SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 22, 1999
HUMBOLDT BANCORP
(Exact name of registrant as specified in its charter)
California 0-27784 93-1175446
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
701 Fifth Street, Eureka, California 95501; 707-445-3233
(Address and telephone number of principal executive offices)
Item 2. Acquisition of Assets.
Pursuant to an "Agreement And Plan Of Reorganization And Merger" entered
into as of June 22, 1999 (the "Merger Agreement"), Humboldt Bancorp, a
California bank holding company, will acquire both Global Bancorp, a California
bank holding company headquartered in Napa, California, and its wholly-owned
subsidiary Capitol Thrift & Loan association ("Capitol Thrift"). Capitol Thrift
is a California licensed industrial loan company. The acquisition will be
effected by the merger of both Global Bancorp and Capitol Thrift into Humboldt
Bank, a wholly owned subsidiary of Humboldt Bancorp. Following the merger,
Humboldt Bank will be the sole surviving corporation. It is anticipated that the
business of Capitol Thrift will be operated as a division of Humboldt Bank.
The total consideration to be paid for the acquisition will be
$16,500,000, comprised of the following: (i) $9,000,000 in cash; (ii)
approximately $2,000,000 in Humboldt Bancorp common stock computed by the total
amount of shareholders' equity in Global Bancorp, less $9,000,000 to be paid in
cash and merger expenses in excess of $100,000; and (iii) the balance of
approximately $5,500,000 in the form of a Humboldt Bank promissory note, payable
in full on January 30, 2002, to accrue interest at 8% per annum, and subject to
certain adjustments for loan losses and expenses as identified in the Merger
Agreement. Pursuant to the Merger Agreement, up to $2,000,000 of the promissory
note may be paid at maturity in the form of Humboldt common stock at the
election of the holders of the promissory note. Among other conditions, before
the merger may be consummated, it must be approved by the shareholders of Global
Bancorp, and by both the Federal Deposit Insurance Corporation and the
California Department of Financial Institutions. In addition, as a condition to
the consummation of the merger, Humboldt Bancorp is required to raise capital
through the sale of its common stock.
Humboldt Bancorp, Humboldt Bank, Global Bancorp, and Capitol Thrift may
terminate the Merger Agreement at any time by mutual consent. In addition, if
Global Bancorp terminates the Merger Agreement or its shareholders do not
approve the Merger Agreement, Global Bancorp or Capitol Thrift must pay to
Humboldt Bancorp $250,000 in cash. Moreover, if Global Bancorp or Capitol Thrift
terminates the Merger Agreement and within 180 days, Global Bancorp or Capitol
Thrift approve another sale or execute another letter of intent, or a third
party acquires 15% or more of the outstanding shares of Global Bancorp, Global
Bancorp or Capitol Thrift must pay to Humboldt Bancorp $350,000 in cash. If the
Merger Agreement is terminated by Humboldt Bancorp or Global Bancorp terminates
<PAGE>2
the Merger Agreement because of a breach of Humboldt Bancorp's representations
and warranties, or if there is a failure by Humboldt Bancorp to complete its
public offering, then Humboldt Bancorp must pay to Global Bancorp the sum of
$250,000.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Financial statements of Global Bancorp and Capitol Thrift and pro
forma information will be filed by amendment within 60 days of
the due date of this Form 8-K.
(b) Pro forma financial information.
Pro forma information will be filed by amendment within 60 days
of the due date of this Form 8-K.
(c) Exhibits.
2.1 Agreement And Plan Of Reorganization And Merger (without
exhibits) between and among Humboldt Bancorp, Humboldt
Bank, Global Bancorp, and Capitol Thrift.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 7, 1999 HUMBOLDT BANCORP,
a California Corporation
/s/ THEODORE MASON
---------------
Theodore Mason,
President
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
This AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement")
is entered into as of June 22, 1999 by and among GLOBAL BANCORP, a California
corporation ("GLOBAL"), CAPITOL THRIFT & LOAN ASSOCIATION, a California
industrial loan corporation ("CAPITOL") which is a wholly-owned subsidiary of
GLOBAL, HUMBOLDT BANCORP, a California corporation ("BANCORP"), and HUMBOLDT
BANK, a California state-chartered bank ("BANK"), which is a wholly-owned
subsidiary of BANCORP.
RECITALS:
WHEREAS, the respective Boards of Directors of GLOBAL, CAPITOL, BANCORP
and BANK have determined that it is in the best interests of GLOBAL and BANCORP
and their respective shareholders for GLOBAL and CAPITOL to be merged with and
into BANK, upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the California Corporations Code, the
California Financial Code and other applicable laws;
WHEREAS, in order to facilitate the mergers of GLOBAL and CAPITOL with
and into BANK, BANK shall create HB Merger Company ("HBMC") which shall be
merged with and into GLOBAL, with GLOBAL as the surviving corporation (the
"Interim Merger"), which shall be immediately followed by the adoption of a plan
of liquidation by GLOBAL of its subsidiary CAPITOL to be effected by means of a
merger of CAPITOL into GLOBAL and, immediately following the consummation of
such liquidation the adoption of a plan of liquidation by BANK of its subsidiary
GLOBAL by means of a merger of GLOBAL with and into BANK, with BANK as the
surviving corporation (collectively referred to as the "BANK Mergers").
WHEREAS, each of the Boards of Directors of GLOBAL, CAPITOL, BANCORP and
BANK have approved this Agreement and the transactions contemplated hereby;
WHEREAS, GLOBAL's Board of Directors has resolved to recommend approval
of the merger of HBMC with and into GLOBAL followed by the adoption of a plan of
liquidation of CAPITOL to be effected by means of a merger of CAPITOL into
GLOBAL;
WHEREAS, BANCORP's Board of Directors has approved a resolution to
increase the capital accounts of BANCORP and BANK through a public offering of
BANCORP common stock in order to consummate the transaction contemplated by this
Agreement;
WHEREAS, the Interim Merger and the BANK Mergers require certain
shareholder and regulatory approvals and may be effected only after the
necessary approvals have been obtained;
WHEREAS, for federal income tax purposes, it is intended that the
Interim Merger will qualify as a "qualified stock purchase" under Section 338(d)
of the Internal Revenue Code of 1986, as amended (the "IRC") and the BANK
Mergers will qualify as tax free liquidations under Section 332 of the IRC, as
set forth in Revenue Ruling 90-95, 1990-2 C.B.67;
<PAGE>2
WHEREAS, upon the consummation of the BANK Mergers, BANK shall
continue as a wholly-owned subsidiary of BANCORP; and
WHEREAS, BANK's Board of Directors has resolved to recommend approval
after the liquidation of CAPITOL into GLOBAL, the adoption of a plan of
liquidation of GLOBAL with and into BANK with BANK as the surviving corporation.
NOW, THEREFORE, in consideration of these premises and the
representations, warranties and agreements herein contained, GLOBAL, CAPITOL,
BANCORP and BANK hereby agree as follows:
ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth
below:
"Acquisition Event" shall mean any of the following:
(a) Prior to the termination of this Agreement, GLOBAL shall
have authorized, recommended, publicly proposed or
publicly announced an intention to authorize, recommend
or propose, or shall have entered or announced an
intention to enter into a letter of intent, an agreement-
in-principle or a definitive agreement with any Person
(other than BANCORP or any of its Subsidiaries) to
effect, an Acquisition Transaction. As used herein, the
term "Acquisition Transaction" shall mean (i) a merger,
consolidation or similar transaction involving GLOBAL or
any of its Subsidiaries (other than internal mergers,
reorganizations, consolidations or dissolutions involving
only existing Subsidiaries), (ii) the disposition, by
sale, lease, exchange, dissolution or liquidation, or
otherwise, of all or substantially all of the assets of
GLOBAL or any asset or assets of GLOBAL the disposition
or lease of which would result in a material change in
the business or business operations of GLOBAL; or (iii)
the issuance, other than pursuant to outstanding stock
options, sale or other disposition by GLOBAL (including,
without limitation, by way of merger, consolidation,
share exchange or any similar transaction) of shares of
GLOBAL Common Stock or other Equity Securities, or the
grant of any option, warrant or other right to acquire
shares of GLOBAL Common Stock or other Equity Securities,
representing directly, or on an as-exercised, as-
exchanged or as-converted basis (in the case of options,
warrants, rights or exchangeable or convertible Equity
Securities), 15% or more of the voting securities of
GLOBAL;
(b) The approval by GLOBAL shareholders, or the consummation by
GLOBAL, of any Acquisition Transaction as described in Subsection
(a) of this Paragraph within a period of one hundred eighty (180)
days following: (i) the termination of this Agreement by BANCORP
pursuant to Sections 8.1.3, 8.1.5, 8.1.7, or 8.1.8.
"Acquisition Proposal" shall have the meaning given such term in Section
6.2.5.
"Affected Party" shall have the meaning given to it in Section 5.7.
<PAGE>3
"Affiliate" or "affiliate" shall mean, with respect to any other Person,
any Person that, directly or indirectly, controls or is controlled by or
is under common control with such Person.
"Affiliate Agreements" shall have the meaning given to such term in
Section 5.3.3. "BANCORP" shall mean Humboldt Bancorp.
"BANCORP Common Stock" shall mean the common stock, no par value per
share, of BANCORP.
"BANCORP Fairness Opinion" shall have the meaning given to such term in
Section 7.2.8.
"BANCORP Filings" shall have the meanings given such term in Section
4.6.1.
"BANCORP Financial Statements" shall mean the financial statements of
BANCORP for the year ended December 31, 1998.
"BANCORP Market Value Per Share" shall mean the last trade of BANCORP
Common Stock prior to the Effective Time.
"BANCORP Public Offering" shall mean the public offering of BANCORP
Common Stock.
"BANCORP Stock Plans" shall have the meaning set forth in Section 4.5.
"BANCORP Trading Price" shall mean the price for BANCORP common stock
sold in the BANCORP Public Offering discounted by the commission paid to
the underwriter.
"BANK" shall mean Humboldt Bank.
"BANK Merger" shall have the meaning given such term in Section 2.1.
"BANK Merger Agreements" shall have the meaning given such term in
Section 2.1.
"BANK Note" shall have the meaning given such term in Section 2.8.
"Benefit Arrangement" shall have the meaning given such term in Section
3.21.4.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Business Day" shall mean any day, other than a Saturday, Sunday or any
other day, such as a legal holiday, on which California state banks in
California are not open for substantially all their banking business.
"California Corporations Code" shall mean the General Corporation Law of
the State of California.
<PAGE>4
"CAPITOL" shall mean Capitol Thrift & Loan Association.
"California Financial Code" shall mean the Financial Code of the State
of California.
"Cash Merger Price" shall mean nine million dollars ($9,000,000).
"Cash Per Share Merger Price" shall mean the Cash Merger Price divided
by the total number of shares of GLOBAL Common Stock outstanding at the
Closing Date.
"CDFI" shall mean the California Department of Financial Institutions.
"Classified Assets" shall have the meaning given to such term in Section
6.1.15.
"Closing" shall have the meaning given to such term in Section 2.1.
"Closing Date" shall have the meaning given to such term in Section 2.1.
"Closing Schedules" shall have the meaning given to such term in Section
5.7.
"Commissioner" shall mean the Commissioner of Financial Institutions of
the State of California.
"Default" shall mean, as to any party to this Agreement, a failure by
such party to perform, in any material respect, any of the agreements or
covenants of such party contained in Articles 5 or 6.
"Determination Date" shall mean the last business day of the calendar
month immediately preceding the calendar month in which the Effective
Time occurs.
"Director Shareholder Agreement" shall have the meaning given such term
in Section 7.2.10.
"Dissenting Shares" shall mean shares of GLOBAL Common Stock which come
within all of the descriptions set forth in Subparagraphs (1), (2), (3)
and (4) of Paragraph (a) of Section 1300 of the California Corporations
Code.
"Dissenting Shareholder Notices" shall mean the notice required to be
given to record holders of Dissenting Shares pursuant to Paragraph (a)
of Section 1301 of the California Corporations Code.
"Effective Time" shall have the meaning given such term in Section 2.1.
"Employee Plan" shall have the meaning given such term in Section
3.21.3.
"Environmental Laws" shall mean and include any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any
Governmental Entity pertaining to health or to the environment,
including, without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Federal Water Pollution Control Act Amendments,
<PAGE>5
the Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Hazardous Materials Transportation Act of 1975, as amended, the Safe
Drinking Water Act, as amended, and the Toxic Substances Control Act, as
amended.
"Equity Securities" shall have the meaning given to such term in the
Exchange Act.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Adjusted Value" shall have the meaning given such term in
Section 2.6.2 (ii).
"Escrow Merger Price" shall mean the Merger Price less the sum of the
Cash Merger Price and Stock Merger Price.
"Escrow Payment Date" shall mean January 30, 2002.
"Escrow Per Share Merger Price" shall mean the Escrow Adjusted Value
divided by the total number of Shares of GLOBAL Common Stock outstanding
at the Closing Date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean U.S. Stock Transfer Corporation, or such
other Person as BANCORP shall have appointed to perform the duties set
forth in Section 2.8.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"GAAP" shall mean generally accepted accounting principles.
"GLOBAL" shall mean Global Bancorp.
"GLOBAL Certificates" shall have the meaning given such term in Section
2.8.1.
"GLOBAL Collateralizing Real Estate" shall have the meaning given to
such term in Section 3.23.1.
"GLOBAL Common Stock" shall mean the common stock, no par value, of
GLOBAL.
"GLOBAL's Costs Associated With the Transaction" shall mean all legal,
accounting and professional costs incurred or to be incurred by GLOBAL
for the merger transactions contemplated by this Agreement up to the
Closing Date (including investment banking fees) which have not been
paid or accrued by GLOBAL by the Determination Date, provided further
that GLOBAL shall not be required to expense or accrue up to $100,000 of
legal and/or accounting costs incurred by GLOBAL and associated with the
transaction and identified with preparation of the Proxy
<PAGE>6
Statement/Prospectus for GLOBAL or the BANCORP Public Offering.
"GLOBAL Fairness Opinion" shall have the meaning given to such term in
Section 7.3.5.
"GLOBAL Filings" shall have the meaning given such term in Section
3.6.1.
"GLOBAL Financial Statements" shall have the meaning given to such term
in Section 3.7.3.
"GLOBAL Material Adverse Event" shall have the meaning given to such
term in Section 8.1.8.
"GLOBAL Properties" shall have the meaning given to such term in Section
3.23.1.
"GLOBAL Shareholder Committee" shall have the meaning given such term in
Section 9.1.
"GLOBAL State Documents" shall have the meaning given to such term in
Section 3.6.2.
"GLOBAL Stock Options" shall mean any options to purchase any shares of
GLOBAL Common Stock or any other Equity Securities of GLOBAL granted on
or prior to the Effective Time, whether pursuant to the GLOBAL Stock
Option Plan or otherwise.
"GLOBAL Stock Option Plan" shall mean GLOBAL's written Stock Option Plan
as described in Schedule 3.5 and 3.24 hereto.
"Governmental Entity" shall mean any court, federal, state, local or
foreign government or any administrative agency or commission or other
governmental authority or instrumentality whatsoever.
"Hazardous Substances" shall have the meaning given such term in Section
3.23.4.
"HBMC" shall mean HB Merger Company.
"Interim Merger" shall have the meaning given such term in Section 2.1.
"Interim Merger Agreement" shall have the meaning given such term in
Section 2.1.
"Interim Surviving Corporation" shall have the meaning given such term
in Section 2.1.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"Knowledge" shall mean, with respect to any representation or warranty
contained in this Agreement; the actual knowledge, after reasonable
inquiry, of any director or executive officer of GLOBAL or BANCORP.
"Last Regulatory Approval" shall mean the final Requisite Regulatory
Approval required, from any Governmental Entity under applicable federal
laws of the United States and laws of any state having jurisdiction over
<PAGE>7
the Merger, to permit the parties to consummate the Merger.
"Loan Loss" as set forth in Section 2.6.2 shall mean (i) a writedown of
an existing loan or the establishment of a specific reserve for an
existing loan required by either the CDFI or the FDIC, (ii) a writedown
of an existing loan or the establishment of a specific reserve for an
existing loan required by outside third party loan review, (iii) the net
loss from the sale, which sale must be conducted in a reasonable manner
and with 15 days prior notice to the GLOBAL Shareholder Committee, of an
existing loan at a price less than book value, (iv) the net loss from
the conversion of an existing loan, that is or becomes a nonperforming
loan, to other real estate owned which requires a writedown of the value
of the property below the carrying value of such loan, or (v) the net
loss from the sale of other real estate owned which was a loan of
CAPITOL as of the Effective Time. For the purposes of this definition
the outside third party loan review shall be performed no more than once
per year by such outside party reasonably acceptable to the parties.
"Material Adverse Effect" shall mean a material adverse effect: (i) on
the business, assets, results of operations, financial condition or
prospects of a Person and its subsidiaries, if any, taken as a whole
(unless specifically indicated otherwise); or (ii) on the ability of a
Person that is a party to this Agreement to perform its obligations
under this Agreement or to consummate the transactions contemplated by
this Agreement.
"Mergers" shall have the meaning set forth in Section 2.1.
"Merger Agreements" shall have the meaning given to such term in Section
2.1.
"Merger Price" shall mean $16,500,000.
"New Certificates" shall have the meaning given to such term in Section
2.8.1.
"OREO" shall have the meaning given to such term in Section 3.13.
"Perfected Dissenting Shares" shall mean Dissenting Shares as to which
the recordholder has made demand on GLOBAL in accordance with Paragraph
(b) of Section 1301 of the California Corporations Code and has not
withdrawn such demand prior to the Effective Time.
"Per Share Merger Price" shall mean the sum of the Cash Per Share Merger
Price, Stock Per Share Merger Price and the Escrow Per Share Merger
Price.
"Persons" or "persons" shall mean an individual, corporation,
partnership, limited liability company, joint venture, trust or
unincorporated organization, Governmental Entity or any other legal
entity whatsoever.
"Proxy Statement/Prospectus" shall have the meaning given to such term
in Section 3.7.2.
"Registration Statements" shall have the meaning given to such term in
Section 3.7.2.
"Regulatory Authority" shall mean any Governmental Entity, the approval
of which is legally required for consummation of the Merger.
<PAGE>8
"Requisite Regulatory Approvals" shall have the meaning set forth in
Section 7.1.2.
"Returns" shall mean all returns, declarations, reports, statements,
declarations of estimate taxes, claims or refunds, and other documents
required to be filed with respect to federal, state, local and foreign
Taxes including any schedule or attachment thereto and any amendment
thereof, and the term "Return" means any one of the foregoing Returns.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Merger Price" shall mean the sum of the total shareholders'
equity for GLOBAL as of the Determination Date (after expensing or
accruing of GLOBAL'S Costs Associated With the Transaction) less the
Cash Merger Price.
"Stock Per Share Merger Price" shall mean the result of the fraction,
the numerator is the product of the Stock Merger Price divided by the
total number of Shares of GLOBAL Common Stock outstanding at the Closing
Date and the denominator is the BANCORP Trading Price.
"Subsidiary" shall mean, with respect to any corporation (the "parent"),
any other corporation, association or other business entity of which
more than 50% of the shares of the Voting Stock are owned or controlled,
directly or indirectly, by the parent or by one or more Subsidiaries of
the parent, or by the parent and one or more of its Subsidiaries.
