<PAGE>
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): December 14, 1999
COAST BANCORP
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 0-28938 77-0401327
- -------------------------------- ------------- --------------------------
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number Identification No.)
740 FRONT STREET, SANTA CRUZ, CALIFORNIA 95060
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (831) 458-4500
---------------
<PAGE>
ITEM 5. OTHER EVENTS.
Coast Bancorp ("Coast") has entered into an Agreement and Plan of
Reorganization with Greater Bay Bancorp ("GBB") dated as of December 14, 1999
(the "Agreement"). Pursuant to the Agreement, Coast will be merged into GBB
pursuant to a tax-free exchange of shares whereby Coast shareholders will
receive GBB common stock (the "Merger"). Upon consummation of the Merger, Coast
Commercial Bank, a wholly-owned subsidiary of Coast, will be operated as a
wholly-owned subsidiary of GBB.
The Agreement has been approved by the Boards of Directors of both
companies, is subject to conditions usual and customary for merger transactions
of this type, including approval by Coast's and GBB's shareholders, approval by
bank regulatory authorities, declaration as effective of a registration
statement to be filed by GBB with respect to the shares of GBB common stock to
be issued in connection with the Merger and satisfaction of certain other terms
and conditions. A copy of the Agreement is attached hereto as Exhibit 2 and
incorporated herein by reference.
In the Merger, Coast shareholders will receive GBB common stock valued
at approximately $125,000,000, based on an exchange ratio of 0.675 shares of GBB
common stock for each outstanding share of Coast common stock. As provided in
the Agreement, the exchange ratio is subject to certain adjustments, based on
changes in the market price of GBB common stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
(2) Agreement and Plan of Reorganization
(10.1) Stock Option Agreement
(99) Press Release
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: December 17, 1999 COAST BANCORP
BY: /s/ Harvey J. Nickelson
-------------------------------------
Harvey J. Nickelson
President & Chief Executive Officer
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
GREATER BAY BANCORP
AND
COAST BANCORP
DECEMBER 14, 1999
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and
entered into as of the 14th day of December, 1999, by and between GREATER BAY
BANCORP, a California corporation ("GBB"), and COAST BANCORP, a California
corporation ("Coast").
WHEREAS, the Boards of Directors of GBB and Coast deem advisable and in
the best interests of their respective shareholders the merger of Coast with and
into GBB (the "Merger") upon the terms and conditions set forth herein and in
accordance with the California General Corporation Law (the "CGCL") (GBB,
following the effectiveness of the Merger, being hereinafter sometimes referred
to as the "Surviving Corporation");
WHEREAS, the Boards of Directors of GBB and Coast have approved the
Merger pursuant to this Agreement and the Agreement of Merger by and between GBB
and Coast (the "Agreement of Merger"), in substantially the form of EXHIBIT A
attached hereto, pursuant to which Coast will merge with and into GBB and each
outstanding share of Coast common stock, no par value ("Coast Stock"), excluding
any Coast Perfected Dissenting Shares (as defined below), will be converted into
the right to receive a specified amount of GBB common stock, no par value ("GBB
Stock"), upon the terms and subject to the conditions set forth herein;
WHEREAS, as an inducement to GBB to enter into this Agreement, Coast
desires to, and immediately after the execution and delivery hereof will, enter
into a stock option agreement (the "Stock Option Agreement") dated as of the
date hereof with GBB, pursuant to which Coast shall grant to GBB an option to
purchase shares of Coast Stock; and
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, on the basis of the foregoing recitals and in
consideration of the mutual covenants, agreements, representations and
warranties contained herein, the parties hereto do covenant and agree as
follows:
ARTICLE 1.
DEFINITIONS
Except as otherwise expressly provided for in this Agreement, or unless
the context otherwise requires, as used throughout this Agreement the following
terms shall have the respective meanings specified below:
"Affiliate" of, or a person "Affiliated" with, a specific person(s) is a
person that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person(s)
specified.
<PAGE>
"Affiliated Group" means, with respect to any entity, a group of entities
required or permitted to file consolidated, combined or unitary Tax Returns (as
defined herein).
"Agreement of Merger" has the meaning set forth in the second recital of
this Agreement.
"Average Closing Price" means the average of the daily closing price of a
share of GBB Stock reported on the Nasdaq National Market System during the 20
consecutive trading days ending at the end of the third trading day immediately
preceding the Effective Time of the Merger (as defined herein).
"BAB" means Bay Area Bank, a California state chartered bank and wholly
owned subsidiary of GBB.
"BBC" means Bay Bank of Commerce, a California state chartered bank and
wholly owned subsidiary of GBB.
"Banks" means BAB, BBC, CNB, GGB, MPB and PBC.
"Benefit Arrangements" has the meaning set forth in Section 4.20(b).
