sutro with such data, material and
information regarding the business and financial condition of the Company and
Mid-Peninsula (the "Information") as Sutro reasonably believes necessary to
complete the Opinion. The Company recognizes and confirms that in rendering
the Opinion described herein, Sutro (i) will be relying primarily on the
Information and on information available from generally recognized public
sources, without independent verification; and, (ii) does not assume
responsibility for the accuracy or completeness of the Information and such
other information.
3. Sutro agrees to keep any non-public Information confidential so long as it
remains non-public, unless disclosure, in the written opinion of Sutro's
counsel to be delivered to the Company prior to such disclosure, is required
by law and Sutro will not use such information, except in connection with the
assignment herein contemplated.
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4. The Opinion rendered by Sutro pursuant to this letter may be included in any
communication by Cupertino to its respective shareholders, provided that
Sutro has a prior opportunity to review and approve any disclosure relating
to the Opinion. In addition, Sutro may not be otherwise publicly referred
to in connection with the proposed Transaction or the Opinion without Sutro's
prior written approval, which will not be unreasonably withheld. Other than
as aforesaid, any advice rendered by us in connection with this engagement
and any material furnished by Sutro to Cupertino and/or the Board of
Directors may not be disclosed publicly in any manner without Sutro's written
approval and will be treated by Cupertino and Sutro as confidential.
Subject to the foregoing, Sutrohereby consents to the use of the Opinion in
a proxy statement in connection with the Transaction or other documents
disseminated to the Company's shareholders in conjunction with the
Transaction.
5. As compensation for the Opinion to be provided pursuant to this letter
agreement, the Company, agrees to pay Sutro the following fees:
a) A non-refundable retainer of $25,000 payable promptly following the
Bank's execution of this letter agreement, plus;
b) A fee of $37,500, payable promptly upon the execution of a definitive
agreement to effect a Transaction, plus;
c) An additional fee of $37,500, payable promptly upon a mailing of a
proxy statement to the Company' shareholders concerning the
Transaction, plus;
d) An additional fee of $75,000, payable promptly upon closing of the
Transaction.
6. In addition to any fees that may be payable to Sutro hereunder and regardless
of whether any transaction contemplated herein is proposed or consummated,
the Company hereby agrees, from time to time upon request to reimburse Sutro
for all reasonable fees and disbursements of Sutro's counsel and all of
Sutro's reasonable travel and other incidental out-of-pocket expenses
incurred prior to any termination of this agreement, in connection with any
actual or proposed transaction or otherwise arising out of Sutro's engagement
hereunder. Such expenses shall not exceed $15,000 for Sutro's counsel and
$25,000 for Sutro's other incidental expenses without prior written approval
of the Company, which approval shall not be unreasonably withheld.
7. Sutro and the Company have entered into a separate letter agreement, dated
the date hereof, providing for the indemnification of Sutro by the Company in
connection with Sutro's engagement hereunder. This letter agreement and the
Indemnification Agreement constitute the entire agreement between us, and it
may not be modified except in writing signed by all parties hereto. This
letter agreement and the Indemnification Agreement constitute the entire
agreement between us and supersede and take precedence over all prior
agreements or understandings whether oral or written, between Sutro and the
Company with respect to the engagement described herein and may only be
modified by written agreement which is signed by both parties. This letter
agreement and the Indemnification Agreement shall be governed by and
construed in accordance with the laws of the State of California. Should
suit be brought to enforce this letter agreement or the Indemnification
Agreement, the prevailing party shall be entitled to recover from the other
reimbursement for reasonable attorney's fees.
8. Sutro's engagement hereunder may be terminated by either the Company or Sutro
at any time, with or without cause, upon 30 days prior written advice to that
effect to the other party; provided, however, that:
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(i) if such notice is provided by Sutro, Sutro will be entitled to its
fees earned to the date the notice is provided; and
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(ii) if such notice is provided by the Company, Sutro will be entitled to
its fees earned to date and, in the event that at any time prior to
the expiration of one year after such termination a Transaction is
consummated, the remainder of its fees.
The provisions of this Section 8 and Sections 6 and 9 hereof and the letter
agreement referred to in Section 7 hereof shall survive any such termination.
9. The Company expressly acknowledges that, except as otherwise indicated
herein, all opinions and advice (written or oral) given by Sutro to the
Company in connection with Sutro's engagement are intended solely for the
benefit and use of the Company (including management, directors and
attorneys) in considering the transaction to which they relate and the
Company agrees that no such opinion or advice shall be used for any other
purpose or reproduced, disseminated, quoted or referred to at any time, in
any manner or for any purpose. Neither party shall make any public
references to the other, without the prior written consent of such party,
which consent shall not be unreasonably withheld.
10. The Company expressly acknowledge that Sutro has been retained solely as an
advisor to the Company, and not as an advisor to or agent of any other
person, and that the Company's engagement of Sutro is not intended to confer
rights upon any persons not a party hereto (including shareholders,
employees or creditors of the Company) as against Sutro or its affiliates or
their respective directors, officers, agents and employees.
11. Sutro will render such other financial advisory and investment banking
services as may from time to time be agreed upon by Sutro and the Company.