"Superior Proposal" shall have the meaning given to such term in Section
6.2.5.
"Surviving Corporation" shall have the meaning given to such term in
Section 2.1.
"Taxes" shall mean all federal, state, local and foreign net income,
gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties, or other taxes, together
with any interest and any penalties, additions to tax, or additional
amounts with respect thereto, and the term "Tax" means any one of the
foregoing Taxes.
"Tax Filings" shall mean any applications, reports, statements or other
Returns required to be filed with any local, state or federal
Governmental Entity before the Mergers may become effective, including,
but not limited to, any filing required to be made with the California
Franchise Tax Board to obtain a Tax Clearance Certificate for the
Mergers.
"Understanding" shall have the meaning set forth in Section 6.1.5.
<PAGE>9
"Voting Securities" or "Voting Stock" shall mean the stock or other
securities or any other interest entitling the holders thereof to vote
in the election of the directors, trustees or Persons performing similar
functions of the Person in question, including, without limitation,
nonvoting securities that are convertible or exchangeable into voting
securities, but shall not include any stock or other interest so
entitling the holders thereof to vote only upon the happening of a
contingency (other than a conversion or exchange thereof into voting
securities), whether or not such contingency has occurred.
ARTICLE 2. THE MERGERS
Section 2.1 The Mergers. Subject to the terms and conditions of this
Agreement, as promptly as practicable following the receipt of the Last
Regulatory Approval and the expiration of all applicable waiting periods, HBMC
shall be merged with and into GLOBAL with GLOBAL as the Interim Surviving
Corporation pursuant to the agreement of merger attached to the Agreement as
Exhibit 2.1 (A) (the "Interim Merger Agreement") and in accordance with the
applicable provisions of the California Corporations Code (the "Interim
Merger"). Immediately following the Interim Merger, GLOBAL will adopt a plan of
liquidation whereby CAPITOL will be merged with and into GLOBAL and, immediately
following the consummation of that liquidation, BANK will adopt a plan of
liquidation whereby GLOBAL shall be merged with and into BANK, with BANK being
the Surviving Corporation, all pursuant to the agreements of merger attached to
this Agreement as Exhibit 2.1 (B) (the "BANK Merger Agreements") and in
accordance with the applicable provisions of the California Financial Code and
the California Corporations Code (the "BANK Mergers"). When used in this
Agreement, the term "Mergers" shall mean the Interim Merger and BANK Mergers,
and "Merger Agreements shall mean the Interim Merger Agreement and BANK Merger
Agreements. The closing of the Mergers (the "Closing") shall take place at a
location and time and Business Day to be designated by BANCORP and reasonably
concurred to by GLOBAL (the "Closing Date") which shall not, however, be later
than ten (10) Business Days after receipt of the Last Regulatory Approval,
expiration of all applicable waiting periods and the completion of BANCORP
Public Offering. The Mergers shall be effective when the last of the Merger
Agreements (together with any other documents required by law to effectuate the
Mergers) shall have been filed with the Secretary of State of the State of
California and the Commissioner. When used in this Agreement, the term
"Effective Time" shall mean the time of filing of the last of the Merger
Agreements with the Secretary of State, "Interim Surviving Corporation" shall
mean GLOBAL, and "Surviving Corporation" shall mean BANK.
Section 2.2 Effect of Mergers. By virtue of the Mergers and at the
Effective Time, all of the rights, privileges, powers and franchises and all
property and assets of every kind and description of GLOBAL and CAPITOL shall be
vested in and be held and enjoyed by the Surviving Corporation, without further
act or deed, and all the estates and interests of every kind of GLOBAL and
CAPITOL, including all debts due to either of them, shall be as effectively the
property of the Surviving Corporation as they were of GLOBAL and CAPITOL
immediately prior to the Effective Time, and the title to any real estate vested
by deed or otherwise in GLOBAL and CAPITOL shall not revert or be in any way
impaired by reason of the Mergers; and all rights of creditors and liens upon
any property of GLOBAL and CAPITOL shall be preserved unimpaired and all debts,
liabilities and duties of GLOBAL and CAPITOL shall be debts, liabilities and
duties of the Surviving Corporation and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
<PAGE>10
by it, and none of such debts, liabilities or duties shall be expanded,
increased, broadened or enlarged by reason of the Mergers.
Section 2.3 Articles of Incorporation. The Articles of Incorporation of
BANK in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended and the name of the
Surviving Corporation shall be "Humboldt Bank."
Section 2.4 (Reserved).
Section 2.5 Cancellation of GLOBAL Stock Options. At the Effective Time,
all outstanding rights with respect to GLOBAL Common Stock pursuant to stock
options under the GLOBAL Stock Option Plan which have not been exercised shall
be canceled. BANCORP will not assume any stock options under the GLOBAL Stock
Option Plan.
Section 2.6 Conversion of GLOBAL Common Stock.
2.6.1 Each share of GLOBAL Common Stock shall be converted at the
Effective Time into and become the right to receive cash equal to the Cash Per
Share Merger Price, shares of BANCORP Common Stock equal to the Stock Per Share
Merger Price and an interest in the BANK Note with the right to receive at the
Escrow Payment Date, in cash and/or BANCORP Common Stock, the Escrow Per Share
Merger Price, subject to adjustment as provided in any other section of this
Agreement; provided, however, that the shares held by any shareholder who
properly exercises dissenters' rights provided under the California Corporations
Code, shall not be so converted and in lieu of such conversion shall be treated
in accordance with the provisions of the California Corporations Code. The total
consideration to be delivered by BANCORP and BANK to the Exchange Agent, at the
Effective Time, shall not exceed the Merger Price.
2.6.2 Escrow Merger Price. The Escrow Merger Price to be paid
under the provisions of Section 2.6.1 shall be subject to the following terms
and conditions:
(i) The Escrow Merger Price shall be entitled to interest
at the rate of eight percent (8%) of the Escrow Merger Price commencing
as of the Determination Date as adjusted pursuant to Section 2.6.2 per
annum, payable in cash to the Exchange Agent on a semi-annual basis on
April 15 and October 15.
(ii) The Escrow Merger Price shall be adjusted downward on
a quarterly basis at the end of each quarter to the extent an adjustment
is required to reflect the effect of: (a) any Loan Loss on the Church
Loan portfolio identified on Schedule 2.6.2(a) up to a
maximum of $1,024,000; (b) any Loan Loss on the Residential Loan
portfolio identified on Schedule 2.6.2(b) up to a maximum of $1,420,000;
(c) any Loan Loss on the FHA Title I Loan portfolio identified on
Schedule 2.6.2(c) up to a maximum of $500,000; (d) any Loan Loss on the
Miscellaneous Loan portfolio identified on Schedule 2.6.2(d) up to a
maximum of $109,000; (e) ninety percent (90%) of any Loan Loss on any of
the Commercial Loans identified on Schedule 2.6.2(e) up a maximum of
$5,520,000; (f) costs of litigation of any type, inclusive of attorneys'
fees and settlements, resulting from GLOBAL's and or CAPITOL's actions
or those of its directors, officers, employees or agents, which
litigation was in existence prior to the Effective Time; (g) writedowns
for any accounting adjustments required by BANCORP's certified public
<PAGE>11
accountants for the December 31, 1999 audited financial statements of
BANCORP which shall be issued no later than April 30, 2000 to bring the
financial statements of GLOBAL and or CAPITOL as of the Determination
Date into conformity with generally accepted accounting principles; (h)
any losses on sale of other real estate owned on the books of CAPITOL at
the Effective Time; (i) costs of the Mergers incurred by GLOBAL and or
CAPITOL and not expended or properly accrued by GLOBAL and or CAPITOL
prior to the Determination Date; (j) any of the above-described losses,
net of any recoveries, incurred by GLOBAL and or CAPITOL from the
Determination Date to the Effective Time; and (k) any and all expenses
of the Global Shareholders Committee as provided by Section 9.1.
(iii) The Escrow Merger Price shall be adjusted upward on
a quarterly basis at the end of each quarter to the extent an adjustment
is required hereby to reflect the effect of (a) any recoveries on any
loans of CAPITOL, up to the Escrow Payment Date, for which there has
been a Loan Loss under Sections 2.6.2(ii)(a-d), (b) ninety percent (90%)
of any recoveries on any loans of CAPITOL, up to the Escrow Payment
Date, for which there has been a Loan Loss under Section 2.6.2(ii)(e),
(c) any interest due on the Escrow Merger Price that has not been paid
in cash prior to the Escrow Payment Date and (d) writeups for any
accounting adjustments required by Bancorp's certified public
accountants for the December 31, 1999 audited financial statements of
Bancorp which shall be issued no later than April 30, 2000 to bring the
financial statements of GLOBAL and CAPITOL as of the Determination Date
into conformity with generally accepted accounting principles.
(iv) The Escrow Adjusted Value shall mean the Escrow
Merger Price adjusted pursuant to Section 2.6.2(ii) and Section
2.6.2(iii).
(v) The Escrow Adjusted Value shall be paid by BANK on
Escrow Payment Date which shall be distributed to the former GLOBAL
shareholder in the form of the Escrow Per Share Merger Price. The Escrow
Per Share Merger Price shall be paid in cash and BANCORP Common Stock
through the Exchange Agent provided, however, that BANCORP shall not be
required to deliver to the Exchange Agent more than two million dollars
($2,000,000) of BANCORP Common Stock valued at the BANCORP Market Value
Per Share plus seven percent (7%) adjusted for stock splits and stock
dividends.
(vi) In the event that BANCORP and the GLOBAL Shareholders
Committee as provided for in Section 9.1 cannot agree on the Escrow
Adjusted Value, BANCORP and the representative of GLOBAL shall each
select an outside third party expert who shall select
an additional third party expert to determine the Escrow Adjusted Value.
The decision of the additional outside third party expert shall be final
and binding upon the parties.
(vii) Except as provided in this section, BANCORP and
HUMBOLDT shall have no rights of any kind whatsoever whether by offset
of otherwise in or to the Escrow Merger Price for any claim, loss or
damage asserted against GLOBAL or CAPITOL or their respective
shareholders, directors, officers, and agents.
<PAGE>12
(viii) BANCORP, to the extent possible, will provide a
minimum of fifteen days notice to the Global Shareholders Committee,
as provided for in Section 9.1, of any adjustments to the Escrow Merger
Price under Section 2.6.2 (ii).
Section 2.7 Fractional Shares. No fractional shares of BANCORP Common
Stock shall be issued as part of the Stock Per Share Merger Price or the Escrow
Per Share Merger Price. Shareholders will be entitled to cash equal to the
fractional share multiplied by the BANCORP Market Value Per Share.
Section 2.8 Exchange Procedures. On or as soon as practicable after the
Effective Time BANCORP or BANK will deliver to the Exchange Agent, (i) cash
equal to the Cash Merger Price, (ii) certificates representing the number of
shares of BANCORP Common Stock issuable in the Mergers; (iii) cash for the
payout of fractional shares; and (iv) a promissory note issued by BANK equal to
the Escrow Merger Price ("BANK Note").
2.8.1 Upon surrender to the Exchange Agent for cancellation of
one or more certificates for shares of GLOBAL Common Stock ("GLOBAL
Certificates"), accompanied by a duly executed letter of transmittal in proper
form, the Exchange Agent shall, as promptly as practicable thereafter, deliver
to each holder of such surrendered GLOBAL Certificates, certificates
representing the appropriate number of shares of BANCORP Common Stock ("New
Certificates"), checks for payment of the Cash Per Share Merger Price and a
facsimile of the BANK Note with evidence of ownership. In no event shall the
holders of GLOBAL Certificates be entitled to receive interest on cash amounts
due them hereunder.
2.8.2 Until a GLOBAL Certificate has been surrendered and
exchanged as herein provided, each share of GLOBAL Common Stock represented by
such GLOBAL Certificate shall represent, on and after the Effective Time, the
right to receive the Per Share Merger Price. No dividends or other distributions
that are declared on any shares of BANCORP Common Stock into which any shares of
GLOBAL Common Stock have been converted at the Effective Time shall be paid to
the holder of such GLOBAL shares until the GLOBAL Certificates evidencing such
GLOBAL shares have been surrendered in exchange for New Certificates in the
manner herein provided, but upon such surrender, such dividends or other
distributions, from and after the Effective Time, will be paid to such holders.
In no event shall the holders entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions.
2.8.3 No transfer taxes shall be payable by any shareholder in
respect of the issuance of New Certificates, except that if any New Certificate
is to be issued in a name other than that in which the GLOBAL Certificates
surrendered shall have been registered, it shall be a condition of such issuance
that the holder requesting such issuance shall properly endorse the certificate
or certificates and shall pay to BANCORP or the Exchange Agent any transfer
taxes payable by reason thereof, or of any prior transfer of such surrendered
certificate, or establish to the satisfaction of BANCORP or the Exchange Agent
that such taxes have been paid or are not payable.
2.8.4 Any BANCORP Common Stock or cash delivered to the Exchange
Agent and not distributed pursuant to this Section 2.8 as of September 30, 2002
shall be returned to BANCORP, in which event the Persons entitled thereto shall
look only to BANCORP for payment thereof.
<PAGE>13
2.8.5 Notwithstanding anything to the contrary set forth in
Sections 2.8.2 and 2.8.3 hereof, if any holder of GLOBAL Common Stock shall be
unable to surrender such holder's GLOBAL Certificates because such GLOBAL
Certificates have been lost or destroyed, such holder may deliver in lieu
thereof an affidavit and indemnity bond in form and substance and with surety
satisfactory to the Exchange Agent and BANCORP.
2.8.6 The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the shares of BANCORP Common
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 BANCORP Common Stock for the account of the Persons entitled
thereto.
2.8.7 After the Effective Time, there shall be no further
registration of transfers of the shares of GLOBAL Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, GLOBAL Certificates representing such shares of GLOBAL Common Stock are
presented to BANCORP, they shall be canceled and exchanged for the Per Share
Merger Price as provided in this Article 2.
2.8.8 After the Effective Time, BANK shall pay in cash to the
Exchange Agent, for the benefit of former GLOBAL Shareholders, the interest
required on the Escrow Merger Price under Section 2.6.2(i). The Exchange Agent
shall deliver to the former GLOBAL Shareholders such interest on a semi-annual
basis.
Section 2.9 Exchange Procedures for Escrow Adjusted Value.
2.9.1 Prior to the Escrow Payment Date the Exchange Agent will
forward to all former GLOBAL shareholders a letter of transmittal and election
form whereby each former GLOBAL shareholder shall elect to exchange the interest
in the BANK Note in the form of cash or BANCORP Common Stock at the BANCORP
Market Value Per Share plus ten percent (7%) adjusted for stock splits and stock
dividends. If no election is made then such former GLOBAL shareholder shall
receive only cash. BANCORP and BANK shall not be required to deliver to the
Exchange Agent more than two million dollars ($2,000,000) of BANCORP Common
Stock valued at the BANCORP Market Value Per Share plus seven percent (7%)
adjusted for stock splits and stock dividends. If required, the Exchange Agent
shall pro-rate to each former GLOBAL shareholder cash and BANCORP Common Stock
as provided herein, except that no former GLOBAL shareholder will be required to
take any consideration for the interest in the BANK Note except cash.
2.9.2 On or as soon as practicable after the Escrow Payment Date,
BANCORP or BANK will deliver to the Exchange Agent in exchange for the BANK
Note, cash and BANCORP Common Stock equal to the Escrow Adjusted Value. Any cash
delivered to the Exchange Agent pursuant to this Section 2.9 and not distributed
as of September 30, 2002 shall be returned to BANCORP or BANK. No interest will
be paid to former GLOBAL shareholders from cash deposited with the Exchange
Agent pursuant to this Section 2.9.
Section 2.10 Board of Directors of BANCORP and BANK following the
Effective Time. At the Effective Time, the Board of Directors and officers of
BANCORP and BANK shall be directors and officers of BANCORP and BANK after the
<PAGE>14
Effective Time, except that the Board of Directors of BANCORP and BANK shall be
increased by one person selected by GLOBAL from GLOBAL's Board of Directors.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF GLOBAL AND
CAPITOL
GLOBAL and CAPITOL represent and warrant to BANCORP and BANK as follows:
Section 3.1 Organization; Corporate Power; Etc. GLOBAL is a California
corporation duly organized validly existing and in good standing under the laws
of the State of California and have all requisite corporate power and authority
to own, lease and operate its respective properties and assets and to carry on
its respective business substantially as it is being conducted on the date of
this Agreement. CAPITOL is a California state-chartered industrial loan company
duly organized, validly existing and in good standing under the laws of the
State of California and has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business
substantially as it is being conducted on the date of this Agreement. GLOBAL and
CAPITOL have all requisite corporate power and authority to enter into this
Agreement and, subject to obtaining all Requisite Regulatory Approvals and
GLOBAL's shareholder approval, GLOBAL and CAPITOL will have the requisite
corporate power and authority to perform its obligations hereunder with respect
to the consummation of the transactions contemplated hereby. CAPITOL is
authorized by the CDFI to conduct a general industrial loan business. CAPITOL is
not a member of the Federal Reserve System. CAPITOL's deposits are insured by
the FDIC in the manner and to the full extent provided by law. CAPITOL maintains
and operates branch offices only in the State of California. Neither the scope
of the business of GLOBAL, or any Subsidiary of GLOBAL, nor the location of any
of their respective properties, requires that GLOBAL or any of its respective
Subsidiaries be licensed or qualified to conduct business in any jurisdiction
other than the State of California, where the failure to be so licensed and
qualified would have a Material Adverse Effect on GLOBAL taken as a whole.
Section 3.2 Licenses and Permits. Except as disclosed on Schedule 3.2,
GLOBAL and its Subsidiaries have all material licenses, certificates,
franchises, rights 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 not, individually or
in the aggregate, have a Material Adverse Effect on GLOBAL or CAPITOL or on the
ability of GLOBAL or CAPITOL to consummate the transactions contemplated by this
Agreement. The properties, assets, operations and businesses of GLOBAL and those
of its Subsidiaries, are and have been maintained and conducted, in all material
respects, in compliance with all applicable licenses, certificates, franchises,
rights and permits.
Section 3.3 Subsidiaries. Other than as set forth on Schedule 3.3, there
is no corporation, partnership, joint venture or other entity in which GLOBAL or
CAPITOL owns, directly or indirectly (except as pledgee pursuant to loans or
stock or other interest held as the result of or in lieu of foreclosure pursuant
to pledge or other security arrangement) any equity or other voting interest or
position.
<PAGE>15
Section 3.4 Authorization of Agreement; No Conflicts.
3.4.1 The execution and delivery of this Agreement and the Merger
Agreements by GLOBAL and CAPITOL, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of GLOBAL and CAPITOL, subject only to the approval
of this Agreement, the Merger Agreements and the Merger by GLOBAL's shareholders
and by GLOBAL as CAPITOL's sole shareholder. This Agreement has been duly
executed and delivered by GLOBAL and CAPITOL and constitutes a legal, valid and
binding obligation of GLOBAL and CAPITOL, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general equitable principles. The Merger Agreements, upon the
receipt of all Requisite Regulatory Approvals and the due execution and filing
of such Merger Agreements in accordance with the applicable provisions of the
California Corporations Code, will constitute a legal, valid and binding
obligation of GLOBAL and CAPITOL, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally and
by general equitable principles.