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on
which a bank chartered under the laws of the State of California is closed.
"CCB" means Coast Commercial Bank, a California state chartered bank and
wholly owned subsidiary of Coast.
"Certificates" has the meaning set forth in Section 2.5(b).
"CFC" means California Financial Code.
"CGCL" has the meaning set forth in the second recital of this Agreement.
"Classified Credits" has the meaning set forth in Section 6.7.
"Closing" means the consummation of the Merger provided for in Article 2
of this Agreement on the Closing Date (as defined herein) at the offices of
Greater Bay Bancorp, 400 Emerson Street, Palo Alto, California, or at such other
place as the parties may agree upon.
"Closing Date" means the date which is the first Friday which follows the
last to occur of (i) the approval of this Agreement and the transactions
contemplated hereby by the shareholders of Coast and GBB, (ii) the receipt of
all permits, authorizations, approvals and consents specified
3
<PAGE>
in Section 9.3 hereof, (iii) the expiration of all applicable waiting periods
under the law, (iv) the expiration of the 30 day period following the mailing
by Coast to its shareholders of a notice of approval of the Merger by the
outstanding shares pursuant to Section 1301 of the CGCL, or such other date
as the parties may agree upon.
"Coast 401(k) Plan" means the Coast Commercial Bank Employee Stock
Ownership Plan with 401(k) Provisions.
"Coast Adjusted Book Value" means the total stockholders' equity of Coast
as reflected on the consolidated financial statements to be provided by Coast to
GBB pursuant to Section 11.14, as adjusted (a) to eliminate all amounts
received by Coast in connection with the exercise of any Coast Stock Options (as
defined herein) since September 30, 1999, (b) to eliminate any amount related to
accumulated other comprehensive income and including instead on such financial
statements the amount of Coast's consolidated accumulated other comprehensive
income as of September 30, 1999, (c) to deduct any dividends to be paid pursuant
to Section 6.1(b) hereof after the date of such financial statements and (d) to
eliminate amounts paid or accrued for Merger-related expenses, including but not
limited to, legal, accounting and financial advisory fees.
"Coast Conflicts and Consents List" has the meaning set forth in Section
4.6.
"Coast Contract List" has the meaning set forth in Section 4.16.
"Coast Derivatives List" has the meaning set forth in Section 4.32.
"Coast Dissenting Shares" means any shares of Coast Stock held by
"dissenting shareholders" within the meaning of Chapter 13 of the CGCL.
"Coast Employee Plan List" has the meaning set forth in Section 4.20.
"Coast Environmental Compliance List" has the meaning set forth in
Section 4.12(b).
"Coast Filings" has the meaning set forth in Section 4.5.
"Coast Filings List" has the meaning set forth in Section 4.5.
"Coast Indemnification List" has the meaning set forth in Section 4.30.
"Coast Insurance List" has the meaning set forth in Section 4.7.
"Coast Intellectual Property List" has the set forth in Section 4.35.
"Coast Investment Securities List" has the meaning set forth in` Section
4.26.
4
<PAGE>
"Coast List" means any list required to be furnished by Coast to GBB
herewith.
"Coast Litigation List" has the meaning set forth in Section 4.10.
"Coast Loan List" has the meaning set forth in Section 4.25.
"Coast Offices List" has the meaning set forth in Section 4.23.
"Coast Operating Losses List" has the meaning set forth in Section 4.24.
"Coast Perfected Dissenting Shares" means Coast Dissenting Shares which
the holders thereof have not withdrawn or caused to lose their status as Coast
Dissenting Shares.
"Coast Personal Property List" has the meaning set forth in Section 4.8.
"Coast Property" has the meaning set forth in Section 4.12(b).
"Coast Real Property List" has the meaning set forth in Section 4.9.
"Coast Shareholders' Meeting" means the meeting of Coast's shareholders
referred to in Section 6.6.
"Coast Stock" has the meaning set forth in the second recital of this
Agreement.
"Coast Stock Option" means any option issued pursuant to the Coast Stock
Option Plan.
"Coast Stock Option Plan" means the Coast Bancorp 1995 Amended and
Restated Stock Option Plan.
"Coast Supplied Information" has the meaning set forth in Section 4.34.
"Coast Tax List" has the meaning set forth in Section 4.11.
"Coast Undisclosed Liabilities List" has the meaning set forth in Section
4.19.
"CNB" means Cupertino National Bank, a national banking association and
wholly owned subsidiary of GBB.
"Code" has the meaning set forth in the fourth recital of this Agreement.
"Commissioner" means the Commissioner of the Department of Financial
Institutions of the State of California.
"Competing Transaction" has the meaning set forth in Section 6.1(n).
5
<PAGE>
"Conversion Ratio" has the meaning set forth in Section 2.2(a).