In the event that the Company requests Sutro to provide such services,
Cupertino and Sutro shall enter into a supplemental agreement providing for
such compensation as is reasonable and customary within the industry for
such services, and such supplemental agreement will be subject to the terms
of the Indemnification Agreement.
If this letter accurately sets forth our mutual understanding, please sign this
letter and the attached Indemnification Agreement, date and return the enclosed
copies.
Very truly yours,
SUTRO & CO. INCORPORATED
By: /s/ Scott E. Wendelin
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Scott E. Wendelin
Managing Director
Accepted and Agreed to
as of the date written above:
CUPERTINO NATIONAL BANCORP
BOARD OF DIRECTORS
By: /s/ John M. Gatto
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John M. Gatto
Chairman of the Board
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May 10, 1996
CONFIDENTIAL
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Sutro & Co. Incorporated
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025
Gentlemen:
In consideration of Sutro's agreement to act on behalf of Cupertino National
Bancorp (the "Company" or "Cupertino"), in connection with the possible
combination, joint venture or other business combination with certain target
Companies or the possible purchase by the Company of all or a significant
portion of the assets or more than 10% of the equity securities of one of the
targets, pursuant to the engagement letter of even date herewith, we hereby
agree to indemnify and hold harmless Sutro, its affiliates, the respective
partners, directors, officers, agents and employees of Sutro and its affiliates
and each person, if any, controlling Sutro or any of its affiliates within the
meaning of either Section 15 of the Securities Act of 1933 or Section 20 of the
Securities Exchange Act of 1934, (Sutro and each such other person are
hereinafter referred to as an "Indemnified Person"), from and against any such
losses, claims, damages, expenses and liabilities (or actions in respect
thereof), joint or several, as they may be incurred (including all legal fees
and other expenses incurred in connection with investigating, preparing,
defending, paying, settling or compromising any claim, action, suit, proceeding,
loss, damage, expense or liability, whether or not in connection with an action
in which any Indemnified Person is a named party) to which any of them may
become subject (including in settlement of any action, suit or proceeding, if
such settlement is effected with the Company's consent, which consent shall not
be unreasonably withheld), and which are related to or arise out of Sutro's
engagement, the transaction contemplated by such engagement or any Indemnified
Person's role in connection therewith, including, but not limited to, any
losses, claims, damages, expenses and liabilities (or actions in respect
thereof) arising out of, based upon or caused by any untrue statement or alleged
untrue statement of a material fact contained in the offering memorandum, or any
amendment or supplement thereto, or in any other document of the Company, or
arising out of, based upon or caused by any omission or alleged omission to
state in any of them a material fact required to be stated therein or necessary
to make the statements in any of them not misleading. The Company will not,
however, be responsible under the foregoing provisions with respect to any loss,
claim, damage, expense or liability to the extent that a court having
jurisdiction shall have determined by a final judgment (not subject to further
appeal) that such loss, claim, damage, expense or liability resulted from
actions taken or omitted to be taken by Sutro due to its gross negligence or
willful misconduct.
If the indemnity referred to above should be, for any reason whatsoever,
unenforceable, unavailable to or otherwise insufficient to hold harmless Sutro
and each Indemnified Person in connection with the transaction, each Indemnified
Person shall be entitled to receive from the Company, and the Company shall pay,
contributions for such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) so that each Indemnified Person ultimately bears
only a portion of such losses, claims, damages, liabilities, expenses and
actions as is appropriate (i) to reflect the relative benefits received by Sutro
on the one hand and the Company on the other hand in connection with the
transaction or (ii) if the allocation on that basis is not permitted by
applicable law, to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of Sutro and the Company in connection
with the actions or omissions to act which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations; provided, however, that in no event shall the aggregate
contribution of all Indemnified Persons to all losses, claims, damages,
liabilities, expenses and actions exceed the amount of the fee actually received
by Sutro pursuant to the engagement letter. The respective relative benefits
received by Sutro and the Company in connection with the transaction shall be
deemed to be in the same proportion as the aggregate fee paid to Sutro in
connection with the transaction bears to the total consideration of the
transaction. The relative fault of Sutro and the Company shall be determined by
reference to, among other
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things, whether the actions or omissions to act were
by Sutro or the Company and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action or omission to
act.
The indemnity, contribution and expense payment obligations of the Company
referred to above shall be in addition to any liability which the Company may
otherwise have and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of any Indemnified
Person and the Company. The Company also agrees that the Indemnified Persons
shall have no liability to the Company or any person asserting claims on behalf
of or in right of the Company for or in connection with any matter referred to
in this letter except to the extent that any such liability results from the
gross negligence or willful misconduct of Sutro in performing the services that
are the subject of this letter and in no event shall such liability exceed the
amount of fees actually received by Sutro hereunder.
Very truly yours,
CUPERTINO NATIONAL BANCORP
By: /s/ John M. Gatto
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John M. Gatto
Chairman of the Board
Accepted and Agreed to
as of the date written above:
SUTRO & CO. INCORPORATED
By: /s/ Scott E. Wendelin
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Scott E. Wendelin
Managing Director
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