3.4.2 Except as disclosed on Schedule 3.4, the execution and
delivery of this Agreement and the Merger Agreements, and the consummation of
the transactions contemplated hereby and thereby, do not and will not conflict
with, or result in any violation of or default or loss of a material benefit
under, any provision of the Articles of Incorporation or Bylaws of GLOBAL and
CAPITOL, or except for the necessity of obtaining Requisite Regulatory Approvals
and approval of a majority vote of the shareholders of GLOBAL, any material
mortgage, indenture, lease, agreement or other material instrument or any
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to GLOBAL and CAPITOL or any of
its assets or properties, other than any such conflict, violation, default or
loss which (i) will not have a Material Adverse Effect on GLOBAL, CAPITOL or
BANCORP following consummation of the Mergers; or (ii) will be cured or waived
prior to the Effective Time. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required in
connection with the execution and delivery of this Agreement or the Merger
Agreements by GLOBAL and CAPITOL or the performance by GLOBAL and CAPITOL of its
obligations hereunder and thereunder, except for (a) filings required in order
to obtain the Requisite Regulatory Approvals; (b) the filing and approval of the
Merger Agreements with the Secretary of the State of California and the
Commissioner; (c) Tax Filings; and (d) as set forth in Schedule 3.4.
Section 3.5 Capital Structure. The authorized capital stock of GLOBAL
consists of 1,200,000 shares of GLOBAL Common Stock, no par value per share and
600,000 shares of GLOBAL Preferred Stock, no par value. No GLOBAL Preferred
Stock has been issued. On the date of this Agreement, 670,850 shares of GLOBAL
Common Stock were outstanding, and 35,750 shares of GLOBAL Common Stock were
reserved for issuance pursuant to outstanding GLOBAL Stock Options under the
GLOBAL Stock Option Plan. On the Effective Date GLOBAL shall have no more than
706,600 shares of GLOBAL Common Stock outstanding and all stock options under
the GLOBAL Stock Option Plan that have not been exercised will be canceled. All
outstanding shares of GLOBAL Common Stock are validly issued, fully paid and
nonassessable and do not possess any preemptive rights and were not issued in
violation of any preemptive rights or any similar rights of any Person. CAPITOL
<PAGE>16
has 175,000 shares of common stock, no par value per share, outstanding, all of
which are owned by GLOBAL. Except for outstanding GLOBAL Stock Options under the
GLOBAL Stock Option Plan, GLOBAL and CAPITOL do not have outstanding any
options, warrants, calls, rights, commitments, securities or agreements of any
character to which GLOBAL and CAPITOL is a party or by which it is bound
obligating GLOBAL and CAPITOL to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of GLOBAL and CAPITOL or
obligating GLOBAL and CAPITOL to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
Section 3.6 GLOBAL Filings.
3.6.1 Since January 1, 1996, GLOBAL and its Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with (a) the Federal Reserve Board or any Federal Reserve Bank; (b) the
Commissioner or Commissioner of the Department of Corporations; (c) the FDIC;
and (d) any other applicable federal, state or local governmental or regulatory
authority. All such reports, registrations and filings, and all reports sent to
GLOBAL's shareholders during the three-year period ended December 31, 1998
(whether or not filed with any Regulatory Authority), are collectively referred
to as the "GLOBAL Filings. Except to the extent prohibited by law, copies of the
GLOBAL Filings have been made available to BANCORP. As of their respective
filing or mailing dates, each of the past GLOBAL Filings (a) was true and
complete in all material respects (or was amended so as to be so promptly
following discovery of any discrepancy); and (b) complied in all material
respects with all of the statutes, rules and regulations enforced or promulgated
by the governmental or regulatory authority with which it was filed (or was
amended so as to be so promptly following discovery of any such noncompliance)
and none contained any untrue statement of a material fact or omitted 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. The GLOBAL Financial Statements, together with the financial
statements contained in the GLOBAL Filings have been prepared in accordance with
GAAP, or applicable regulatory accounting principles, applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present (subject, in the case of the unaudited statements,
to recurring adjustments normal in nature and amount) the financial position of
GLOBAL as of the dates thereof and the results of its operations, cash flows and
changes in shareholders' equity for the periods then ended.
3.6.2 GLOBAL and its subsidiaries have timely filed each report,
schedule and amendments to each of the foregoing since January 1, 1996 that
GLOBAL and CAPITOL were required to file with the Commissioner or Commissioner
of the Department of Corporations and the FDIC (the "GLOBAL State Documents"),
all of which have been made available to BANCORP. As of their respective dates,
the GLOBAL State Documents complied in all material respects with the applicable
requirements of the California Financial Code and the Federal Deposit Insurance
Act, as the case may be, and the rules and regulations of the Commissioner or
Commissioner of the Department of Corporations and the FDIC thereunder
applicable to such GLOBAL State Documents, and none of the GLOBAL State
Documents contained any untrue statement of a material fact or omitted 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. The financial statements of GLOBAL included in the GLOBAL
Filings comply in all material respects with applicable regulatory accounting
requirements and with the published rules and regulations of the Commissioner
<PAGE>17
(as applicable) with respect thereto, and have been prepared in accordance with
GAAP, or applicable regulatory accounting principles, applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by regulations
of the Commissioner) and fairly present (subject, in the case of the unaudited
statements, to recurring adjustments normal in nature and amount) the financial
position of GLOBAL as of the dates thereof and the results of its operations and
cash flows for the periods then ended.
Section 3.7 Accuracy of Information Supplied.
3.7.1 No representation or warranty of GLOBAL and CAPITOL
contained herein or any statement, schedule, exhibit or certificate given or to
be given by or on behalf of GLOBAL or any of its Subsidiaries, to BANCORP in
connection herewith and none of the information supplied or to be supplied by
GLOBAL or its Subsidiaries to BANCORP hereunder contains or will contain any
untrue statement of material fact or omits 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 are made, not misleading.
3.7.2 None of the information supplied or to be supplied by
GLOBAL or relating to GLOBAL which is included or incorporation by reference in
(i) the Registration Statement on Form S-1 to be filed with the SEC by BANCORP
in connection with the BANCORP Public Offering of common stock and the
Registration Statement on Form S-4 to be filed with the SEC by BANCORP in
connection with the issuance of shares of BANCORP Common Stock in the merger of
GLOBAL with and into BANK (including the Proxy Statement of GLOBAL and the
Prospectus of BANCORP ("Proxy Statement/Prospectus") constituting a part
thereof), (the Registration Statement on Form S-1 and the Registration Statement
on Form S-4 are collectively referred to herein as the "Registration
Statements") will, at the time that each of the Registration Statements become
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) the Proxy Statement/Prospectus and any amendment
or supplement thereto will, at all times from the date of mailing to
shareholders of GLOBAL through the date of the meeting of shareholders of GLOBAL
to be held in connection with the Mergers, 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; and (iii) the applications and forms to be
filed with securities or "blue sky" authorities, self regulatory authorities, or
any Governmental Entity in connection with the merger, the issuance of any
shares of BANCORP Common Stock in connection with the merger of GLOBAL with and
into BANK, or any Requisite Regulatory Approvals will in connection with the
Mergers, at the time filed or at the time they become effective, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Proxy
Statement/Prospectus (except for such portions thereof that relate only to
BANCORP and its Subsidiaries) will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
3.7.3 GLOBAL has or will deliver to BANCORP copies of the audited
balance sheets of GLOBAL and its Subsidiaries as of December 31, 1998, 1997 and
1996 and the related statements of income, changes in shareholders' equity and
<PAGE>18
cash flows for the years then ended and the related notes to such financial
statements, all as audited by Grant Thornton & Co., independent public
accountants (the "GLOBAL Financial Statements"), and GLOBAL will hereafter until
the Closing Date deliver to BANCORP copies of additional financial statements of
GLOBAL as provided in Sections 5.1.1(iii) and 6.1.11(iii). The GLOBAL Financial
Statements have been prepared (and all of said additional financial statements
will be prepared) in accordance with GAAP, or applicable regulatory accounting
principles, applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) consistently followed throughout the
periods covered by such statements, and present (and, when prepared, will
present) fairly the financial position of GLOBAL and its Subsidiaries as of the
respective dates indicated and the results of operations, cash flows and changes
in shareholders' equity at the respective dates and for the respective periods
covered by such financial statements (subject, in the case of the unaudited
statements, to recurring adjustments normal in nature and amount). In addition,
GLOBAL has delivered to BANCORP copies of all management or other letters
delivered to GLOBAL by its independent accountants in connection with any of the
GLOBAL Financial Statements or by such accountants or any consultant regarding
the internal controls or internal compliance procedures and systems of GLOBAL
issued at any time since January 1, 1996, and will make available for inspection
by BANCORP or its representatives, at such times and places as BANCORP may
reasonably request, reports and working papers produced or developed by such
accountants or consultants.
Section 3.7.4 Notwithstanding anything set forth elsewhere in this
Agreement no due diligence examination of GLOBAL or CAPITOL conducted by or on
behalf of BANCORP and the BANK either prior or subsequent to execution of this
Agreement, shall have any effect whatsoever on the representations of GLOBAL or
CAPITOL in this Section 3 or in any other section of this Agreement.
Section 3.8 Compliance with Applicable Laws. Except as disclosed on
Schedule 3.8, to the best of GLOBAL's or CAPITOL's Knowledge, the respective
businesses of GLOBAL and its Subsidiaries are not being conducted in violation
of any law, ordinance or regulation, except for violations which individually or
in the aggregate would not have a Material Adverse Effect on GLOBAL or CAPITOL,
or BANCORP at or following the Effective Time. Except as set forth in Schedule
3.8, no investigation or review by any Governmental Entity with respect to
GLOBAL or CAPITOL is pending or, to the Knowledge of GLOBAL or CAPITOL
threatened, nor has any Governmental Entity indicated to GLOBAL or CAPITOL an
intention to conduct the same.
Section 3.9 Litigation. Except as set forth in Schedule 3.9, there is no
suit, action or proceeding or investigation pending, or to the Knowledge of
GLOBAL or CAPITOL threatened against or affecting GLOBAL or any of its
Subsidiaries which, if adversely determined, would have a Material Adverse
Effect on GLOBAL or its Subsidiaries; nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against GLOBAL or any of its Subsidiaries that has, or which, insofar as
reasonably can be foreseen, in the future would have, any such Material Adverse
Effect. Schedule 3.9 contains a true, correct and complete list, including
identification of the applicable insurance policy covering such litigation, if
any, subject to reservation of rights, if any, the applicable deductible and the
amount of any reserve therefor, of all pending litigation in which GLOBAL or any
of its Subsidiaries is a named party, and except as disclosed on Schedule 3.9,
all of the litigation shown on such Schedule is adequately covered by insurance
<PAGE>19
in force, except for applicable deductibles, or has been adequately reserved for
in accordance with GLOBAL's prior business practices.
Section 3.10 Agreements with Banking Authorities. Except as disclosed on
Schedule 3.10,. neither GLOBAL nor any Subsidiary of GLOBAL is a party to any
written agreement or memorandum of understanding with, or order or directive
from, any Governmental Entity.
Section 3.11 Insurance. GLOBAL and its Subsidiaries have in full force
and effect policies of insurance with respect to their assets and businesses
against such casualties and contingencies and in such amounts, types and forms
as are customarily appropriate for their businesses, operations, properties and
assets. Schedule 3.11 contains a list of all policies of insurance and bonds
carried and owned by GLOBAL or any Subsidiary. None of GLOBAL or any of its
Subsidiaries is in default under any such policy of insurance or bond such that
it can be canceled and all material claims thereunder have been filed in timely
fashion. GLOBAL and its Subsidiaries have filed claims with, or given notice of
claim to, their insurers or bonding companies in timely fashion with respect to
all material matters and occurrences for which they believe they have coverage.
Section 3.12 Title to Assets other than Real Property. GLOBAL and its
Subsidiaries have good and marketable title to all their properties and assets
(other than real property which is the subject to Section 3.13), owned or leased
by GLOBAL or any of its Subsidiaries, free and clear of all mortgages, liens,
encumbrances, pledges or charges of any kind or nature except as disclosed on
Schedule 3.12 and except for: (a) encumbrances as set forth in the GLOBAL
Financial Statements; (b) liens for current Taxes not yet due which have been
fully reserved for; and (c) encumbrances, if any, that are not substantial in
character, amount or extent and do not detract materially from the value, or
interfere with present use or the sale or other disposition of the property
subject thereto or affected thereby. All such properties and assets are, and
require only routine maintenance to keep them, in good working condition, normal
wear and tear excepted.
Section 3.13 Real Property. Schedule 3.13 is an accurate list and
general description of all real property owned or leased by GLOBAL or any of its
Subsidiaries, including Other Real Estate Owned ("OREO"). Except as disclosed on
Schedule 3.13, each of GLOBAL and its respective Subsidiaries has good and
marketable title to the real properties that it owns, as described in such
Schedule, free and clear of all mortgages, covenants, conditions, restrictions,
easements, liens, security interests, charges, claims, assessments and
encumbrances, except for (a) rights of lessors, lessees or sublessees in such
matters as are reflected in a written lease; (b) current Taxes (including
assessments collected with Taxes) not yet due and payable; (c) encumbrances, if
any, that are not substantial in character, amount or extent and do not
materially detract from the value, or interfere with present use, or the ability
of GLOBAL CAPITOL to dispose, of the property subject thereto or affected
thereby; and (d) other matters as described in Schedule 3.13. GLOBAL and its
Subsidiaries have valid leasehold interests in the leaseholds they respectively
hold, free and clear of all mortgages, liens, security interest, charges,
claims, assessments and encumbrances, except for (a) claims of lessors,
co-lessees or sublessees in such matters as are reflected in a written lease;
(b) title exceptions affecting the fee estate of the lessor under such leases;
and (c) other matters as described in Schedule 3.13. To the best of GLOBAL's or
CAPITOL's Knowledge, the activities of GLOBAL and its Subsidiaries with respect
to all real property owned or leased by them for use in connection with their
operations are in all material respects permitted and authorized by applicable
zoning laws, ordinances and regulations and all laws and regulations of any
Governmental Entity. Except as set forth in Schedule 3.13, GLOBAL and its
<PAGE>20
Subsidiaries enjoy quiet possession under all material leases to which they are
the lessees and all of such leases are valid and in full force and effect,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally and
by general equitable principles. The buildings and improvements on real
properties owned or leased by GLOBAL or any of its Subsidiaries are in good
condition and repair, and do not require more than normal and routine
maintenance, to keep them in such condition, normal wear and tear excepted.
Section 3.14 Taxes.
3.14.1 Filing of Returns. Except as set forth on Schedule 3.14.1,
GLOBAL and its Subsidiaries have duly prepared and filed federal, state, and
local Returns (for Tax or informational purposes) which were required to be
filed by or in respect of GLOBAL and its Subsidiaries, or any of their
properties, income and/or operations on or prior to the Closing Date. As of the
time they were filed, the foregoing Returns accurately reflected the material
facts regarding the income, business, asset, operations, activities, status, and
any other information required to be shown thereon. No extension of time within
which GLOBAL or any of its Subsidiaries may file any Return is currently in
force.
3.14.2 Payment of Taxes. Except as disclosed on Schedule 3.14.2
with respect to all amounts in respect of Taxes imposed on GLOBAL or any
Subsidiary or for which GLOBAL or any Subsidiary is or could be liable, whether
to taxing authorities (as, for example, under law) or to other Persons (as, for
example, under Tax allocation agreements), with respect to all taxable periods
or portions of periods ending on or before the Closing Date, all applicable tax
laws and agreements have been or will be fully complied with in all material
respects, and all such amounts required to be paid by or on behalf of GLOBAL or
any Subsidiary to taxing authorities or others on or before the date hereof have
been paid.
3.14.3 Audit History. Except as disclosed on Schedule 3.14.3,
there is no review or audit by any taxing authority of any Tax liability of
GLOBAL or any Subsidiary currently in progress. Except as disclosed on Schedule
3.14.3, GLOBAL and its Subsidiaries have not received any written notices within
the three years preceding the Closing Date of any pending or threatened audit,
by the Internal Revenue Service or any state, local or foreign agency, for any
Returns or Tax liability of GLOBAL or any Subsidiary for any period. GLOBAL and
its Subsidiaries currently have no unpaid deficiencies assessed by the Internal
Revenue Service or any state, local or foreign taxing authority arising out of
any examination of any of the Returns of GLOBAL or any Subsidiaries filed for
fiscal years ended on or after December 31, 1994 through the Closing Date, nor
to the Knowledge of GLOBAL is there reason to believe that any material
deficiency will be assessed.
3.14.4 Statute of Limitations. Except as disclosed on Schedule
3.14.4, no agreements are in force or are currently being negotiated by or on
behalf of GLOBAL or any Subsidiaries for any waiver or for the extension of any
statute of limitations governing the time of assessments or collection of any
Tax. No closing agreements or compromises concerning Taxes of GLOBAL or any
Subsidiaries are currently pending.
3.14.5 Withholding Obligations. GLOBAL and its Subsidiaries have
withheld from each payment made to any of their respective officers, directors
and employees, the amount of all applicable Taxes, including, but not limited
<PAGE>21
to, income tax, social security contributions, unemployment contributions,
backup withholding and other deductions required to be withheld therefrom by any
Tax law and have paid the same to the proper taxing authorities within the time
required under any applicable Tax law.
3.14.6 Tax Liens. There are no Tax liens, whether imposed by any
federal, state, local or foreign taxing authority, outstanding against any
assets owned by GLOBAL or its Subsidiaries, except for liens for Taxes that are
not yet due and payable.
3.14.7 Tax Reserves. GLOBAL and its Subsidiaries have made full
and adequate provision and reserve for all federal, state, local or foreign
Taxes for the current period for which Tax and information returns are not yet
required to be filed. The GLOBAL Financial Statements contain fair and
sufficient accruals for the payment of all Taxes for the periods covered by the
GLOBAL Financial Statements and all periods prior thereto.
3.14.8 Tax Elections. No new elections with respect to Taxes or
any changes in current elections with respect to Taxes affecting the assets
owned by GLOBAL or its Subsidiaries shall be made after the date of this
Agreement without the prior written consent of BANCORP, which shall not be
unreasonably withheld. BANCORP shall be deemed to have consented in writing to
any election GLOBAL or its Subsidiaries shall desire to make if: (i) the
electing Person shall have notified the Chief Executive Officer of BANCORP in
writing of its desire to make such election, including in such notice a
reasonably complete summary of the election it desires to make and the reasons
it desires to make such election at least 20 Business Days prior to the due date
(including extensions thereof) for filing such election; and (ii) BANCORP shall
not have responded in writing to such notice by the fifth Business Day prior to
the due date (including extensions thereof) for filing such election.
3.14.9 IRC Section 382 Applicability. None of GLOBAL or any of
its Subsidiaries, including any party joining in any consolidated return to
which GLOBAL is a member, underwent an "ownership change" as defined in IRC
Section 382(GLOBAL) within the "testing period" (as defined in IRC Section 382)
ending immediately before the Effective Time, and not taking into account any
transactions contemplated by this Agreement.