"Covered Person" has the meaning set forth in Section 4.30.
"Deloitte & Touche" means Deloitte & Touche LLP, Coast's independent
auditors and accountants.
"DFI" means the Department of Financial Institutions of the State of
California.
"Effective Time of the Merger" means the date upon which the Merger is
consummated and the Agreement of Merger is filed with the Secretary of State.
"Employee Plans" has the meaning set forth in Section 4.20(a).
"Encumbrance" shall mean any option, pledge, security interest, lien,
charge, encumbrance or restriction (whether on voting or disposition or
otherwise), whether imposed by agreement, understanding, law or otherwise.
"Environmental Regulations" has the meaning set forth in Section 4.12(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliates" has the meaning set forth in Section 4.20(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means Norwest Bank Minnesota, N.A.
"Exchange Fund" has the meaning set forth in Section 2.5(a) hereof.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of GBB" means the audited consolidated financial
statements of GBB consisting of the consolidated balance sheets as of
December 31, 1996, 1997 and 1998, the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended and the
related notes thereto and related opinions thereon for the years then ended and
GBB's unaudited consolidated balance sheets and consolidated statement of
operations and cash flows as of and for the nine month period ended September
30, 1999.
"Financial Statements of Coast" means the consolidated financial
statements of Coast consisting of the consolidated balance sheets as of December
31, 1996, 1997 and 1998, the related statements of income, stockholders' equity
and cash flows for the years then ended and related notes thereto and related
opinions thereon for the years then ended and Coast's unaudited
6
<PAGE>
consolidated balance sheet and consolidated statement of income and cash
flows as of and for the nine month period ended September 30, 1999.
"FRB" means the Board of Governors of the Federal Reserve System.
"GBB 401(k) Plan" means the Greater Bay Bancorp 401(k) Profit Sharing
Plan.
"GBB Acquisition Transaction" has the meaning set forth in Section
2.2(a)(iv).
"GBB Conflicts and Consents List" has the meaning set forth in Section
5.5.
"GBB Dissenting Shares" means any shares of GBB Stock held by "dissenting
shareholders" within the meaning of Chapter 13 of the CGCL.
"GBB Environmental Compliance List" has the meaning set forth in Section
5.9(b).
"GBB Filings" has the meaning set forth in Section 5.4.
"GBB Perfected Dissenting Shares" means any GBB Dissenting Shares which
the holders thereof have not withdrawn or caused to lose their status as GBB
Dissenting Shares.
"GBB Property" has the meaning set forth in Section 5.12(b).
"GBB Shareholders' Meeting" means the meeting of GBB's shareholders
referred to in Section 7.12.
"GBB Stock" has the meaning set forth in the second recital of this
Agreement.
"GBB Stock Option" means any option issued pursuant to the GBB Stock
Option Plan.
"GBB Stock Option Plan" means the Greater Bay Bancorp 1996 Stock Option
Plan, as amended.
"GBB Subsidiaries" means each of the Banks, Pacific Business Funding
Corporation and Peninsula Real Estate Corporation.
"GBB Supplied Information" has the meaning set forth in Section 5.14.
"GBB Undisclosed Liabilities List" has the meaning set forth in Section
5.12.
"GGB" means Golden Gate Bank, a California state chartered bank and
wholly owned subsidiary of GBB.
7
<PAGE>
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any United States federal, state, municipal, domestic, foreign
or other administrative authority or instrumentality.
"Hazardous Materials" has the meaning set forth in Section 4.12(b).
"Immediate Family" means a person's spouse, parents, in-laws, children
and siblings.
"Investment Security" means any equity security or debt security as
defined in Statement of Financial Accounting Standards No. 115.
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement and Prospectus" means the Joint Proxy
Statement and Prospectus that is included as part of the Registration
Statement on Form S-4 (as defined herein) and used to solicit proxies for the
Coast Shareholders' Meeting and the GBB Shareholders' Meeting and to offer
and sell the shares of GBB Stock to be issued in connection with the Merger.
"MPB" means Mid-Peninsula Bank, a California state chartered bank and
wholly-owned subsidiary of GBB.
"Operating Loss" has the meaning set forth in Section 4.24.
"PBC" means Peninsula Bank of Commerce, a California state chartered bank
and wholly owned subsidiary of GBB.
"Person" means any individual, corporation, association, partnership,
limited liability company, trust, joint venture, other entity, unincorporated
body, government or governmental department or agency.
"PwC" means PricewaterhouseCoopers LLP, GBB's independent public
accountants.
"Related Group of Persons" means Affiliates, members of an Immediate
Family or Persons the obligations of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC (as defined herein).