3.14.10 Disclosure Information. Within 45 days of the date of
this Agreement, GLOBAL will deliver to BANCORP a schedule setting forth the
following information with respect to GLOBAL and CAPITOL and as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (a) GLOBAL's and CAPITOL's basis in its assets; (b) the amount of any
net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to GLOBAL and CAPITOL;
and (c) the amount of any deferred gain or loss allocable to GLOBAL and CAPITOL
and arising out of any deferred intercompany transactions.
Section 3.15 Performance of Obligations. GLOBAL and its Subsidiaries
have performed all material obligations required to be performed by them to date
and none of GLOBAL or any of its Subsidiaries is in default under or in breach
of any term or provision of any covenant, contract, lease, indenture or any
other agreement, written or oral, to which any 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 a default or breach, where
<PAGE>22
such default or breach or failure to perform would have a Material Adverse
Effect on GLOBAL or its Subsidiaries. To GLOBAL's and CAPITOL's Knowledge, and
except as disclosed on Schedule 3.15 or in the portion of Schedule 3.16 that
identifies 90-day past due or classified or nonaccrual loans, no party with whom
GLOBAL or any of its Subsidiaries has an agreement that is of material
importance to the businesses of GLOBAL or its Subsidiaries is in default
thereunder.
Section 3.16 Loans and Investments. Except as set forth on Schedule
3.16, all loans, leases and other extensions of credit, and guaranties, security
agreements or other agreements supporting any loans or extensions of credit, and
investments of GLOBAL or their Subsidiaries are, and constitute, in all material
respects, the legal, valid and binding obligations of the parties thereto and
are enforceable against such parties in accordance with their terms, except as
the enforceability thereof may be limited by applicable law and otherwise by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally and by general equitable principles. Except as described on
Schedule 3.16, as of June 1, 1999, no loans or investments held by GLOBAL or any
Subsidiary are: (i) more than ninety days past due with respect to any scheduled
payment of principal or interest, other than loans on a nonaccrual status; (ii)
classified as "loss," "doubtful," "substandard" or "specially mentioned" by
GLOBAL and CAPITOL or any banking regulators; or (iii) on a nonaccrual status in
accordance with GLOBAL's loan review procedures. Except as set forth on Schedule
3.16, none of such assets (other than loans) are subject to any restrictions,
contractual, statutory or other, that would materially impair the ability of the
entity holding such investment to dispose freely of any such assets at any time,
except restrictions on the public distribution or transfer of any such
investments under the Securities Act and the regulations thereunder or state
securities laws and pledges or security interests given in connection with
government deposits. All loans, leases or other extensions of credit
outstanding, or commitments to make any loans, leases or other extensions of
credit to any Affiliates of GLOBAL or CAPITOL are disclosed on Schedule 3.16.
For outstanding loans or extensions of credit or commitments to make loans or
extensions of credit where the original principal amounts are in excess of
$25,000 and which by their terms are either secured by collateral or supported
by a guaranty or similar obligation, the security interests have been duly
perfected in all material respects and have the priority they purport to have in
all material respects, other than by operation of law, and, in the case of each
guaranty or similar obligation, each has been duly executed and delivered to
GLOBAL or any Subsidiary, and to GLOBAL's or CAPITOL's Knowledge, is still in
full force and effect.
Section 3.17 Brokers and Finders. Except as set forth on Schedule 3.17,
none of GLOBAL or any of its 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, the Merger Agreements, nor
the consummation of the transactions provided for herein or therein, will result
in any liability to any broker or finder. GLOBAL or CAPITOL agrees to indemnify
and hold harmless BANCORP and its affiliates, and to defend with counsel
selected by BANCORP and reasonably satisfactory to GLOBAL, from and against any
liability, cost or expense, including attorneys' fees, incurred in connection
with a breach of this Section 3.17.
Section 3.18 Material Contracts. Schedule 3.18 to this Agreement
contains a complete and accurate written list of all material agreements,
obligations or understandings, written and oral, to which GLOBAL or any
Subsidiary is a party as of the date of this Agreement, except for loans and
<PAGE>23
other extensions of credit made by GLOBAL or CAPITOL in the ordinary course of
its business and those items specifically disclosed in the GLOBAL Financial
Statements.
Section 3.19 Absence of Material Adverse Effect. Since January 1, 1999,
the respective businesses of GLOBAL and its Subsidiaries have been conducted
only in the ordinary course, in the same manner as theretofore conducted, and no
event or circumstance has occurred or is expected to occur which has had or
which, with the passage of time or otherwise, could reasonably be expected to
have a Material Adverse Effect on GLOBAL or CAPITOL.
Section 3.20 Undisclosed Liabilities. Except as disclosed on Schedule
3.20, none of GLOBAL or any of its Subsidiaries has any liabilities or
obligations, either accrued, contingent or otherwise, that are material to
GLOBAL and its Subsidiaries and that have not been: (a) reflected or disclosed
in the GLOBAL Financial Statements; or (b) incurred subsequent to December 31,
1998 in the ordinary course of business. GLOBAL or CAPITOL has no Knowledge of
any basis for the assertion against GLOBAL or any of its Subsidiaries, of any
liability, obligation or claim (including without limitation that of any
Governmental Entity) that will have or cause, or could reasonably be expected to
have or cause, a Material Adverse Effect on GLOBAL or CAPITOL that is not fully
and fairly reflected and disclosed in the GLOBAL Financial Statements or on
Schedule 3.20.
Section 3.21 Employees; Employee Benefit Plans; ERISA.
3.21.1 All material obligations of GLOBAL or its Subsidiaries for
payment to trusts or other funds or to any Governmental Entity or to any
individual, director, officer, employee or agent (or his or her heirs, legatees
or legal representatives) with respect to unemployment compensation benefits,
profit-sharing, pension or retirement benefits or social security benefits,
whether arising by operation of law, by contract or by past custom, have been
properly accrued for the periods covered thereby on the GLOBAL Financial
Statements and paid when due. All material obligations of GLOBAL or its
Subsidiaries, whether arising by operation of law, by contract or by past custom
for vacation or holiday pay, bonuses and other forms of compensation which are
payable to their respective directors, officers, employees or agents have been
properly accrued on the GLOBAL Financial Statements for the periods covered
thereby and paid when due. Except as set forth on Schedule 3.21.1, there are no
unfair labor practice complaints, strikes, slowdowns, stoppages or other
controversies pending or, to the Knowledge of GLOBAL or CAPITOL, attempts to
unionize or controversies threatened between GLOBAL or any Subsidiary or
Affiliate and or relating to, any of their employees that are likely to have a
Material Adverse Effect on GLOBAL and its Subsidiaries, taken as a whole. None
of GLOBAL or any Subsidiary is a party to any collective bargaining agreement
with respect to any of their employees and, except as set forth on Schedule
3.21.1, none of GLOBAL or any Subsidiary is a party to a written employment
contract with any of their respective employees and there are no understandings
with respect to the employment of any officer or employee of GLOBAL or any
Subsidiary which are not terminable by GLOBAL or such Subsidiary without
liability on not more than thirty (30) days' notice. Except as disclosed in the
GLOBAL Financial Statements for the periods covered thereby, all material sums
due for employee compensation have been paid and all employer contributions for
employee benefits, including deferred compensation obligations, and all material
benefit obligations under any Employee Plan (as defined in Section 3.21.3
hereof) or any Benefit Arrangement (as defined in Section 3.21.4 hereof) have
been duly and adequately paid or provided for in accordance with plan documents.
Except as set forth on Schedule 3.21.1, no director, officer or employee of
GLOBAL or any Subsidiary is entitled to receive any payment of any amount under
<PAGE>24
any existing agreement, severance plan or other benefit plan as a result of the
consummation of any transaction contemplated by this Agreement or the Merger
Agreement. To GLOBAL's or CAPITOL's Knowledge, it has materially complied with
all applicable federal and state statutes and regulations which govern workers'
compensation, equal employment opportunity and equal pay, including, but not
limited to, all civil rights laws, Presidential Executive Order 1124, the Fair
Labor Standards Act of 1938, as amended, and the Americans with Disabilities
Act.
3.21.2 GLOBAL has delivered as Schedule 3.21.2 a complete list
of:
(a) All current employees of GLOBAL or any of its
Subsidiaries together with each employee's tenure with GLOBAL or such
Subsidiary, title or job classification, and the current annual rate of
compensation anticipated to be paid to each such employee; and
(b) All Employee Plans and Benefit Arrangements, including
all plans or practices providing for current compensation or accruals for active
Employees, including, but not limited to, all employee benefit plans, all
pension, profit-sharing, retirement, bonus, stock option, incentive, deferred
compensation, severance, long-term disability, medical, dental, health,
hospitalization, life insurance or other insurance plans or related benefits.
3.21.3 Except as disclosed on Schedule 3.21.3, none of GLOBAL or
any of its Subsidiaries maintains, administers or otherwise contributes to any
"employee benefit plan," as defined in Section 3(3) of ERISA, which is subject
to any provisions of ERISA and covers any employee, whether active or retired,
of GLOBAL or any of its Subsidiaries (any such plan being herein referred to as
an "Employee Plan"). True and complete copies of each such Employee Plan,
including amendments thereto, have been previously delivered to BANCORP,
together with (i) all agreements regarding plan assets with respect to such
Employee Plans, (ii) a true and complete copy of the annual reports for the most
recent three years (Form 5500 Series including, if applicable, Schedules A and B
thereto) prepared in connection with any such Employee Plan, (iii) a true and
complete copy of the actuarial valuation reports for the most recent three
years, if any, prepared in connection with any such Employee Plan covering any
active employee of GLOBAL or its Subsidiaries, (iv) a copy of the most recent
summary plan description of each such Employee Plan, together with any
modifications thereto, and (v) a copy of the most recent favorable determination
letter (if applicable) from the Internal Revenue Service for each Employee Plan.
None of the Employee Plans is a "multi-employer plan" as defined in Section
3(37) of ERISA or a "multiple employer plan" as covered in Section 412 of the
IRC, and none of GLOBAL or any of its Subsidiaries has been obligated to make a
contribution to any such multi-employer or multiple employer plan within the
past five years. None of the Employee Plans of GLOBAL or any of its Subsidiaries
is, or for the last five years has been, subject to Title IV of ERISA. Each
Employee Plan which is intended to be qualified under Section 401(a) of the IRC
is so qualified and each trust maintained pursuant thereto is exempt from income
tax under Section 501(a) of the IRC, and none of GLOBAL or any of its
Subsidiaries is aware of any fact which has occurred which would cause the loss
of such qualification or exemption.
3.21.4 Except as disclosed in Schedule 3.21.2, none of GLOBAL or
any of its Subsidiaries maintains (other than base salary and base wages) any
form of current or deferred compensation, bonus, stock option, stock
appreciation right, severance pay, salary continuation, retirement or incentive
<PAGE>25
plan or arrangement for the benefit of any director, officer or employee,
whether active or retired, of GLOBAL or any of its Subsidiaries or for any class
or classes of such directors, officers or employees. Except as disclosed in
Schedule 3.21.2, none of GLOBAL or any of its Subsidiaries maintains any group
or individual health insurance, welfare or similar plan or arrangement for the
benefit of any director, officer or employee of GLOBAL or any of its
Subsidiaries, whether active or retired, or for any class or classes of such
directors, officers or employees. Any such plan or arrangement described in this
Section 3.21.4, copies of which have been delivered to BANCORP, shall be herein
referred to as a "Benefit Arrangement."
3.21.5 To GLOBAL's or CAPITOL's Knowledge, all Employee Plans and
Benefit Arrangements are operated in material compliance 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 IRC, applicable to such plans or arrangements, and plan
documents relating to any such plans or arrangements, comply with or will be
amended to comply with applicable legal requirements. To GLOBAL's or CAPITOL's
Knowledge, none of GLOBAL or any of its Subsidiaries, nor any Employee Plan, nor
any trusts created thereunder, nor any trustee, administrator nor any other
fiduciary thereof, has engaged in a "prohibited transaction," as defined in
Section 406 of ERISA and Section 4975 of the IRC, that could subject GLOBAL or
any of its Subsidiaries or BANCORP to liability under Section 409 or 502(i) of
ERISA or Section 4975 of the IRC or that would adversely affect the qualified
status of such plans; each "plan official" within the meaning of Section 412 of
ERISA of each Employee Plan is bonded to the extent required by such Section
412; with respect to each Employee Plan, to GLOBAL's Knowledge, no employee of
GLOBAL's or CAPITOL's or any Subsidiary, nor any fiduciary of any Employee Plan,
has engaged in any breach of fiduciary duty as defined in Part 4 of Subtitle B
of Title I of ERISA which could subject GLOBAL or any of its Subsidiaries to
liability if GLOBAL or any such Subsidiary is obligated to indemnify such Person
against liability. Except as disclosed in Schedule 3.21.5, GLOBAL and its
Subsidiaries have not failed to make any material contribution or pay any amount
due and owing as required by law or the terms of any Employee Plan or Benefit
Arrangement.
3.21.6 Except as set forth on Schedule 3.21.6, no Employee Plan
or Benefit Arrangement has any material liability of any nature, accrued or
contingent, including, without limitation, liabilities for federal, state, local
or foreign taxes, interest or penalty other than liability for claims arising in
the course of the administration of each such Employee Plan. Except as set forth
on Schedule 3.21.6, there is no pending, or to GLOBAL's or CAPITOL's Knowledge
threatened, legal action, proceeding or investigation against any Employee Plan
which could result in material liability to such Employee Plan, other than
routine claims for benefits, and there is no basis for any such legal action,
proceeding or investigation.
3.21.7 Each Benefit Arrangement which is a group health plan
(within the meaning of such term under IRC Section 4980B(2)) materially complies
and has materially complied with the requirements of Section 601 through 608 of
ERISA or Section 4980B of the IRC governing continuation coverage requirements
for employee-provided group health plans.
3.21.8 Except as disclosed in Schedule 3.21.8, none of GLOBAL or
any of its Subsidiaries maintains any Employee Plan or Benefit Arrangement
pursuant to which any benefit or other payment will be required to be made by
GLOBAL or any of its Subsidiaries or Affiliates or pursuant to which any other
benefit will accrue or vest in any director, officer or employee of GLOBAL or
<PAGE>26
any Subsidiary or Affiliate thereof, in either case as a result of the
consummation of the transactions contemplated by this Agreement or the Merger
Agreements.
Section 3.22 Powers of Attorney. No power of attorney or similar
authorization given by GLOBAL or any Subsidiary thereof is presently in effect
or outstanding other than powers of attorney given in the ordinary course of
business with respect to routine matters.
Section 3.23 Hazardous Materials. Except as set forth on Schedule 3.23:
3.23.1 Except for ordinary and necessary quantities of cleaning,
pest control and office supplies, and other small quantities of Hazardous
Substances that are used in the ordinary course of the respective businesses of
GLOBAL and its Subsidiaries and in compliance with applicable Environmental
Laws, or ordinary rubbish, debris and nonhazardous solid waste stored in garbage
cans or bins for regular disposal off-site, or petroleum contained in and de
minimis quantities discharged from motor vehicles in their ordinary operation on
any of the GLOBAL Properties (as defined below), GLOBAL and its Subsidiaries
have not engaged in the generation, use, manufacture, treatment, transportation,
storage (in tanks or otherwise), or the disposal, of Hazardous Substances other
than as permitted by and only in compliance with applicable law. To GLOBAL's or
CAPITOL's Knowledge, no Hazardous Substances have been released, emitted or
disposed of, or otherwise deposited, on, in or from any real property which is
now or has been previously owned since January 1, 1995, or which is currently or
during the past three years was leased, by GLOBAL or any of its Subsidiaries,
including OREO (collectively, the "GLOBAL Properties"), or to GLOBAL's or
CAPITOL's Knowledge, on or in any real property in which GLOBAL or any of its
Subsidiaries now holds any security interest, mortgage or other lien or interest
with an underlying obligation in excess of $25,000 ("GLOBAL Collateralizing Real
Estate"), except for (i) matters disclosed on Schedule 3.23; (ii) ordinary and
necessary quantities of cleaning, pest control and office supplies used and
stored in compliance with applicable Environmental Laws, or ordinary rubbish,
debris and nonhazardous solid waste stored in garbage cans or bins for regular
disposal off-site, or petroleum contained in, and de minimis quantities
discharged from, motor vehicles in their ordinary operation on such GLOBAL
Properties; and (iii) such releases, emissions, disposals or deposits which
constituted a violation of an Environmental Law but did not have a Material
Adverse Effect on the GLOBAL Property involved and would not result in the
incurrence or imposition of any liability, expense, penalty or fine against
GLOBAL or any of its Subsidiaries in excess of $25,000 individually or in the
aggregate. To GLOBAL's of CAPITOL's Knowledge, no activity has been undertaken
on any of the GLOBAL Properties since January l, 1995, and to the Knowledge of
GLOBAL or CAPITOL no activities have been or are being undertaken on any of the
GLOBAL Collateralizing Real Estate, that would cause or contribute to:
(a) any of the GLOBAL Properties or GLOBAL Collateralizing
Real Estate becoming a treatment, storage or disposal facility within the
meaning of RCRA or any similar state law or local ordinance;
(b) a release or threatened release of any Hazardous
Substances under circumstances which would violate any Environmental Laws; or
(c) the discharge of Hazardous Substances into any soil,
subsurface water or ground water or into the air, or the dredging or filling of
any waters, that would require a permit or any other approval under the Federal
<PAGE>27
Water Pollution Control Act, 33 U.S.C. ss.1251 et seq., the Clean Air Act, as
amended, 42 U.S.C. ss.7401 et seq., or any similar federal or state law or local
ordinance; the cumulative effect of which would have a material adverse effect
on the GLOBAL Property or GLOBAL Collateralizing Real Estate involved.
3.23.2 To the Knowledge of GLOBAL or CAPITOL, there are not, and
never have been, any underground storage tanks located in or under any of the
GLOBAL Properties.
3.23.3 None of GLOBAL or any of its Subsidiaries has received any
written notice of, and to the Knowledge of GLOBAL or CAPITOL none has received
any verbal notice of, any pending or threatened claims, investigations,
administrative proceedings, litigation, regulatory hearings or requests or
demands for remedial or responsive actions or for compensation, with respect to
any of the GLOBAL Properties or GLOBAL Collateralizing Real Estate, alleging
noncompliance with or violation of any Environmental Law or seeking relief under
any Environmental Law and none of the GLOBAL Properties or GLOBAL
Collateralizing Real Estate is listed on the United States Environmental
Protection Agency's National Priorities List of Hazardous Waste Sites, or, to
the Knowledge of GLOBAL, any other list, schedule, log, inventory or record of
hazardous waste sites maintained by any federal, state or local agency.
3.23.4 As used throughout this Agreement "Hazardous Substances"
shall mean any material or substance which is (i) defined as a "hazardous
waste," "extremely hazardous waste" or "restricted hazardous waste" under
Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the
California Health and Safety Code Division 20, Chapter 6.5 (Hazardous Waste
Control Law); (ii) defined as a "hazardous substance" under Section 25316 of the
California Health and Safety Code, Division 20, Chapter 6.8
(Carpenter-Presley-Tanner Hazardous Substance Account Act); (iii) defined as a
"hazardous material," "hazardous substance" or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter 6.95
(Hazardous Materials Release Response Plans and Inventory); (iv) defined as a
"hazardous substance" under Section 25281 of the California Health and Safety
Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances);
(v) petroleum or any fraction thereof, any petroleum product and by-product,
gasoline or crude oil; (vi) asbestos or asbestos containing materials; (vii)
listed under Article 9 or defined as hazardous or extremely hazardous pursuant
to Article 11 of Title 22 of the California Administrative Code, Division 4,
Chapter 20; (viii) designated as a "hazardous substance" pursuant to Section 311
of the Federal Water Pollution Control Act (33 U.S.C. 1317); (ix) defined as a
"hazardous waste" pursuant to Section 1004 of the RCRA; (x) defined as a
"hazardous substance" pursuant to Section 101 of CERCLA; (ix) defined under all
other existing and/or currently proposed federal, state and local laws,
ordinances, rules, regulations, orders, requirements, and decrees (in each case
having the force of law) regulating, relating to, or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material; or (xii) any substance, product, waste or other material
of any nature whatsoever which may give rise to liability (A) under any of the
statutes or regulations described in clauses (i) through (ix) above; or (B)
under any reported decisions of any state or federal court having jurisdiction
over GLOBAL, CAPITOL or any portion of the GLOBAL Properties or GLOBAL
Collateralizing Real Estate.
Section 3.24 Stock Options. Schedule 3.24 to this Agreement contains a
description of the GLOBAL Stock Option Plan and list of all GLOBAL Stock Options
outstanding, indicating for each: (a) the grant date; (b) whether vested or
<PAGE>28
unvested; (c) exercise price; and (d) a vesting schedule by optionee.
Section 3.25 Regulatory Approvals To the best Knowledge of GLOBAL and
CAPITOL there are no facts, events or conditions applicable to GLOBAL or CAPITOL
which will or reasonably could adversely affect the likelihood of securing the
regulators approvals or consents of any Governmental Entity to the Mergers and
transactions completed by this Agreement.
Section 3.26 Year 2000 Compliance All of GLOBAL's and CAPITOL's internal
systems and all products and services marked by either of them are fully Year
2000 Compliant. To be "Year 2000 compliant," a system or product or service must
at all times before, during and after January 1, 2000 accurately process and
handle data and time data (including, but not limited to calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first centuries,
in the years 1999 and 2000, including leap year calculations, to the extent that
other information technology used in combination with such internal systems and
such products properly exchange date/time with it. To the extent any such
internal systems and such products and services must perform as a system, such
internal systems and such products and services used in combination with other
such internal systems and such products and services, respectively, must
properly exchange date/time data with them in accordance with the foregoing
warranty. There are no pending, and neither GLOBAL or CAPITOL has any knowledge
of any threatened, claims against GLOBAL or CAPITOL relating to whether the
products and services of GLOBAL and CAPITOL are Year 2000 Compliant.
Section 3.27 Effective Date of Representations, Warranties, Covenants
and Agreements. Each representation, warranty, covenant and agreement of GLOBAL
and CAPITOL set forth in this Agreement shall be deemed to be made on and as of
the date hereof and as of the Effective Time.
ARTICLE 4. REPRESENTATIONS And WARRANTIES OF BANCORP
BANCORP and BANK represent and warrant to GLOBAL and CAPITOL that:
Section 4.1 Organization; Corporate Power; Etc. BANCORP is a California
corporation duly organized, validly existing and in good standing under the laws
of the State of California and have all requisite corporate power and authority
to own, lease and operate its respective properties and assets and to carry on
its respective business substantially as it is being conducted on the date of
this Agreement. BANCORP is a bank holding company registered under the BHCA.
Each of BANCORP's Subsidiaries has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business
substantially as it is being conducted on the date of this Agreement, except
where the failure to have such power or authority would not have a Material
Adverse Effect on BANCORP taken as a whole or the ability of BANCORP to
consummate the transactions contemplated by this Agreement. BANCORP has all
requisite corporate power and authority to enter into this Agreement and,
subject to obtaining all Requisite Regulatory Approvals, BANCORP will have the
requisite corporate power and authority to perform its respective obligations
hereunder with respect to the consummation of the transactions contemplated
hereby. BANCORP is the sole shareholder of BANK. BANK is a California
state-chartered banking authorized by the CDFI to conduct a general banking
business in California. BANK is not a member of the Federal Reserve System.
BANK's deposits are insured by the FDIC in the manner and to the full extent
<PAGE>29
provided by law. Neither the scope of business of BANCORP or any Subsidiary,
including BANK, nor the location of any of their respective properties, requires
that BANCORP or any of its respective Subsidiaries be licensed to conduct
business in any jurisdiction other than those jurisdictions in which they are
licensed or qualified to do business as a foreign corporation, where the failure
to be so licensed or qualified would, individually or in the aggregate, have a
Material Adverse Effect on BANCORP taken as a whole.
Section 4.2 Licenses and Permits. Except as disclosed on Schedule 4.2,
BANCORP and its Subsidiaries have all material licenses, certificates,
franchises, rights 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 not, individually or
in the aggregate, have a Material Adverse Effect on BANCORP taken as a whole, or
on the ability of BANCORP and/or BANK to consummate the transactions
contemplated by this Agreement. The properties, assets, operations and
businesses of BANCORP and those of its Subsidiaries, including BANK, are and
have been maintained and conducted, in all material respects, in compliance with
all applicable licenses, certificates, franchises, rights and permits.
Section 4.3 Subsidiaries. Other than as set forth on Schedule 4.3, there
is no corporation, partnership, joint venture or other entity in which BANCORP
owns, directly or indirectly (except as pledgee pursuant to loans or stock or
other interest held as the result of or in lieu of foreclosure pursuant to
pledge or other security arrangement) any equity or other voting interest or
position.
Section 4.4 Authorization of Agreement; No Conflicts.
4.4.1 The execution and delivery of this Agreement and the Merger
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the parts
of BANCORP and BANK. This Agreement has been duly executed and delivered by
BANCORP and BANK and constitutes a legal, valid and binding obligation of
BANCORP and BANK, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally and by general
equitable principles. The Merger Agreements, upon the receipt of all Requisite
Regulatory Approvals and the due execution and filing of such Merger Agreements
in accordance with the applicable provisions of the California Corporations
Code, will constitute a legal, valid and binding obligation of BANK and BANCORP,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors generally or by general equitable principles.
4.4.2 Except as discussed on Schedule 4.4, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby does not and will not conflict with, or result in any violation of or
default or loss of a material benefit under, any provision of the Articles of
Incorporation or Bylaws of BANCORP and BANK, or except for the necessity of
obtaining the Requisite Regulatory Approvals and successful completion of the
BANCORP Public Offering, any material mortgage, indenture, lease, agreement or
other material instrument, or any permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to BANCORP or BANK or any of their assets or properties or any of their
respective Subsidiaries, other than any such conflict, violation, default or
loss which (i) will not have a Material Adverse Effect on BANCORP and BANK taken
<PAGE>30
as a whole; or (ii) will be cured or waived prior to the Effective Time. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required in connection with the
execution and delivery of this Agreement by BANCORP and BANK or the performance
by BANCORP and BANK of their obligations hereunder, except for (a) filings
required in order to obtain Requisite Regulatory Approvals; (b) the filing of
the Form S-1 Registration Statement with the SEC relative to the BANCORP Public
Offering and the declaration of the effectiveness of the Form S-1 Registration
Statement by the SEC and any applicable state securities law regulatory
authorities; (c) the filing of the Form S-4 Registration Statement (including
the Proxy Statement/Prospectus constituting a part thereof) with the SEC
relating to the Mergers and the declaration of effectiveness of the Form S-4
Registration Statement by the SEC and any applicable state securities law
regulatory authorities; (d) the filing and approval of the Merger Agreements
with the Secretary of the State of California and the Commissioner; (e) any
approvals required to be obtained pursuant to the BHCA or the Federal Deposit
Insurance Act or any other required governmental approval for the execution and
delivery of this Agreement by BANCORP and BANK or the consummation of the
Mergers; (e) any consents, authorizations, approvals, filings or exemptions
required to be made or obtained under the securities or "blue sky" laws of
various jurisdictions in connection with the issuance of shares of BANCORP
Common Stock contemplated by this Agreement; and (f) as set forth in Schedule
4.4.
Section 4.5 Capital Structure of BANCORP. As of the Effective Time, the
authorized capital stock of BANCORP shall consist of 50,000,000 shares of
BANCORP Common Stock, no par value per share. On the date of this Agreement
4,532,831 shares of BANCORP Common Stock were outstanding, 414,778 shares of
BANCORP Common Stock were reserved for issuance pursuant to employee stock
option and 710,698 shares of BANCORP Common Stock issuable under former BANK
options (the "BANCORP Stock Plans"). All outstanding shares of BANCORP Common
Stock are validly issued, fully paid and nonassessable and do not possess any
preemptive rights and were not issued in violation of any preemptive rights or
any similar rights of any Person. The issuance of the shares of BANCORP Common
Stock proposed to be issued pursuant to this Agreement at the Effective Time
will have been duly authorized by all requisite corporate action of BANCORP, and
such shares, when issued as contemplated by this Agreement, will constitute duly
authorized, validly issued and shares of BANCORP Common Stock, and will not have
been issued in violation of any preemptive or similar rights of any Person. As
of the date of this Agreement, and except for this Agreement and the BANCORP
Stock Plans or as set forth in Schedule 4.5, BANCORP does not have outstanding
any options, warrants, calls, rights, commitments, securities or agreements of
any character to which BANCORP is a party or by which it is bound obligating
BANCORP to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of BANCORP or obligating BANCORP to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
Section 4.6 BANCORP Filings.
4.6.1 Since January 1, 1996, BANCORP and its Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with (a) the Federal Reserve Board or any Federal Reserve Bank; (b) the
FDIC; (c) the SEC; and (d) any other applicable federal, state or local
governmental or regulatory authority. All such reports, registrations and
filings including the BANCORP Financial Statements are collectively referred to
as the "BANCORP Filings". Except to the extent prohibited by law, copies of the
<PAGE>31
BANCORP Filings have been made available to GLOBAL. As of their respective
filing or mailing dates, each of the past BANCORP Filings complied in all
material respects with all of the statutes, rules and regulations enforced or
promulgated by the governmental or regulatory authority with which it was filed
(or was amended so as to be so promptly following discovery of any such
noncompliance) and none contained any untrue statement of a material fact or
omitted 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.
4.6.2 BANCORP, or BANK, as the case may be, have timely filed
each report, schedule, and amendments to each of the foregoing since January 1,
1996 that BANCORP, or BANK, was required to file with the Federal Reserve Bank,
FDIC or CDFI, all of which have been made available to GLOBAL. The financial
statements of BANCORP included in the BANCORP Filings comply in all material
respects with applicable accounting requirements and have been prepared in
accordance with GAAP, or applicable regulatory accounting principles, applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto, and fairly present (subject, in the case of the unaudited
statements, to recurring adjustments normal in nature and amount) the
consolidated financial position of BANCORP as of the dates thereof and the
consolidated results of its operations and cash flows or changes in financial
position for the periods then ended.
Section 4.7 Accuracy of Information Supplied.
4.7.1 No representation or warranty of BANCORP contained herein
or any statement, schedule, exhibit or certificate given or to be given by or on
behalf of BANCORP or any of its Subsidiaries, including BANK, to GLOBAL in
connection herewith and none of the information supplied or to be supplied by
BANCORP or any of its Subsidiaries, including BANK, to GLOBAL hereunder contains
or will contain any untrue statement of 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 are made, not
misleading.
4.7.2 None of the information supplied or to be supplied by
BANCORP or relating to BANCORP and BANK which is included or incorporated by
reference in (i) the Registration Statements to be filed with the SEC by BANCORP
in connection with the BANCORP Public Offering of common stock by BANCORP and
the issuance of shares of BANCORP Common Stock in the Mergers will, at the time
the Registration Statements become effective under the Securities Act, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii) the
Proxy Statement/Prospectus and any amendment or supplement thereto will, at all
times from the date of mailing to shareholders of GLOBAL through the date of the
meeting of shareholders of GLOBAL to be held in connection with the Mergers,
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; and (iii)
the applications and forms to be filed with securities or "blue sky"
authorities, self regulatory authorities, or any Governmental Entity in
connection with the Mergers, the issuance of any shares of BANCORP Common Stock
in connection with the Mergers, or any Requisite Regulatory Approvals in
connection with the Mergers will, at the time filed or at the time they become
effective, contain any untrue statement of a material fact or omit to state any
<PAGE>32
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.
4.7.3 BANCORP has or will deliver to GLOBAL copies of: (a) the
audited balance sheets of BANCORP and its Subsidiaries as of December 31, 1998,
1997 and 1996 and the related statements of income, changes in shareholders'
equity and cash flows for the years then ended and the related notes to such
financial statements, all as audited by Richardson & Company, independent public
accountants (the "BANCORP Financial Statements"), and BANCORP will hereafter
until the Closing Date deliver to GLOBAL copies of additional financial
statements of BANCORP as provided in Section 5.1.1(iii). The BANCORP Financial
Statements have been prepared (and all of said additional financial statements
will be prepared) in accordance with GAAP, or applicable regulatory accounting
principles, applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) consistently followed throughout the
periods covered by such statements, and present (and, when prepared, will
present) fairly the financial position of BANCORP and its Subsidiaries as of the
respective dates indicated and the results of operations, cash flows and changes
in shareholders' equity at the respective dates and for the respective periods
covered by such financial statements (subject, in the case of the unaudited
statements, to recurring adjustments normal in nature and amount). In addition,
BANCORP has delivered to GLOBAL copies of all management or other letters
delivered to BANCORP by its independent accountants in connection with any of
the BANCORP Financial Statements or by such accountants or any consultant
regarding the internal controls or internal compliance procedures and systems of
BANCORP issued at any time since January 1, 1995, and will make available for
inspection by GLOBAL or its representatives, at such times and places as GLOBAL
may reasonably request, reports and working papers produced or developed by such
accountants or consultants.
4.7.4 Notwithstanding anything set forth elsewhere in the
Agreement no due diligence examination of BANCORP or BANK conducted by or on
behalf of GLOBAL and CAPITOL either prior or subsequent to execution of this
Agreement, shall have any effect whatsoever on the representations of BANCORP or
BANK in this Section 4 or in any other section of this Agreement.
Section 4.8 Compliance With Applicable Laws. Except as disclosed on
Schedule 4.8, , to the best of BANCORP's Knowledge, the respective businesses of
BANCORP and its Subsidiaries are not being conducted in violation of any law,
ordinance or regulation, except for violations which individually or in the
aggregate would not have a Material Adverse Effect on BANCORP and its
Subsidiaries, taken as a whole. No investigation or review by any Governmental
Entity with respect to BANCORP is pending or, to the Knowledge of BANCORP
threatened, nor has any Governmental Entity indicated to BANCORP an intention to
conduct the same, other than those the outcome of which, as far as can be
reasonably foreseen, will not have a Material Adverse Effect on BANCORP and its
Subsidiaries, taken as a whole.
Section 4.9 Performance of Obligations. BANCORP and its Subsidiaries
have performed all material obligations required to be performed by them to date
and none of BANCORP or any of its Subsidiaries is in default under or in breach
of any term or provision of any covenant, contract, lease, indenture or any
other agreement, written or oral, to which any 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 a default or breach, where
such default or breach or failure to perform would have a Material Adverse
<PAGE>33
Effect on BANCORP and its Subsidiaries, taken as a whole. To BANCORP's
Knowledge, and except as disclosed on Schedule 4.9, no party with whom BANCORP
or any of its Subsidiaries has an agreement that is of material importance to
the business of BANCORP and its Subsidiaries, taken as a whole, is in default
thereunder.
Section 4.10 Regulatory Approval Neither BANCORP nor BANK is subject to
any regulatory enforcement agreement. To the best knowledge of BANCORP there is
no fact, event or condition applicable to BANCORP or BANK which will, or
reasonably could be expected to, adversely affect the likelihood of securing the
required approval or consent of any Governmental Entity to the Mergers and
transaction contemplated by this Agreement.
Section 4.11 Capital Offering To the best knowledge of BANCORP there is
no fact, event or condition applicable to BANCORP or BANK which will, or
reasonably could be expected to, adversely affect BANCORP's ability to raise the
capital, through the BANCORP Public Offering, necessary to complete the Mergers
and the transaction contemplated by this Agreement; provided, however, that
BANCORP makes and shall be deemed to have made no representation and warranty
concerning the effect stock market conditions or the market for financial
institution securities generally, or the market for BANCORP's securities in
particular, may have on BANCORP's ability to raise capital, and this
representation and warranty shall not be deemed to have been breached by BANCORP
if stock market conditions or the market for financial institution securities
generally, or the market for BANCORP's securities in particular, are such that
BANCORP is unable to raise additional equity capital in a sufficient amount or,
in BANCORP's sole judgment, on acceptable terms.
Section 4.12 Undisclosed Liabilities. Except as disclosed on Schedule
4.12, none of BANCORP or BANK has any liabilities or obligations, either
accrued, contingent or otherwise, that are material to BANCORP or BANK and that
have not been: (a) reflected or disclosed in the BANCORP Financial Statements;
or (b) incurred subsequent to December 31, 1998 in the ordinary course of
business. BANCORP or BANK has no Knowledge of any basis for the assertion
against BANCORP or BANK, of any liability, obligation or claim (including
without limitation that of any Governmental Entity) that will have or cause, or
could reasonably be expected to have or cause, a Material Adverse Effect on
BANCORP or BANK that is not fully and fairly reflected and disclosed in the
BANCORP Financial Statements or on Schedule 4.12.
Section 4.13 Litigation Except as set forth in Schedule 4.13, there is
no suit, action or proceeding or investigation pending, or to the Knowledge of
BANCORP and BANK threatened against or affecting BANCORP or BANK which, if
adversely determined, would have a Material Adverse Effect on BANCORP or BANK;
nor is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against BANCORP or BANK that has, or which,
insofar as reasonably can be foreseen, in the future would have, any such
Material Adverse Effect.
Section 4.14 Taxes.
4.14.1 Filing of Returns. Except as set forth on Schedule
4.14.1(a), BANCORP and its Subsidiaries have duly prepared and filed federal,
state, and local Returns (for Tax or informational purposes) which were required
to be filed by or in respect of BANCORP and its Subsidiaries, or any of their
<PAGE>34
properties, income and/or operations on or prior to the Closing Date. As of the
time they were filed, the foregoing Returns accurately reflected the material
facts regarding the income, business, asset, operations, activities, status, and
any other information required to be shown thereon. Except as set forth in
Schedule 4.14.1(b), no extension of time within which BANCORP or any of its
Subsidiaries may file any Return is currently in force.
4.14.2 Payment of Taxes. Except as disclosed on Schedule 4.14.2
with respect to all amounts in respect of Taxes imposed on BANCORP or any
Subsidiary or for which BANCORP or any Subsidiary is or could be liable, whether
to taxing authorities (as, for example, under law) or to other Persons (as, for
example, under Tax allocation agreements), with respect to all taxable periods
or portions of periods ending on or before the Closing Date, all applicable tax
laws and agreements have been or will be fully complied with in all material
respects, and all such amounts required to be paid by or on behalf of BANCORP or
any Subsidiary to taxing authorities or others on or before the date hereof have
been paid.