"Registration Statement on Form S-4" means the Registration Statement on
Form S-4, and such amendments thereto, that is filed with the SEC to register
the shares of GBB Stock to be issued in the Merger under the Securities Act and
to clear use of the Joint Proxy Statement and Prospectus in connection with the
Coast Shareholders' Meeting and the GBB Shareholders' Meeting pursuant to the
regulations promulgated under the Exchange Act.
"Sandler O'Neill Agreement" means the letter agreement dated June 1, 1999
between Coast and Sandler O'Neill & Partners, L.P.
8
<PAGE>
"Scheduled Contracts" has the meaning set forth in Section 4.16.
"SEC" means the Securities and Exchange Commission.
"Secretary of State" means the Secretary of State of the State of
California.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Option Agreement" has the meaning set forth in the third recital
of this Agreement.
"Surviving Corporation" has the meaning set forth in the first recital of
this Agreement.
"Tanks" has the meaning set forth in Section 4.12(b).
"Tax Returns" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"Taxes" means (i) all federal, state, local or foreign taxes, charges,
fees, imposts, levies or other assessments, including, without limitation, all
net income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, property, corporation and estimated taxes, custom duties, fees,
assessments and charges of any kind whatsoever; (ii) all interest, penalties,
fines, additions to tax or additional amounts imposed by any taxing authority in
connection with any item described in clause (i); and (iii) any transferred
liability in respect of any items described in clauses (i) and/or (ii).
"Top Up Option" means, in the event that the Average Closing Price is
less than $32.84, the right of GBB to elect to issue that number of shares of
GBB Stock equal to the quotient obtained by dividing $22.17 by the Average
Closing Price.
"Understanding" means any contract, agreement, understanding, commitment
or offer, whether oral or written, which may become a binding obligation if
accepted by another Person.
ARTICLE 2.
9
<PAGE>
TERMS OF MERGER
2.1. EFFECT OF MERGER AND SURVIVING CORPORATION. At the Effective Time
of the Merger, Coast will be merged with and into GBB pursuant to the terms,
conditions and provisions of the Agreement of Merger and in accordance with the
applicable provisions of the CGCL. By virtue of the Merger, all the rights,
privileges, powers and franchises and all property and assets of every kind and
description of Coast and GBB shall be vested in and be held and enjoyed by the
Surviving Corporation, without further act or deed, and all the interests of
every kind of Coast and GBB, including all debts due to either of them on
whatever account, shall be the property of the Surviving Corporation as they
were of Coast and GBB and the title to any interest in real property and any
interest in personal property vested by deed or otherwise in either Coast or GBB
shall not revert or be in any way impaired by reason of the Merger; and all
rights of creditors and liens upon any property of Coast and GBB shall be
preserved unimpaired and all debts, liabilities and duties of Coast and GBB
shall be debts, liabilities and duties of the Surviving Corporation and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
2.2. STOCK OF COAST. Subject to Section 2.4, each share of Coast Stock
issued and outstanding immediately prior to the Effective Time of the
Merger shall, without any further action on the part of Coast or the holders of
such shares, be treated on the basis set forth herein.
(a) CONVERSION OF COAST STOCK. At the Effective Time of the
Merger, pursuant to the Agreement of Merger, each outstanding share of Coast
Stock excluding any Coast Perfected Dissenting Shares shall, without any further
action on the part of Coast or the holders of any such shares, be automatically
canceled and cease to be an issued and outstanding share of Coast Stock and be
converted into shares of GBB Stock (the "Conversion Ratio") as follows:
(i) If the Average Closing Price is greater than or equal to
$32.84 or less than or equal to $38.16, 0.675 shares of GBB Stock;
(ii) If the Average Closing Price is greater than $38.16, a
number of shares of GBB Stock equal to the quotient obtained by dividing (x)
$25.76 plus the product of 0.333 times the difference between the Average
Closing Price and $38.16, by (y) the Average Closing Price; or
(iii) If the Average Closing Price is less than $32.84, GBB
may, but shall not be required to, elect the Top Up Option. GBB shall notify
Coast in writing, within one Business Day of the calculation of the Average
Closing Price, whether GBB will elect the Top Up Option. If GBB does not
elect the Top Up Option, Coast may terminate the Agreement pursuant to
Section 13.1(m) within one Business Day from the date of receipt of written
notice from GBB of its decision not to elect the Top Up Option. If Coast
does not give GBB written notice of its decision to so terminate the
Agreement within such one Business Day period, the Conversion Ratio will be
0.675 shares of GBB Stock. If GBB elects the Top Up Option, the Conversion
10
<PAGE>
Ratio will equal that number of shares of GBB Stock equal to the quotient
obtained by dividing $22.17 by the Average Closing Price.
(iv) In the event that, prior to the Closing Date, GBB publicly
announces the signing of a definitive agreement with a third party with respect
to a business combination, tender offer or similar transaction which if
consummated would result in the GBB shareholders as of the date of such
announcement owning less than 51% of the outstanding shares of common stock of
the surviving corporation, the price to be paid to GBB shareholders in such
transaction would exceed $38.16 and such transaction is not terminated or
abandoned prior to the Closing Date (a "GBB Acquisition Transaction"), the
Conversion Ratio shall be 0.675 shares of GBB Stock. If such GBB Acquisition
Transaction is terminated or abandoned during the period for determining the
Average Closing Price, GBB can elect to either set the Conversion Ratio at 0.675
shares of GBB Stock or unilaterally delay the Closing Date to a date which is 25
trading days after the date of the public announcement of the termination or
abandonment of such GBB Acquisition Transaction. To preserve the rights of
holders of shares of Coast Stock pursuant to this Section 2.2(a)(iv), GBB and
Coast agree to coordinate the closing of any GBB Acquisition Transaction with
the Closing and to cooperate with such third party in otherwise accomplishing
the purpose hereof. In no event shall GBB close any GBB Acquisition Transaction
that does not result in the purposes of this Section 2.2(a)(iv) being
accomplished, subject to the provisions of Section 14.1(b).
(b) COAST PERFECTED DISSENTING SHARES. Coast Perfected
Dissenting Shares shall not be converted into shares of GBB Stock, but shall,
after the Effective Time of the Merger, be entitled only to such rights as are
granted them by Chapter 13 of the CGCL. Each dissenting shareholder who is
entitled to payment for his shares of Coast Stock shall receive such payment in
an amount as determined pursuant to Chapter 13 of the CGCL.
(c) DIVIDENDS, ETC. If, prior to the Effective Time of the
Merger, GBB shall declare a stock dividend or distribution upon or subdivide,
split up, reclassify or combine the GBB Stock, or make a distribution on the GBB
Stock in any security convertible into GBB Stock, with a record date prior to
the Effective Time of the Merger, appropriate adjustment or adjustments will be
made to the Conversion Ratio.
2.3. EFFECT ON GBB STOCK. At the Effective Time of the Merger, each
outstanding share of GBB Stock shall remain an outstanding share of GBB Stock
and shall not be converted or otherwise affected by the Merger. GBB Perfected
Dissenting Shares shall, after the Effective Time of the Merger, be entitled
only to such rights as are granted them by Chapter 13 of the CGCL. Each
dissenting shareholder who is entitled to payment for his or her shares of GBB
Stock shall receive such payment in an amount as determined pursuant to Chapter
13 of the CGCL.
2.4. FRACTIONAL SHARES. No fractional shares of GBB Stock shall be
issued in the Merger. In lieu thereof, each holder of Coast Stock who would
otherwise be entitled to receive a fractional share shall receive an amount in
cash equal to the product (calculated to the nearest
11
<PAGE>
cent) obtained by multiplying (a) the closing price of GBB Stock reported on
the Nasdaq National Market System on the Business Day immediately preceding
the Closing Date times (b) the fraction of the share of GBB Stock to which
such holder would otherwise be entitled. No such holder shall be entitled to
dividends or other rights in respect of any such fraction.
2.5 EXCHANGE PROCEDURES.
(a) As of the Effective Time of the Merger, GBB shall have
deposited with the Exchange Agent for the benefit of the holders of shares of
Coast Stock, for exchange in accordance with this Section 2.5 through the
Exchange Agent, certificates representing the shares of GBB Stock issuable
pursuant to Section 2.2 in exchange for shares of Coast Stock outstanding
immediately prior to the Effective Time of the Merger, and funds in an amount
not less than the amount of cash payable in lieu of fractional shares of GBB
Stock which would otherwise be issuable in connection with Section 2.2 hereof
but for the operation of Section 2.4 of this Agreement (collectively, the
"Exchange Fund").
(b) GBB shall direct the Exchange Agent to mail, promptly after
the Effective Time of the Merger, to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of Coast Stock (the "Certificates") whose shares
were converted into the right to receive shares of GBB Stock pursuant to Section
2.2 hereof, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as GBB and Coast may reasonably specify),
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of GBB Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by GBB, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of GBB
Stock and cash in lieu of fractional shares which such holder has the right to
receive pursuant to Sections 2.2 and 2.4 hereof, and the Certificate so
surrendered shall forthwith be canceled. In the event a certificate is
surrendered representing Coast Stock, the transfer of ownership of which is not
registered in the transfer records of Coast, a certificate representing the
proper number of shares of GBB Stock may be issued to a transferee if the
Certificate representing such Coast Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.5, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent only the
right to receive upon such surrender the certificate representing shares of GBB
Stock and cash in lieu of any fractional shares of stock as contemplated by this
Section 2.5. Notwithstanding anything to the contrary set forth herein, if any
holder of shares of Coast should be unable to surrender the Certificates for
such shares, because they have been lost or destroyed, such holder may deliver
in lieu thereof a bond in form and substance and with surety reasonably
satisfactory to GBB and shall be entitled to receive the certificate
representing the proper number
12
<PAGE>
of shares of GBB Stock and cash in lieu of fractional shares in accordance
with Sections 2.2 and 2.4 hereof.