Section 4.15 Year 2000 Compliance All of BANCORP's and BANK's internal
systems and all products and services marked by either of them are fully Year
2000 Compliant. To be "Year 2000 compliant," a system or product or service must
at all times before, during and after January 1, 2000 accurately process and
handle data and time data (including, but not limited to calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first centuries,
in the years 1999 and 2000, including leap year calculations, to the extent that
other information technology used in combination with such internal systems and
such products properly exchange date/time with it. To the extent any such
internal systems and such products and services must perform as a system, such
internal systems and such products and services used in combination with other
such internal systems and such products and services, respectively, must
properly exchange date/time data with them in accordance with the foregoing
warranty. There are no pending, and neither BANCORP or BANK has any knowledge of
any threatened, claims against BANCORP or BANK relating to whether the products
and services of BANCORP and BANK are Year 2000 Compliant.
Section 4.16 Effective Date of Representations, Warranties, Covenants
and Agreements. Each representation, warranty, covenant and agreement of BANCORP
and BANK set forth in this Agreement shall be deemed to be made on and as of the
date hereof and as of the Effective Time.
ARTICLE 5. COVENANTS
Section 5.1 Access to Information, Due Diligence, etc.
5.1.1 Upon reasonable notice, each party shall permit the other
party and their accountants, counsel and other representatives reasonable access
to their officers, employees, properties, books, contracts, commitments and
records and from the date hereof through the Effective Time, and shall furnish
or provide access to each other as soon as practicable, (i) a copy of each of
GLOBAL's Filings or BANCORP's Filings filed subsequent to the date of this
Agreement promptly after such document has been filed with the appropriate
Governmental Entity, provided, however, that copies of any Returns relating to
Taxes of any of GLOBAL or any of its Subsidiaries shall be furnished to BANCORP
at least 15 Business Days prior to the proposed date of filing thereof and shall
not be filed without the prior approval of BANCORP, which approval shall not be
<PAGE>35
unreasonably withheld or delayed; (ii) unless otherwise prohibited by law, a
copy of each report, schedule and other documents filed or received by it during
such period with any Regulatory Authority or the Internal Revenue Service or
other taxing authority, as to documents other than related to employees or
customers and other than those distributed to banks generally; (iii) as promptly
as practicable following the end of each calendar month after the date hereof, a
balance sheet of GLOBAL or BANCORP as of the end of such month; and (iv) all
other information concerning its business, properties, assets, financial
condition, results of operations, liabilities, personnel and otherwise as GLOBAL
or BANCORP may reasonably request. In furtherance of the foregoing BANCORP or
BANK shall have the right to examine CAPITOL's loan portfolio on a monthly
basis.
5.1.2 Until the Effective Time, a representative of BANCORP shall
be entitled and shall be invited to attend meetings of the Board of Directors of
GLOBAL and CAPITOL, and at least five (5) days' prior written notice of the
dates, times and places of such meetings shall be given to BANCORP except that
in the case of special meetings BANCORP shall receive the same number of days'
prior notice as GLOBAL's or CAPITOL's directors receive for such meetings;
provided, however, that such representative shall excuse himself or herself from
any portion of any such meetings that (i) relate to approval of, or the exercise
of any rights under, this Agreement by GLOBAL or CAPITOL, and (ii) involve
discussions between such Board of Directors or such Loan Committee and legal
counsel for GLOBAL or CAPITOL that are entitled to be protected from disclosure
under an attorney-client privilege which would be lost due to the presence of
such representative of BANCORP.
5.1.3 BANCORP, BANK, GLOBAL and CAPITOL each agrees to keep
confidential and not divulge to any other party or Person (other than to the
employees, attorneys, accountants and consultants of each who have a need to
receive such information and other than as may be required by law) any
information received from the other, unless and until such documents and other
information otherwise becomes publicly available or unless the disclosure of
such information is required by this Agreement or authorized by each party. In
the event of termination of this Agreement for any reason, the parties shall
promptly return, or at the election of the other party destroy, all nonpublic
documents obtained from the other and any copies or notes of such documents
(except as otherwise required by law) and, upon the request of the other party,
confirm such destruction to the other in writing.
Section 5.2 Shareholder Approval.
5.2.1 GLOBAL shall promptly call a meeting of its shareholders to
be held at the earliest practicable date after the date on which the
Registration Statements are filed with the SEC for the purpose of approving this
Agreement and authorizing the Merger Agreements and the Mergers. GLOBAL's Board
of Directors will recommend to GLOBAL shareholders, approval of this Agreement,
the Merger Agreements and the Mergers; provided, however, that the GLOBAL Board
of Directors may withdraw its recommendation if such Board of Directors believes
in good faith (based on a written opinion of a financial advisor that is
experienced in evaluating the fairness of Acquisition Proposals) that a Superior
Proposal (defined below) has been made and shall have determined in good faith,
after consultation with and based on written advice of its outside legal
counsel, that the withdrawal of such recommendation is necessary for such Board
of Directors to comply with its fiduciary duties under applicable law.
<PAGE>36
5.2.2 If the merger of GLOBAL with and into BANK is approved by
vote of the shareholders of GLOBAL, then, within ten (10) days thereafter GLOBAL
shall send a Dissenting Shareholder Notice to each recordholder of any
Dissenting Shares.
5.2.3 Prior to the Effective Time of the Merger, GLOBAL, as the
sole shareholder of CAPITOL, and BANCORP as sole shareholder of BANK, shall take
all action necessary for the consummation of the Mergers.
Section 5.3 Taking of Necessary Action.
5.3.1 Subject to the terms and conditions of this Agreement, each
of the parties hereto agrees, subject to applicable laws and the fiduciary
duties of GLOBAL's, CAPITOL's, BANCORP's or BANK's Boards of Directors, as
advised in writing by their respective counsel, to use all reasonable efforts
promptly to take or cause to be taken all action and promptly to do or cause to
be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Merger Agreements, including, without limitation, the
delivery of any certificate or other document reasonably requested by counsel to
a party to this Agreement. Without limiting the foregoing, BANCORP, BANK, GLOBAL
and CAPITOL will use their reasonable efforts to obtain all consents of third
parties and Government Entities necessary or, in the reasonable opinion of
BANCORP or GLOBAL advisable for the consummation of the transactions
contemplated by this Agreement. Without limiting the foregoing, BANCORP shall
cause BANK to take all actions necessary to execute and file the Merger
Agreements and to effect all transactions contemplated of BANCORP by this
Agreement and GLOBAL and CAPITOL shall take all actions necessary to effect all
transactions contemplated by this Agreement and the Merger Agreements. In case
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the Merger Agreements, or
to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of GLOBAL or CAPITOL, the proper
officers or directors of BANCORP, BANK, GLOBAL or CAPITOL, as the case may be,
shall take all such necessary action.
5.3.2 The obligations of GLOBAL and CAPITOL contained in Section
6.2.5 of this Agreement shall continue to be in full force and effect despite
any Default thereof by reason of receipt of a Superior Proposal (defined below)
and any Default thereof by the defaulting party shall entitle BANCORP to such
legal or equitable remedies as may be provided in this Agreement or by law
notwithstanding that any action or inaction of the Board of Directors or
officers of GLOBAL or CAPITOL which is required to enable such party to fulfill
such obligations may be excused based on the continuing fiduciary obligations of
GLOBAL's Board of Directors and officers to its shareholders. Notwithstanding
the foregoing, however, in the event of a termination of this Agreement by
BANCORP and the actual payment of the liquidated damages as provided for in
Section 8.5 of this Agreement, neither GLOBAL or CAPITOL or their respective
directors or officers shall have any obligations or liabilities of any kind
under this Agreement by reason of any such Default, and BANCORP shall have no
further obligations of any kind under this Agreement.
5.3.3 GLOBAL shall use its best efforts to cause each director,
executive officer and other Person who is an "Affiliate" of GLOBAL (for purposes
of Rule 145 under the Securities Act) to deliver to BANCORP, on the date of this
<PAGE>37
Agreement, a written agreement in the form attached hereto as Exhibit 5.3 (the
"Affiliate Agreements") which shall include a 180 day lockup provision.
Section 5.4 Registration Statements and Applications.
5.4.1 BANCORP and GLOBAL will cooperate and jointly prepare and
file as promptly as practicable the Registration Statements, the statements,
applications, correspondence or forms to be filed with appropriate State
securities law regulatory authorities, and the statements, correspondence or
applications to be filed to obtain the Requisite Regulatory Approvals to
consummate the transactions contemplated by this Agreement. Each of BANCORP and
GLOBAL shall use all reasonable efforts to have the Registration Statements
declared effective under the Securities Act as promptly as practicable after
such filing, and thereafter mail the Proxy Statement/Prospectus to the
shareholders of GLOBAL. Each party will furnish all financial or other
information, including accountant comfort letters relating thereto,
certificates, consents and opinions of counsel concerning it and its
Subsidiaries received by such party.
5.4.2 Each party shall provide to the other at the request of the
other party: (i) immediately prior to the filing thereof, copies of all material
statements, applications, correspondence or forms to be filed with state
securities law regulatory authorities, the SEC and other appropriate regulatory
authorities to obtain the Requisite Regulatory Approvals to consummate the
transactions contemplated by this Agreement; and (ii) promptly after delivery
to, or receipt from, such regulatory authorities all written communications,
letters, reports or other documents relating to the transactions contemplated by
this Agreement.
Section 5.5 Expenses.
5.5.1 Subject to the provisions of this Agreement relating to the
payment by HUMBOLDT of certain of GLOBAL's expenses incurred in the preparation
of the Proxy Statement/Prospectus and BANCORP Public Offering, whether or not
the Mergers are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring the same.
5.5.2 GLOBAL and CAPITOL shall use their best efforts to ensure
that their attorneys, accountants, financial advisors, investment bankers and
other consultants engaged by it in connection with the transaction contemplated
by this Agreement submit full and final bills on or before the Determination
Date and that all such expenses are paid or properly accrued prior to the
Determination Date.
Section 5.6 Notification of Certain Events.
5.6.1 GLOBAL shall provide to BANCORP, as soon as practicable,
written notice (sent via facsimile and overnight mail or courier) of the
occurrence or failure to occur of any of the events, circumstances or conditions
that are the subject of Sections 6.1 and 6.2, which notice shall provide
reasonable detail as to the subject matter thereof.
5.6.2 BANCORP shall provide to GLOBAL, as soon as practicable,
written notice (sent via facsimile and overnight mail or courier) of the
occurrence or failure to occur of any of the events, circumstances or conditions
<PAGE>38
that are the subject of Section 6.3 and 6.4, which notice shall provide
reasonable detail as to the subject matter thereof.
5.6.3 Each party shall promptly advise the others in writing of
any change or event which could reasonably be expected to have a Material
Adverse Effect on the business, properties, assets, financial condition, results
of operations, liabilities or personnel of such party or on its ability to
consummate the transactions contemplated by this Agreement or the Merger
Agreements.
5.6.4 GLOBAL and BANCORP shall immediately notify the other in
writing in the event that such party becomes aware that the Registration
Statements at any time contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in order to
make the statement therein, in light of the circumstances under which they were
made, not misleading or that the Registration Statements otherwise are required
to be amended and supplemented, which notice shall specify, in reasonable
detail, the circumstances thereof. BANCORP shall promptly amend and supplement
such materials and disseminate the new or modified information so as to fully
comply with the Securities Act. If the amendment or supplement so required
relates to information concerning GLOBAL, the out-of-pocket costs and expenses
of preparing, filing and disseminating such amendment or supplement shall be
borne by GLOBAL.
Section 5.7 Closing Schedules. Subject to the provisions of Section
5.10, GLOBAL and CAPITOL has delivered to BANCORP on or before the date of this
Agreement all of the Schedules to this Agreement which GLOBAL and CAPITOL are
required to deliver to BANCORP hereunder (the "GLOBAL Schedules"). BANCORP has
delivered to GLOBAL on or before the date of this Agreement all of the Schedules
to this Agreement which BANCORP is required to deliver to GLOBAL hereunder ( the
"BANCORP Schedules"). Immediately prior to the Closing Date, GLOBAL and CAPITOL
shall have prepared updates of the GLOBAL Schedules provided for in this
Agreement and shall deliver to BANCORP revised schedules containing the updated
information (or a certificate signed by GLOBAL's or CAPITOL's Chief Executive
Officer stating that there have been no changes on the applicable schedules);
and BANCORP shall have prepared updates of the BANCORP Schedules provided for in
this Agreement and shall deliver to GLOBAL revised Schedules containing updated
information (or a certificate signed by BANCORP's Chief Executive Officer
stating that there has been no change on the applicable schedules.) Such updated
schedules shall sometimes be referred to collectively, as the "Closing
Schedules." The Closing Schedules shall be dated as of the day prior to the
Closing Date and shall contain information as of the day prior to the Closing
Date or as of such earlier date as is practicable under the circumstances. In
the event the Closing Schedules disclose an event, occurrence or circumstance
that has had or could reasonably be expected to have a Material Adverse Effect
on GLOBAL, on the one hand, or on BANCORP, on the other hand, or on consummation
of the transactions contemplated by this Agreement, that was not disclosed in
the previously delivered Schedules hereto, the party delivering such Closing
Schedules (the "Affected Party") shall so notify the other party in the letter
of transmittal for such Closing Schedules, the Closing Date shall be delayed for
seven (7) Business Days and such other party shall be entitled to terminate this
Agreement within five (5) Business Days after receiving such Closing Schedules
that disclose such event, occurrence or circumstance. In the event of any such
termination, the terminating party shall have no liability for such termination.
The Affected Party shall have no liability to the terminating party in such an
event unless (i) as a result of the existence of such event, occurrence or
circumstance so disclosed in the Closing Schedules any of the representations or
warranties of the Affected Party contained in this Agreement are found to have
<PAGE>39
been untrue in any material respect as of the date of this Agreement, or (ii)
the event, occurrence or circumstance could have been prevented in the exercise
of reasonable diligence by any officers or directors of the Affected Party, in
either of which cases the Affected Party shall be liable to the terminating
party for Liquidated Damages as provided in Section 8.5 hereof.
Section 5.8 Additional Accruals/Appraisals. Prior to the Closing Date,
but after the Determination Date, at BANCORP's request, GLOBAL or CAPITOL shall,
consistent with GAAP and applicable banking regulations, establish such
additional accruals and reserves immediately prior to the Closing Date as may be
necessary to conform GLOBAL's or CAPITOL's accounting and credit and OREO loss
reserve practices and methods to those of BANCORP or BANK, provided, however,
that no accrual or reserve made by GLOBAL or CAPITOL pursuant to this Section
5.8, or any litigation or regulatory proceeding arising out of any such accrual
or reserve, or any other effect on GLOBAL or CAPITOL resulting from GLOBAL's or
CAPITOL's compliance with this Section 5.8, shall constitute or be deemed to be
a breach, violation of or failure to satisfy any representation, warranty,
covenant, condition or other provision of this Agreement or otherwise be
considered in determining whether any such breach, violation or failure to
satisfy shall have occurred. Additionally, no such accrual or reserve made by
GLOBAL or CAPITOL pursuant to this Section 5.8 shall be used by the parties in
the calculation of the Stock Per Share Merger Price.
Section 5.9 NASDAQ BANCORP will take all appropriate action to list
BANCORP Common Stock on the NASDAQ National Market System as soon as practicable
after the Effective Time.
Section 5.10 Updated Schedules and Exhibits. The parties acknowledge
that the Schedules and Exhibits attached to this Agreement are incomplete as of
the date hereof. The parties shall update and complete all Schedules and
Exhibits required by this Agreement and shall deliver to the other parties such
updated and completed Schedules and Exhibits within 30 days of the execution of
this Agreement.