(c) No dividends or other distributions declared or made with
respect to GBB Stock with a record date after the Effective Time of the Merger
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of GBB Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.4 until
the holder of record of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of GBB Common Stock issued in exchange thereof,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of GBB Stock to which such holder is
entitled pursuant to Section 2.4 and the amount of dividends or other
distributions with a record date after the Effective Time of the Merger
theretofore paid with respect to such whole shares of GBB Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time of the Merger but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole shares
of GBB Stock.
(d) All shares of GBB Stock issued upon the surrender for
exchange of Coast Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.4) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Coast Stock, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Coast Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to GBB for any reason, they shall
be canceled and exchanged as provided in this Agreement.
(e) Any portion of the Exchange Fund which remains
undistributed to the shareholders of Coast following the passage of six months
after the Effective Time of the Merger shall be delivered to GBB, upon demand,
and any shareholders of Coast who have not theretofore complied with this
Section 2.5 shall thereafter look only to GBB for payment of their claim for GBB
Stock, any cash in lieu of fractional shares of GBB Stock and any dividends or
distributions with respect to GBB Stock.
(f) Neither GBB nor Coast shall be liable to any holder of
shares of Coast Stock for such shares (or dividends or distributions with
respect thereto) or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the shares of GBB Stock held by
it from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect to such shares
of GBB Stock for the account of the Persons entitled thereto.
13
<PAGE>
(h) Certificates surrendered for exchange by any Person
constituting an "Affiliate" of Coast for purposes of Rule 145(c) under the
Securities Act shall not be exchanged for certificates representing whole shares
of GBB Stock until GBB has received a written agreement from such person as
provided in Section 6.9.
2.6. DIRECTORS OF SURVIVING CORPORATION AND CCB. Commencing with the
first meeting of the GBB Board of Directors after the Effective Time of the
Merger, the Board of Directors of the Surviving Corporation shall be comprised
of the persons serving as directors of GBB immediately prior to the Effective
Time of the Merger, and James C. Thompson, or if he is unable or unwilling to
serve, such other member of Coast's Board of Directors designated by Coast and
reasonably acceptable to GBB. Such persons shall serve until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified. Immediately after the Effective Time of the Merger,
David L. Kalkbrenner, or such other person designated by GBB and reasonably
acceptable to Coast, shall be appointed to the Board of Directors of CCB.
Commencing with the first calendar quarter after the Effective Time of the
Merger, the CCB Board of Directors will meet on a quarterly basis and the CCB
director fees will be revised to equal the amount of director fees paid to
members of the Boards of Directors of the Banks.
2.7 EXECUTIVE OFFICERS OF SURVIVING CORPORATION. Immediately after
the Effective Time of the Merger, the executive officers of the Surviving
Corporation shall be comprised of the persons serving as executive officers of
GBB immediately prior to the Effective Time of the Merger. Such persons shall
serve until the earlier of their resignation or termination.
ARTICLE 3.
THE CLOSING
3.1. CLOSING DATE. The Closing shall take place on the Closing Date.
3.2. EXECUTION OF AGREEMENTS. As soon as practicable after execution
of this Agreement, the Agreement of Merger together with all other agreements
necessary to consummate the transactions described herein shall be executed by
the parties thereto. On the Closing Date, the Agreement of Merger, together
with all requisite certificates, shall be duly filed with the Secretary of State
as required by applicable law and regulations.
3.3 FURTHER ASSURANCES. At the Closing, the parties hereto shall
deliver, or cause to be delivered, such documents or certificates as may be
necessary in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement. From and after the
Effective Time of the Merger, each of the parties hereto covenants and agrees,
without the necessity of any further consideration whatsoever, to execute,
acknowledge and deliver any and all other documents and instruments and take any
and all such other action as may be reasonably necessary or desirable to more
effectively carry out the intent and purpose of this Agreement and the Agreement
of Merger.
14
<PAGE>
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF COAST
Coast represents and warrants to GBB as follows:
4.1. INCORPORATION, STANDING AND POWER. Coast has been duly organized,
is validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. CCB is a California state chartered bank duly organized, validly existing
and in good standing under the laws of the State of California and is authorized
by the DFI to conduct a general banking business. CCB's deposits are insured by
the FDIC in the manner and to the fullest extent provided by law. Each of Coast
and CCB has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. Neither the scope of the business of Coast or CCB nor the location
of any of their respective properties requires that either Coast or CCB be
licensed to do business in any jurisdiction other than the State of California
where the failure to be so licensed would, individually or in the aggregate,
have a material adverse effect on the business, financial condition, results of
operations or prospects of Coast on a consolidated basis. Coast has delivered
to GBB true and correct copies of its and CCB's Articles of Incorporation and
Bylaws, as amended, and in effect as of the date hereof.
4.2. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital
stock of Coast consists of 40,000,000 shares of Coast Stock, of which 4,818,578
shares are outstanding, and 10,000,000 shares of preferred stock, none of which
are outstanding. All of the outstanding shares of Coast Stock are duly
authorized, validly issued, fully paid and nonassessable. Except for Coast
Stock Options covering 301,660 shares of Coast Stock granted pursuant to the
Coast Stock Option Plan, there are no outstanding options, warrants or other
rights in or with respect to the unissued shares of Coast Stock nor any
securities convertible into such stock, and Coast is not obligated to issue any
additional shares of its common stock or any additional options, warrants or
other rights in or with respect to the unissued shares of such stock or any
other securities convertible into such stock. Coast has furnished GBB a list
(the "Coast Option List") setting forth the name of each holder of a Coast
Option, the number of shares of Coast Stock covered by each such option, the
vesting schedule of such option, the exercise price per share and the expiration
date of each such option.
(b) As of the date of this Agreement, the authorized capital
stock of CCB consists of 3,000,000 shares of common stock, no par value per
share, of which 2,277,999 shares are outstanding. All of the outstanding shares
of such common stock are duly authorized, validly issued, fully paid and
nonassessable and are owned of record and beneficially by Coast. There are no
outstanding options, warrants or other rights in or with respect to the unissued
shares of such common stock or any other securities convertible into such stock,
and CCB is not obligated
15
<PAGE>
to issue any additional shares of its common stock or any options, warrants
or other rights in or with respect to the unissued shares of its common stock
or any other securities convertible into such stock.
4.3. SUBSIDIARIES. Other than CCB, Coast does not own, directly or
indirectly (except as a pledgee pursuant to loans or upon acquisition in
satisfaction of debt previously contracted), the outstanding stock or equity or
other voting interest in any Person.
4.4. FINANCIAL STATEMENTS. Coast has previously furnished to GBB a
copy of the Financial Statements of Coast. The Financial Statements of Coast:
(a) present fairly in all material respects the consolidated financial condition
of Coast as of the respective dates indicated and its consolidated results of
operations and changes in cash flows, for the respective periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
recurring adjustments; (b) have been prepared in accordance with generally
accepted accounting principles consistently applied (except as otherwise
indicated therein); (c) set forth as of the respective dates indicated adequate
reserves for loan losses and other contingencies and (d) are based upon the
books and records of Coast and CCB.
4.5. REPORTS AND FILINGS. Except as set forth in a list (the "Coast
Filings List"), since January 1, 1996, each of Coast and CCB has filed all
reports, returns, registrations and statements (collectively, "Coast Filings"),
together with any amendments required to be made with respect thereto, that were
required to be filed with (a) the FDIC, (b) the DFI, (c) the FRB, (d) the SEC
and (e) any other applicable Governmental Entity, including taxing authorities,
except where the failure to file such reports, returns, registrations or
statements has not had and is not reasonably expected to have a material adverse
effect on the business, financial condition, results of operations or prospects
of Coast on a consolidated basis. No administrative actions have been taken or
orders issued in connection with such Coast Filings. As of their respective
dates, each of such Coast Filings (y) complied in all material respects with all
laws and regulations enforced or promulgated by the Governmental Entity with
which it was filed (or was amended so as to be in compliance promptly following
discovery of any such noncompliance); and (z) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statement contained in any of such Coast Filings fairly presented the financial
position of Coast on a consolidated basis, Coast alone or CCB alone, as the case
may be, and was prepared in accordance with generally accepted accounting
principles or banking regulations consistently applied, except as stated
therein, during the periods involved. Coast has furnished or made available to
GBB true and correct copies of all Coast Filings filed by Coast since January 1,
1996.