ARTICLE 6. CONDUCT OF BUSINESS
Section 6.1 Affirmative Conduct of GLOBAL and CAPITOL . During the
period from the date of execution of this Agreement through the Effective Time,
GLOBAL and CAPITOL shall carry on their business, and in the ordinary course in
substantially the manner in which heretofore conducted, subject to changes in
law applicable to all California state-chartered industrial loan corporations or
all nonmember financial entities insured by the FDIC and directives from
regulators, and use all commercially reasonable efforts to preserve intact its
business organization, keep available the services of its officers and
employees, (other than terminations in the ordinary course of business) and
preserve its relationships with customers, depositors, suppliers and others
having business dealings with it; and, to these ends, shall fulfill each of the
following:
6.1.1 Use its commercially reasonable efforts, or cooperate with
others, to expeditiously bring about the satisfaction of the conditions
specified in Article 7 hereof;
6.1.2 Advise BANCORP promptly in writing of any change that would
have a Material Adverse Effect on its capital structure, financial condition,
assets, results of operations, business or prospects or of any matter which
would make the representations and warranties set forth in Article 3 hereof not
<PAGE>40
true and correct in any material respect as of the effective date of the
Registration Statement and at the Effective Time;
6.1.3 Keep in full force and effect all of its existing material
permits and licenses and those of its Subsidiaries;
6.1.4 Use its commercially reasonable efforts to maintain
insurance or bonding coverage on all material properties for which it is
responsible and on its business operations, and carry not less than the same
coverage for fidelity, public liability, personal injury, property damage and
other risks equal to that which is in effect as of the date of this Agreement;
and notify BANCORP in writing promptly of any facts or circumstances which could
affect its ability, or that of any of its Subsidiaries, to maintain such
insurance or bonding coverage;
6.1.5 Perform its contractual obligations and not breach or come
into default on any of such obligations, and not amend, modify, or, except as
they may be terminated in accordance with their terms, terminate any material
contract, agreement, understanding, commitment, or offer, whether written or
oral, (collectively referred to as an "Understanding") or materially default in
the performance of any of its obligations under any Understanding where such
default would have a Material Adverse Effect on GLOBAL or CAPITOL;
6.1.6 Duly observe and conform to all legal requirements
applicable to its business, except for any failure to so observe and conform
that would not, individually or in the aggregate, and, in the future will not,
have a Material Adverse Effect on GLOBAL or CAPITOL;
6.1.7 Duly and timely file as and when due all reports and
Returns required to be filed with any Governmental Entity;
6.1.8 Maintain its assets and properties in good condition and
repair, normal wear and tear excepted;
6.1.9 Promptly advise BANCORP in writing of any event or any
other transaction within the Knowledge of GLOBAL and CAPITOL, whereby any Person
or related group of Persons acquires, after the date of this Agreement, directly
or indirectly, record or beneficial ownership (as defined in Rule 13d-3
promulgated by the SEC pursuant to the Exchange Act) or control of 5% or more of
the outstanding shares of GLOBAL Common Stock either prior to or after the
record date fixed for the GLOBAL shareholders' meeting or any adjourned meeting
thereof to approve the transactions contemplated herein;
6.1.10 (a) Prior to the Determination Date maintain a reserve for
loan and lease losses ("Loan Loss Reserve") at a level which is adequate to
provide for all known and reasonably expected losses on loans, leases and other
extensions of credit outstanding and other inherent risks in GLOBAL's portfolio
of loans and leases, in accordance with GAAP and applicable regulatory
accounting principles and banking laws and regulations but in no exception shall
such account be less than two million dollars ($2,000,000);
(b) Charge off all loans, receivables and other assets,
or portions thereof, deemed uncollectible in accordance with GAAP, regulatory
accounting principles, and applicable law or regulation, or which have been
<PAGE>41
classified as "loss" or as directed by any regulatory authority, unless such
classification or direction has been disregarded in good faith by GLOBAL and
CAPITOL, GLOBAL and CAPITOL has submitted in writing to such regulatory
authority the basis upon which it has so disregarded such classification or
direction, and such regulatory authority retracts its direction requiring such
charge-off;
6.1.11 Furnish to BANCORP, as soon as practicable, and in any
event within fifteen days after it is prepared: (i) a copy of any report
submitted to the Board of Directors of GLOBAL and CAPITOL and access to the
working papers related thereto, provided, however, that GLOBAL and CAPITOL need
not furnish BANCORP any materials relating to deliberations of GLOBAL's and
CAPITOL's Board of Directors with respect to its approval of this Agreement,
communications of GLOBAL's and CAPITOL's legal counsel with the Board of
Directors or officers of GLOBAL and CAPITOL regarding GLOBAL's and CAPITOL's
rights against or obligations to BANCORP or its Subsidiaries under this
Agreement, or books, records and documents covered by the attorney-client
privilege or which are attorneys' work product; (ii) copies of all material
reports, renewals, filings, certificates, statements, correspondence and other
documents specific to GLOBAL and CAPITOL or filed with or received from any
Federal Reserve Bank, the FDIC, the Commissioner or any Governmental Entity;
(iii) monthly unaudited balance sheets, statements of income and changes in
shareholders' equity for GLOBAL and CAPITOL and its Subsidiaries and quarterly
unaudited balance sheets, statements of income and changes in shareholders'
equity for GLOBAL and CAPITOL, in each case prepared on a basis consistent with
past practice; and (iv) such other reports as BANCORP may reasonably request
(which are otherwise deliverable under this Section 6.1.11) relating to GLOBAL
and CAPITOL. Each of the financial statements of GLOBAL and CAPITOL delivered
pursuant to this Section 6.1.11 shall be accompanied by a certificate of the
Chief Financial Officer of GLOBAL and CAPITOL to the effect that such financial
statements fairly present the financial information presented therein of GLOBAL
and CAPITOL, for the periods covered, subject to recurring adjustments normal in
nature and amount, necessary for a fair presentation and are prepared on a basis
consistent with past practice;
6.1.12 GLOBAL and CAPITOL agree that through the Effective Time,
as of their respect dates, (i) each GLOBAL Filing will be true and complete in
all material respects; and (ii) each GLOBAL Filing will comply in all material
respects with all of the 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 will be made, not misleading. Any financial
statement contained in any of such GLOBAL Filings that is intended to present
the financial position of GLOBAL and CAPITOL during the periods involved to
which it relates will fairly present in all material respects the financial
position of GLOBAL and CAPITOL and will be prepared in accordance with GAAP or
consistent with applicable regulatory accounting principles and banking law and
banking regulations, except as stated therein;
6.1.13 Maintain reserves for contingent liabilities in accordance
with GAAP or applicable regulatory accounting principles, and consistent with
past practices;
6.1.14 Promptly notify BANCORP of the filing, or threatened
filing, of any litigation, or the filing or threatened filing of any government
or regulatory action, including an investigation or notice of investigation, or
<PAGE>42
similar proceeding or notice of any material claims against GLOBAL and CAPITOL
or any of their assets;
6.1.15 Inform BANCORP of the amounts and categories of any loans,
leases or other extensions of credit, or other assets, that have been classified
by any bank regulatory authority or by any unit of GLOBAL and CAPITOL as
"Specially Mentioned," "Renegotiated," "Substandard," "Doubtful," "Loss" or any
comparable classification ("Classified Assets"). GLOBAL and CAPITOL will furnish
to BANCORP, as soon as practicable, and in any event within fifteen days after
the end of each calendar month, schedules including the following: (i)
Classified Assets by type (including each credit or other asset in an amount
equal to or greater than $10,000), and its classification category; (ii)
nonaccrual credits by type (including each credit in an amount equal to or
greater than $10,000); (iii) renegotiated loans by type (loans on which interest
has been renegotiated to lower than market rates because of the financial
condition of the borrowers); (iv) delinquent credits by type (including each
delinquent credit in an amount equal to or greater than $10,000), including an
aging into 30-89 and 90+ day categories; (v) loans or leases or other assets
charged off, in whole or in part, during the previous month by type (including
each such loan or lease or other asset in an amount equal to or greater than
$10,000); and (vi) OREO or assets owned stating with respect to each its type;
6.1.16 Furnish to BANCORP, upon BANCORP's request, schedules with
respect to the following: (i) participating loans and leases, stating, with
respect to each, whether it is purchased or sold and the loan or lease type;
(ii) loans or leases (including any commitments) by GLOBAL and CAPITOL to any
director or officer (at or above the Vice President level) of GLOBAL or any of
its Subsidiaries, or to any Person holding 5% or more of the capital stock of
GLOBAL, including, with respect to each such loan or lease, the identity and, to
the best Knowledge of GLOBAL and CAPITOL, the relation of the borrower to GLOBAL
and CAPITOL, the loan or lease type and the outstanding and undrawn amounts; and
(iii) standby letters of credit, by type, (including each letter of credit in a
face amount equal to or greater than $10,000); and
6.1.17 Make available to BANCORP copies of each credit
authorization package, consisting of all applications for and financial
information regarding loans, renewals of loans or other extensions of credit of
$25,000 or more (on a noncumulative basis) for secured loans or secured
extensions of credit and $10,000 in the case of unsecured loans or unsecured
extensions of credit, which are approved by GLOBAL and CAPITOL after the date of
this Agreement, within ten Business Days of preparation of such packages.
Section 6.2 Negative Covenants of GLOBAL and CAPITOL. During the period
from the date of execution of this Agreement through the Effective Time, GLOBAL
and CAPITOL agree that without BANCORP's prior written consent, they shall not:
6.2.1 (a) Declare or pay any dividend on, other than regular cash
dividends consistent with past practices, or make any other distribution in
respect of, any of its capital stock; (b) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(c) repurchase or otherwise acquire any shares of its capital stock;
<PAGE>43
6.2.2 Take any action that would or might result in any of the
representations and warranties of GLOBAL and CAPITOL set forth in the Agreement
becoming untrue in any material respect or any of the conditions to the Merger
set forth in Article 7 not being satisfied, except to the extent such actions
are required to be undertaken by applicable law, regulation or at the direction
of any Regulatory Authority;
6.2.3 Issue, deliver, sell, or grant, or authorize the issuance,
delivery, sale or grant of, or purchase, any shares of the capital stock of
GLOBAL and CAPITOL or any securities convertible or exercisable into or
exchangeable for such capital stock, or any rights, warrants or options, except
for the exercise of existing stock options under existing stock option plans or
enter into any agreements to do any of the foregoing;
6.2.4 Amend its Articles of Incorporation or Bylaws, except as
required by applicable law or by the terms of this Agreement;
6.2.5 Authorize or knowingly permit any of its representatives,
directly or indirectly, to solicit or encourage any Acquisition Proposal (as
hereinafter defined) or participate in any discussions or negotiations with, or
provide any nonpublic information to, any Person or group of persons (other than
BANCORP, and its representatives) concerning any such solicited Acquisition
Proposal. GLOBAL and CAPITOL shall notify BANCORP immediately if any inquiry
regarding an Acquisition Proposal is received by GLOBAL and CAPITOL, including
the terms thereof. For purposes of this Section 6.2.5, "Acquisition Proposal"
shall mean any (a) proposal pursuant to which any Person other than BANCORP
would acquire or participate in a merger or other business combination or
reorganization involving GLOBAL and CAPITOL; (b) proposal by which any Person or
group, other than BANCORP, would acquire the right to vote ten percent (10%) or
more of the capital stock of GLOBAL entitled to vote for the election of
directors; (c) acquisition of the assets of GLOBAL and CAPITOL other than in the
ordinary course of business; or (d) acquisition in excess of ten percent (10%)
of the outstanding capital stock of GLOBAL, other than as contemplated by this
Agreement. Notwithstanding the foregoing, nothing contained in this Agreement
shall prevent GLOBAL and CAPITOL or GLOBAL's and CAPITOL's Board of Directors
from (i) furnishing nonpublic information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity, or recommending an
unsolicited bona fide written Acquisition Proposal to the shareholders of
GLOBAL, if and only to the extent that (A) the Board of Directors of GLOBAL and
CAPITOL has determined and believes in good faith (after consultation with and
the concurrence of its financial advisor) that such Acquisition Proposal would,
if consummated, result in a transaction materially more favorable, from a
financial point of view, to GLOBAL's shareholders than the transaction
contemplated by this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as a "Superior Proposal") and GLOBAL's and
CAPITOL's Board of Directors have determined in good faith, after consultation
with and based on written advice from its outside legal counsel, that such
action is necessary for GLOBAL and CAPITOL to comply with its fiduciary duties
to shareholders under applicable law, and (B) prior to furnishing such nonpublic
information to, or entering into discussions or negotiations with, such person
or entity, GLOBAL's and CAPITOL's Board of Directors has received from such
person or entity an executed confidentiality agreement, with terms no more
favorable to such party than those contained in the Confidentiality Agreement
between GLOBAL, CAPITOL, BANCORP and BANK, or (ii) complying with Rule 14e-2
<PAGE>44
promulgated under the Exchange Act with regard to an Acquisition Proposal, if
such Rule is applicable thereto;
6.2.6 Acquire or agree to acquire by merging, consolidating with,
or by purchasing all or a substantial portion of the assets of, or in any other
manner, any business or any Person or otherwise acquire or agree to acquire any
assets which are material to GLOBAL and CAPITOL, other than in the ordinary
course of business consistent with prior practice;
6.2.7 Sell, lease or otherwise dispose of any of its assets which
are material, individually or in the aggregate, to GLOBAL and CAPITOL, except in
the ordinary course of business consistent with prior practice;
6.2.8 Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of GLOBAL or any of its
Subsidiaries or guarantee any debt securities of others other than in the
ordinary course of business consistent with prior practice;
6.2.9 Enter into any Understanding, except: (a) deposits
incurred, and short-term debt securities (obligations maturing within one year)
issued, in its ordinary course of business consistent with prior practice, and
liabilities arising out of, incurred in connection with, or related to the
consummation of this Agreement; (b) commitments to make loans or other
extensions of credit in the ordinary course of business consistent with prior
practice; and (c) loan sales in the ordinary course of business, without any
recourse, provided that no commitment to sell loans shall extend beyond the
Effective Time;
6.2.10 Make or enter into a commitment to make any loan or other
extension of credit to any director, officer or employee of GLOBAL or any of its
Subsidiaries, except in accordance with practice or policy in existence on the
date of this Agreement and in compliance with all applicable laws and all
applicable regulations and directives of any Governmental Entity;
6.2.11 Except in the ordinary course of business consistent with
prior practice or as required by an existing contract, and provided prior
disclosure thereof has been made in Schedule 6.2.11, grant any general or
uniform increase in the rates of pay of employees or employee benefits or any
increase in salary or employee benefits of any officer, employee or agent or pay
any bonus to any Person;
6.2.12 Sell, transfer, mortgage, encumber or otherwise dispose of
any assets or other liabilities except in the ordinary course of business
consistent with prior practice or as required by any existing contract;
6.2.13 Make the credit underwriting policies, standards or
practices relating to the making of loans and other extensions of credit, or
commitments to make loans and other extensions of credit, or the Loan Loss
Reserve policies, less stringent than those in effect on December 31, 1998 or
reduce the amount of the Loan Loss Reserves or any other reserves for potential
losses or contingencies;
<PAGE>45
6.2.14 Make any capital expenditures, or commitments with respect
thereto, except those in the ordinary course of business which do not exceed
$5,000 individually or $15,000 in the aggregate;
6.2.15 Renew, extend or amend any existing employment contract or
agreement, enter into any new employment contract or agreement or make any bonus
or any special or extraordinary payments to any Person;
6.2.16 Except in the ordinary course of business consistent with
prior practice, and in compliance with applicable laws and regulations, make any
material investments, by purchase of stock or securities, contributions of
capital, property transfers, purchases of any property or assets or otherwise,
in any other individual, corporation or other entity;
6.2.17 Except as otherwise required to correct a prior filing,
compromise or otherwise settle or adjust any assertion or claim of a deficiency
in Taxes (or interest thereon or penalties in connection therewith) or file any
appeal from an asserted deficiency except in a form previously approved by
BANCORP, which approval will not be unreasonably withheld, in writing, or file
or amend any federal, foreign, state or local Tax Return or report or make any
tax election or change any method or period of accounting unless required by
GAAP or applicable law and, then, only after submitting such Tax return or
report or proposed Tax election or change in any method or period of accounting,
to BANCORP for its approval, which it shall not unreasonably withhold or delay;
6.2.18 Except as contemplated in this Agreement, terminate any
Employee Plan or Benefit Arrangement;
6.2.19 Change its fiscal year or methods of accounting in effect
at December 31, 1998, except as required by changes in GAAP or regulatory
accounting principles as concurred to by GLOBAL's independent public
accountants;
6.2.20 Take or cause to be taken into OREO any property without
(a) a Phase I environmental report, reporting no adverse environmental condition
on such property, with a copy of such report delivered to BANCORP prior to
taking such property into OREO; and (b) the written consent of BANCORP, which
shall not be unreasonably withheld.
Section 6.3 Conduct of BANCORP. During the period from the date of
execution of this Agreement through the Effective Time, BANCORP agrees (except
to the extent GLOBAL shall otherwise consent in writing) to do the following:
6.3.1 Use its commercially reasonable efforts, or cooperate with
others, to expeditiously bring about the satisfaction of the conditions
specified in Article 7 hereof;
6.3.2 Advise GLOBAL promptly in writing of any change that would
have a Material Adverse Effect on its capital structure, consolidated financial
condition, consolidated assets, consolidated results of operations, business or
prospects or of any matter which would make the representations and warranties
set forth in Article 4 hereof not true and correct in any material respect as of
the effective date of the Registration Statement and at the Effective Time;
<PAGE>46
6.3.3 Use its best efforts to accomplish the BANCORP Public
Offering necessary to complete the Mergers.
6.3.4 Use its best efforts to file all required applications with
the Commissioner, FRB and FDIC on or before July 30, 1999.
6.3.5 Furnish to GLOBAL, as soon as practicable, and in any event
within fifteen days after it is prepared: (i) copies of all material reports,
renewals, filings, certificates, statements, correspondence and other documents
specific to BANCORP and BANK or filed with or received from any Federal Reserve
Bank, the FDIC, the Commissioner or any Governmental Entity; (ii) monthly
unaudited balance sheets, statements of income and changes in shareholders'
equity for BANCORP and quarterly unaudited balance sheets, statements of income
and changes in shareholders' equity for BANCORP and BANK, in each case prepared
on a basis consistent with past practice; and (ii) such other reports as GLOBAL
may reasonably request (which are otherwise deliverable under this Section
6.3.5) relating to BANCORP and BANK.
6.3.6 BANK will furnish to GLOBAL, as soon as practicable, and in
any event within fifteen days after the end of each calendar quarter, schedules
including the following: (i) Classified Assets by type (including each credit or
other asset in an amount equal to or greater than $100,000), and its
classification category; (ii) nonaccrual credits by type (including each credit
in an amount equal to or greater than $100,000); (iii) renegotiated loans by
type (loans on which interest has been renegotiated to lower than market rates
because of the financial condition of the borrowers); (iv) delinquent credits by
type (including each delinquent credit in an amount equal to or greater than
$100,000), including an aging into 30-89 and 90+ day categories; (v) loans or
leases or other assets charged off, in whole or in part, during the previous
month by type (including each such loan or lease or other asset in an amount
equal to or greater than $100,000); and (vi) OREO or assets owned stating with
respect to each its type;
Section 6.4 Negative Covenants of BANCORP. During the period from the
date of execution of this Agreement through the Effective Time, BANCORP agrees
that without GLOBAL's prior written consent, it shall not:
6.4.1 (a) Declare or pay any dividend on, other than regular cash
dividends consistent with past practices, or make any other distribution in
respect of, any of its capital stock; (b) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock (other
than a previously announced 5-for-2 stock split effective July 1, 1999; or (c)
repurchase or otherwise acquire any shares of its capital stock;
6.4.2 Take any action that would or might result in any of the
representations and warranties of BANCORP set forth in the Agreement becoming
untrue in any material respect or any of the conditions to the Merger set forth
in Article 7 not being satisfied, except to the extent such actions are required
to be undertaken by applicable law, regulation or at the direction of any
Regulatory Authority;
<PAGE>47
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING
Section 7.1 Conditions to the Parties' Obligations. The obligations of
all the parties to this Agreement to effect the Mergers shall be subject to the
fulfillment of the following conditions:
7.1.1 This Agreement, the Merger Agreements and the Mergers shall
have been validly approved by the holders of a majority of the outstanding
shares of GLOBAL Common Stock entitled to vote;
7.1.2 All permits, approvals and consents required to be
obtained, and all waiting periods required to expire, prior to the consummation
of the Mergers under applicable federal laws of the United States or applicable
laws of any state having jurisdiction over the transactions contemplated by this
Agreement and the Merger Agreement shall have been obtained or expired, as the
case may be (all such permits, approvals and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals"),
without the imposition of any condition which in the reasonable judgment of any
party to be affected by such condition is materially burdensome upon such party
or its respective Affiliates or the Surviving Corporation;
7.1.3 There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Mergers, by any Government Entity which: (i) makes the consummation of any of
the mergers illegal; (ii) requires the divestiture by BANCORP of any material
asset or of a material portion of the business of BANCORP; or (iii) imposes any
condition upon BANCORP or its Subsidiaries (other than general provisions of law
applicable to all banks and bank holding companies) which in the judgment of
BANCORP would be materially burdensome;
7.1.4 The Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and shall remain in effect. No
legal, administrative, arbitration, investigatory or other proceeding by any
Governmental Entity or any other Person shall have been instituted and, at what
otherwise would have been the Effective Time, remain pending by or before any
Governmental Entity to restrain or prohibit the transactions contemplated
hereby;
7.1.5 BANCORP and GLOBAL shall have received opinions of counsel
for the other party in substantially the forms previously agreed to by the
parties as set forth in Exhibits 7.1.5A and 7.1.5B, respectively, dated as of
the Closing Date;
7.1.6 No action, suit or proceeding shall have been instituted or
threatened before any court or governmental body seeking to challenge or
restrain the transactions contemplated by this Agreement or the Merger
Agreements which presents a substantial risk that such transactions will be
restrained or that either party hereto may suffer material damages or other
relief as a result of consummating such transactions; and
Section 7.2 Conditions to BANCORP's Obligations. The obligations of
BANCORP to effect either of the Mergers shall be subject to the fulfillment (or
waiver, in writing, by BANCORP) of the following conditions:
<PAGE>48
7.2.1 Except as otherwise provided in this Section 7.2, (a) the
representations and warranties of GLOBAL and CAPITOL contained in Article 3
shall be true in all material respects as of the Effective Time as though made
at the Effective Time, except to the extent they expressly refer to an earlier
time and except where the failure to be true, individually or in the aggregate,
would not have or would not be reasonably likely to have, a Material Adverse
Effect on GLOBAL, CAPITOL or the Surviving Corporation, or upon the consummation
of the transactions contemplated hereby; (b) GLOBAL and CAPITOL shall have duly
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at the Effective Time, except where the failure to so perform and
comply, individually or in the aggregate, would not have or would not be
reasonably likely to have a Material Adverse Effect on GLOBAL and CAPITOL or the
Surviving Corporation, or upon the consummation of the transactions contemplated
hereby; (c) none of the events or conditions entitling BANCORP to terminate this
Agreement under Article 8 shall have occurred and be continuing; and (d) GLOBAL
and CAPITOL shall have delivered to BANCORP certificates dated the date of the
Effective Time and signed by the President and Chief Executive Officer to the
effect set forth in Subsections 7.2.1(a), (b) and (c);
7.2.2 There shall have been obtained, without the imposition of
any material burden or restriction on any of the parties hereto not in existence
on the date hereof, each consent to the consummation of the Mergers required to
be obtained from any Person under any agreement, contract or license to which
GLOBAL and CAPITOL is a party or by or under which it is bound or licensed, the
withholding of which might have a Material Adverse Effect on GLOBAL, CAPITOL,
the Surviving Corporation or BANCORP at or following the Effective Time, or on
the transactions contemplated by this Agreement;
7.2.3 GLOBAL and CAPITOL shall have delivered its Closing
Schedules to BANCORP on the day immediately preceding the Closing Date and none
of such Closing Schedules shall reflect any item that was not on the GLOBAL
Schedules (or in the GLOBAL Financial Statements) delivered on the date of
execution of this Agreement that has had, would have, or could be reasonably
likely to have, a Material Adverse Effect on GLOBAL, CAPITOL, the Surviving
Corporation or BANCORP at or after the Effective Time, or on the consummation of
the transactions contemplated hereby;
7.2.4 Between the date of this Agreement and the Effective Time,
no event or circumstance shall have occurred which has had or could reasonably
be expected to have a Material Adverse Effect on GLOBAL, or its Subsidiaries,
and BANCORP shall have received a certificate signed on behalf of GLOBAL and
CAPITOL by the President and Chief Executive Officer of GLOBAL and CAPITOL to
such effect;
7.2.5 Counsel for BANCORP shall have approved, in the exercise of
counsel's reasonable discretion, the validity of all transactions herein
contemplated, as well as the form and substance of all opinions, certificates,
instruments of transfer and other documents to be delivered to BANCORP hereunder
or that are reasonably requested by such counsel;
7.2.6 The issuance of the BANCORP Common Stock in the merger of
HBMC with and into GLOBAL shall have been qualified or registered with the
appropriate State securities law or "blue sky" regulatory authorities of all
States in which qualification or registration is required under the State
<PAGE>49
securities laws, and such qualifications or registration shall not have been
suspended or revoked;
7.2.7 Neither GLOBAL or CAPITOL shall be subject to any
memorandum of understanding, cease and desist order, or other agreement with any
Governmental Entity restricting the conduct of any of their respective
businesses, prospects and operations, so as to have a Material Adverse Effect on
BANCORP or BANK after the Effective Time;
7.2.8 BANCORP's Board of Directors shall have received an opinion
to the effect that the terms of the Mergers, from a financial standpoint, are
fair to the shareholders of BANCORP (the "Bancorp Financial Opinion") and such
opinion shall not have been revoked at any time prior to the Effective Time;
7.2.9 BANCORP shall have completed the BANCORP Public Offering
and shall have received the amount of cash necessary to complete the Mergers.
7.2.10 All of GLOBAL's and CAPITOL's director-shareholders shall
have delivered to BANCORP on the date of this Agreement the Director-Shareholder
Agreements in the form attached hereto as Exhibit 7.2.10;
7.2.11 GLOBAL shall have provided to BANCORP satisfactory
evidence that GLOBAL Stock Options have either been exercised or canceled.
Section 7.3 Conditions to GLOBAL's Obligations. The obligations of
GLOBAL to effect the Merger shall be subject to the fulfillment (or waiver, in
writing, by GLOBAL) of the following conditions:
7.3.1 Except as otherwise provided in this Section 7.3, (a) the
representations and warranties of BANCORP contained in Article 4 shall be true
in all material respects as of the Effective Time as though made at the
Effective Time, except to the extent they expressly refer to an earlier time and
except where the failure to be true, individually or in the aggregate, would not
have or would not be reasonably likely to have, a Material Adverse Effect on
BANCORP and BANK, taken as a whole, or upon consummation of the transactions
contemplated hereby; (b) BANCORP shall have duly performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with it prior to or at the Effective Time, except
where the failure to so perform and comply, individually or in the aggregate,
would not have or would not be reasonably likely to have a Material Adverse
Effect on BANCORP and BANK, taken as a whole, or upon the consummation of the
transactions contemplated hereby; (c) none of the events or conditions entitling
GLOBAL to terminate this Agreement under Article 8 shall have occurred and be
continuing; and (d) BANCORP shall have delivered to GLOBAL certificates dated
the date of the Effective Time and signed by a duly authorized officer to the
effect set forth in Subsections 7.3.1(a), (b) and (c);
7.3.2 Counsel for GLOBAL shall have approved, in the exercise of
counsel's reasonable discretion, the validity of all transactions herein
contemplated, as well as the form and substance of all opinions, certificates,
instruments of transfer and other documents to be delivered to GLOBAL hereunder
or that are reasonably requested by such counsel;
<PAGE>50
7.3.3 There shall not have been any change in the consolidated
financial condition, aggregate consolidated net assets, shareholders' equity,
business, or consolidated operating results of BANCORP and its Subsidiaries,
taken as a whole, from December 31, 1998 to the Effective Time that results in a
Material Adverse Effect as to BANCORP and its Subsidiaries, taken as a whole;
7.3.4 BANCORP shall have delivered its Closing Schedules to
GLOBAL on the day immediately preceding the Closing Date and none of such
Closing Schedules shall reflect any item that was not on the BANCORP Schedules
(or in the BANCORP Financial Statements) delivered on the date of execution of
this Agreement that has had, or would have a Material Adverse Effect on BANCORP
and its Subsidiaries, taken as a whole, at or after the Effective Time, or on
the consummation of the transactions contemplated hereby;
7.3.5 GLOBAL's Board of Directors shall have received an opinion
to the effect that the terms of the Mergers, from a financial standpoint, are
fair to the shareholders of GLOBAL ("Global Fairness Opinion") and such opinion
shall not have been revoked at any time prior to the Effective Time;
7.3.6 BANCORP shall have delivered written evidence to GLOBAL's
Board of Directors of the continuation of directors and officers liability
insurance for the Boards of Directors of GLOBAL and CAPITOL for a period of
three years after the Effective Time, which is at least equal to the directors
and officers liability insurance coverage in existence at GLOBAL and CAPITOL at
the date of this Agreement.
ARTICLE 8. TERMINATION, AMENDMENTS And WAIVERS
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time;
8.1.1 By mutual consent of the Boards of Directors of BANCORP and
GLOBAL;
8.1.2 By BANCORP or GLOBAL upon the failure to satisfy any
conditions specified in Section 7.1 if such failure is not caused by any action
or inaction of the party requesting termination of this Agreement;
8.1.3 By BANCORP or GLOBAL if an Acquisition Event involving
GLOBAL or CAPITOL shall have occurred;
8.1.4 By GLOBAL if there shall have been a material breach of any
of the representations or warranties of BANCORP set forth in this Agreement,
which breach, in the reasonable opinion of GLOBAL, by its nature cannot be cured
or is not cured prior to the Closing and which breach would, in the reasonable
opinion of GLOBAL, individually or in the aggregate, have, or be reasonably
likely to have, a Material Adverse Effect on BANCORP and its Subsidiaries, taken
as a whole, or upon the consummation of the transactions contemplated hereby;
8.1.5 By BANCORP if there shall have been a material breach of
any of the representations or warranties of GLOBAL or CAPITOL set forth in this
Agreement, which breach, in the reasonable opinion of BANCORP, by its nature
cannot be cured or is not cured prior to the Closing and which breach would, in
<PAGE>51
the reasonable opinion of BANCORP, individually or in the aggregate, have, or be
reasonably likely to have, a Material Adverse Effect on GLOBAL or CAPITOL or
upon the consummation of the transactions contemplated hereby;
8.1.6 By GLOBAL after the occurrence of a Default by BANCORP and
the continuance of such Default for a period of 20 Business Days after written
notice of such Default, if such Default, in the reasonable opinion of GLOBAL,
cannot be cured prior to the Closing or, even though curable by the Closing, it
is not cured prior to the Closing;
8.1.7 By BANCORP after the occurrence of a Default by GLOBAL or
CAPITOL and the continuance of such Default for a period of 20 Business Days
after written notice of such Default, if such Default, in the reasonable opinion
of BANCORP, cannot be cured prior to the Closing or, even though curable by the
Closing, it is not cured prior to the Closing;
8.1.8 By BANCORP if the Closing Schedules delivered by GLOBAL
disclose the occurrence of an event or the existence of any facts or
circumstances, not disclosed in the Schedules or the GLOBAL Financial Statements
delivered to BANCORP on or before the date hereof, that has had or could
reasonably be expected to have a Material Adverse Effect on GLOBAL or CAPITOL,
or after the Effective Time, on BANCORP, or on the consummation of the
transactions contemplated hereby (an "GLOBAL Material Adverse Event");
8.1.9 By GLOBAL upon the failure of any of the conditions
specified in Section 7.3 to have been satisfied prior to December 31, 1999; or
8.1.10 By BANCORP upon the failure of any of the conditions
specified in Section 7.2 to have been satisfied prior to December 31, 1999;
8.1.11 By GLOBAL if BANCORP shall not have completed the BANCORP
Public Offering by October 31, 1999;
8.1.12 By BANCORP or GLOBAL within five business days of the
receipt of updated and complete schedules and exhibits to this Agreement
described in Section 5.10 hereof;
8.1.13 By GLOBAL if Global's Board of Directors does not receive
the Global Fairness Opinion within thirty days of the execution of this
Agreement;
8.1.14 By GLOBAL or BANCORP upon the completion of due diligence
of the other party, which due diligence must be completed within thirty days of
the execution of this Agreement, provided however that the due diligence of
GLOBAL and CAPITOL by BANCORP shall be limited to legal, corporate or financial
matters.
Section 8.2 Effect of Termination; Survival. Except as provided in
Section 8.5, no termination of this Agreement as provided in Section 8.1 for any
reason or in any manner shall release, or be construed as so releasing, any
party hereto from its obligations pursuant to Sections 5.1.3, 5.5, 8.5 or 9.5
hereof or from any liability or damage to any other party hereto arising out of,
in connection with, or otherwise relating to, directly or indirectly, said
party's material breach, Default or failure in performance of any of its
covenants, agreements, duties or obligations arising hereunder, or any breaches
<PAGE>52
of any representation or warranty contained herein arising prior to the date of
termination of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, at any time before or after approval hereof by the shareholders of
GLOBAL; provided, however, that after any such approval by GLOBAL shareholders,
no amendments shall be made which by law require further approval by GLOBAL
shareholders without such further approval.
Section 8.4 Waiver. Any term or provision of this Agreement other than
regulatory approval or any other provision required by law, may be waived in
writing at any time by the party which is, or whose shareholders are, entitled
to the benefits thereof.
Section 8.5 Liquidated Damages; Cancellation Fee.
8.5.1 In the event of the occurrence of (i) an Acquisition Event
involving GLOBAL or CAPITOL, then GLOBAL or CAPITOL shall pay to BANCORP the sum
of Three Hundred Fifty Thousand Dollars ($350,000) in cash.
8.5.2 In the event of termination of this Agreement by GLOBAL
pursuant to Section 8.1.9 as a result of the revocation of the GLOBAL Fairness
Opinion; or a termination of this Agreement by BANCORP pursuant to (i) Section
8.1.2 (no approval by GLOBAL shareholders), or (ii) pursuant to Section 8.1.5
(breach of representations or warranties of GLOBAL) or Section 8.1.7 (Default)
or Section 8.1.8 (disclosure in the Closing Schedules of an GLOBAL Material
Adverse Event), where such breach of representation or warranty, Default or
GLOBAL Material Adverse Event shall have been caused in whole or in material
part by any action or inaction within the control of GLOBAL or any of its
Subsidiaries, or any of their directors or executive officers (it being
understood that any breach or Default or GLOBAL Material Adverse Event that
occurred after the date of this Agreement and was outside of the control of
GLOBAL and its Subsidiaries, and the directors and executive officers thereof,
such as, by way of example only, the filing of a lawsuit against GLOBAL or
CAPITOL, shall not come within this Section 8.5.2), then, GLOBAL or CAPITOL
shall pay to BANCORP the sum of Two Hundred Fifty Thousand Dollars ($250,000),
in cash; provided, however, that if an Acquisition Transaction occurs involving
GLOBAL or CAPITOL within one hundred eighty (180) days following any termination
by BANCORP to which this Section 8.5.2 applies, GLOBAL or CAPITOL shall pay to
BANCORP an additional One Hundred Thousand Dollars ($100,000) in cash.
8.5.3 In the event of the termination of this Agreement by
BANCORP pursuant to Section 8.1.10 as a result of the revocation of the BANCORP
Fairness Opinion; or a termination of this Agreement by GLOBAL pursuant to 8.1.4
(breach of representations and warranties of BANCORP), Section 8.1.11 (failure
to complete BANCORP Public Offering), or Section 8.1.6 (Default), where such
breach of representation or warranty, or such Default or BANCORP Material
Adverse Event shall have been caused in whole or in material part by any action
or inaction within the control of BANCORP or any of its Subsidiaries, or any of
their directors or executive officers (it being understood that any action or
inaction outside of the control of BANCORP, its Subsidiaries and their directors
and executive officers, such as, by way of example only, the filing of a lawsuit
against BANCORP, shall not come within this Section 8.5.3), then, BANCORP shall
pay to GLOBAL the sum of Two Hundred Fifty Thousand Dollars ($250,000), in cash.
<PAGE>53
8.5.4 The parties have determined that the occurrence of any of
the events or circumstances set forth in Sections 8.5.1, 8.5.2 and 8.5.3 would
cause a substantial damage and loss and lost business opportunities to the party
terminating this Agreement as a result thereof and that the payments
contemplated by Sections 8.5.1, 8.5.2 and 8.5.3 above provide reasonable and
fair compensation for such damage, loss and lost business opportunities and are
not intended to be and do not constitute a penalty or forfeiture. Such payments
will be made within 10 Business Days following a termination of the Agreement
that gives rise to the payment of such liquidated damages pursuant to Sections
8.5.1, 8.5.2 or 8.5.3, as applicable. Upon the making and receipt of payments
due under this Section 8.5, neither party, nor any Affiliates of any party,
shall have any further obligation or liability of any kind under this Agreement
to the other party, except pursuant to Section 5.1.3, 5.5 and 9.5.
8.5.5 In the event of the termination of this Agreement by
BANCORP or GLOBAL and for any reason other than as specified in Sections 8.5.1,
8.5.2 or 8.5.3 above, none of the parties hereto, nor any Affiliates of any such
parties, inclusive of officers and directors, shall have any further obligation
or liability of any kind to the other party, except pursuant to Sections 5.1.3,
5.5 and 9.5.
ARTICLE 9. GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations and Warranties. Except as
provided in Section 8.2 none of the representations, warranties, covenants and
agreements made by GLOBAL and CAPITOL in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time, except
for those covenants and agreements contained in this Section 9.1, Section 2.6.2
(Escrow Merger Price), Section 2.8 (Certain Exchange Procedures), Section 2.9
(Exchange Procedures for Escrow Adjusted Value), and Section 2.10 (BANCORP Board
of Directors), each of which shall survive in accordance with its terms. The
Board of Directors of BANCORP shall delegate to a shareholder committee made up
of a majority of the last Board of Directors of GLOBAL (which shall act by
majority vote) the authority to enforce the provisions of and resolve any
disputes regarding Section 2.6.2 from and after the Effective Date. The expenses
of the committee, including fees paid to accountants, attorneys, appraisers and
other consultants, shall be paid by HUMBOLDT and will be charged against the
Escrow Merger Price to the extent such funds remain. All representations,
warranties, covenants, and agreements made by HUMBOLDT and BANK shall survive
the Effective Date.
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested), sent by confirmed
overnight courier or telecopied (with electronic confirmation and verbal
confirmation for the person to whom such telecopy is addressed), on the date
such notice is so delivered, mailed or sent, as the case may be, to the parties
at the following addresses (or any such other address for a party as shall be
specified by like notice):
<PAGE>54
If to GLOBAL or CAPITOL at:
Global Bancorp
1424 Second Street
Napa, California 94559
Fax No. (707) 252-4950
Attention: Sherwood Tarlow, Chairman
Capitol Thrift & Loan Association
1424 Second Street
Napa, California 94559
Fax No. (707) 252-4950
Attention: Robert F. Kelley, President/CEO
with a copy to:
Severson & Werson
One Embarcadero Center, Suite 2500
San Francisco, California 94111
Fax No. (415) 956-0439
Attention: Roger S. Mertz, Esq.
with a copy to:
Mr. Sherwood Tarlow
P. O. Box 5274
38 Brailey Way
(Extension Please Point Way)
Edgartown, Massachusetts 02539
If to BANCORP or BANK:
Humboldt Bancorp
701 Fifth Street
Eureka, California 95501
Fax No. (707) 441-0214
Attention: Ted Mason, President/CEO
<PAGE>55
with a copy to:
Gary Steven Findley & Associates
1470 North Hundley Street
Anaheim, California 92806
Fax No. (714) 630-7910
Attention: Gary Steven Findley, Esq.
Section 9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.4 Entire Agreement/No Third Party Rights/Assignment. This
Agreement (including the documents and instruments referred to herein): (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) except as expressly set forth herein, is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder; (c) shall not be assigned by a party, by operation of law or
otherwise, without the consent of the other parties; and (d) subject to the
foregoing, shall be binding upon and shall inure to the benefit of the parties
hereto and their permitted successors and assigns.
Section 9.5 Nondisclosure of Agreement. BANCORP and GLOBAL agree, except
as required by law or the rules of the NASDAQ, so long as this Agreement is in
effect, not to issue any public notice, disclosure or press release with respect
to the transactions contemplated by this Agreement without seeking the consent
of the other party, which consent shall not be unreasonably withheld.
Section 9.6 Assignment. None of the parties may assign their rights
under this Agreement without prior written consent of the other parties hereto.
Section 9.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without regard
to any applicable conflicts of law.
Section 9.8 Headings/Table of Contents. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
Section 9.9 Enforcement of Agreement. The parties hereto agree that
irreparable damage will occur in the event that any of the provisions of this
Agreement or the Merger Agreement are not performed in accordance with its
specific terms or is otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the State of California or any state having jurisdiction, this
being in addition to any remedy to which they are entitled at law or in equity.
Section 9.10 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
<PAGE>56
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, BANCORP, BANK, GLOBAL and CAPITOL have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first above written.
HUMBOLDT BANK GLOBAL BANCORP
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
By:_______________________________ By:______________________________
Name:_____________________________ Name:____________________________
HUMBOLDT BANCORP CAPITOL THRIFT & LOAN ASSOCIATION
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
By:_______________________________ By:______________________________
Name:_____________________________ Name:____________________________