4.6. AUTHORITY OF COAST. The execution and delivery by Coast of
this Agreement and the Agreement of Merger and, subject to the requisite
approval of the shareholders of Coast of this Agreement and the transactions
contemplated hereby, the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of Coast. This Agreement is, and the Agreement of Merger
will be,
16
<PAGE>
upon due execution and delivery by the respective parties thereto, a valid
and binding obligation of Coast enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, liquidation, receivership, conservatorship, insolvency,
moratorium or other similar laws affecting the rights of creditors generally
and by general equitable principles. Except as set forth in a list furnished
by Coast to GBB (the "Coast Conflicts and Consents List"), neither the
execution and delivery by Coast of this Agreement and the Agreement of
Merger, the consummation of the transactions contemplated herein or therein,
nor compliance by Coast with any of the provisions hereof or thereof, will:
(a) conflict with or result in a breach of any provision of its or CCB's
Articles of Incorporation, as amended, or Bylaws, as amended; (b) constitute
a breach of or result in a default (or give rise to any rights of
termination, cancellation or acceleration, or any right to acquire any
securities or assets) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, agreement or
other instrument or obligation to which Coast or CCB is a party, or by which
Coast or CCB or any of their respective properties or assets are bound; (c)
result in the creation or imposition of any Encumbrance on any of the
properties or assets of Coast or CCB; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Coast or CCB or
any of their respective properties or assets. Except as set forth in the
Coast Conflicts and Consents List, no consent of, approval of, notice to or
filing with any Governmental Entity having jurisdiction over any aspect of
the business or assets of Coast or CCB, and no consent of, approval of or
notice to any other Person, is required in connection with the execution and
delivery by Coast of this Agreement and the Agreement of Merger or the
consummation by Coast of the Merger or the transactions contemplated hereby
or thereby, except (i) the approval of this Agreement and the Agreement of
Merger and the transactions contemplated hereby and thereby by the
shareholders of Coast; (ii) such approvals as may be required by the FRB and
the DFI; (iii) the filing of the Joint Proxy Statement and Prospectus and
Registration Statement on Form S-4 with the SEC; and (iv) the filing of the
Agreement of Merger with the Secretary of State.
4.7. INSURANCE. Each of Coast and CCB has policies of insurance and
bonds with respect to its assets and business against such casualties and
contingencies and in such amounts, types and forms as are customarily
appropriate for its business, operations, properties and assets. All such
insurance policies and bonds are in full force and effect. Except as set forth
in a list furnished by Coast to GBB (the "Coast Insurance List"), no insurer
under any such policy or bond has canceled or indicated an intention to cancel
or not to renew any such policy or bond or generally disclaimed liability
thereunder. Except as set forth in the Coast Insurance List, neither Coast nor
CCB is in default under any such policy or bond and all material claims
thereunder have been filed in a timely fashion. Set forth in the Coast
Insurance List is a list of all policies of insurance carried and owned by
either Coast or CCB showing the name of the insurance company, the nature of the
coverage, the policy limit, the annual premiums and the expiration dates. There
has been delivered to GBB a copy of each such policy of insurance.
4.8. PERSONAL PROPERTY. Each of Coast and CCB has good and marketable
title to all its material properties and assets, other than real property, owned
or stated to be owned by Coast or CCB, free and clear of all Encumbrances
except: (a) as set forth in the Financial Statements of
17
<PAGE>
Coast; (b) for Encumbrances for current taxes not yet due; (c) for
Encumbrances incurred in the ordinary course of business; (d) for
Encumbrances that are not substantial in character, amount or extent and that
do not materially detract from the value, or interfere with present use, of
the property subject thereto or affected thereby, or otherwise materially
impair the conduct of business of Coast or CCB; or (e) as set forth in a list
furnished by Coast to GBB (the "Coast Personal Property List.")
4.9. REAL ESTATE. Coast has furnished GBB a list of real property,
including leaseholds and all other interests in real property (other than
security interests), owned by Coast or CCB (the "Coast Real Property List").
Except as set forth on the Coast Real Property List, each of Coast and CCB has
duly recorded or caused to be recorded, in the appropriate county, all
recordable interests in the real property described in the Coast Real Property
List. Either Coast or CCB has good and marketable title to the real property,
and valid leasehold interests in the leaseholds, described in the Coast Real
Property List, free and clear of all Encumbrances, except (a) with respect to
leasehold interests of Coast and CCB, for rights of lessors, co-lessees or
sublessees in such matters that are reflected in the lease or Encumbrances not
created by Coast or CCB; (b) for current taxes not yet due and payable; (c) for
such Encumbrances, if any, as do not materially detract from the value of or
materially interfere with the present use of such property; and (d) as described
in the Coast Real Property List. Coast has furnished GBB with true and correct
copies of all leases included in the Coast Real Property List, all title
insurance policies and all documents evidencing recordation of all recordable
interests in real property included in the Coast Real Property List.
4.10. LITIGATION. Except as set forth in a list furnished by Coast to
GBB (the "Coast Litigation List"), there is no private or governmental suit,
claim, action or proceeding pending, nor to Coast's knowledge threatened,
against Coast or CCB or against any of their respective directors, officers or
employees relating to the performance of their duties in such capacities or
against or affecting any properties of Coast or CCB which, if adversely
determined, would have, individually or in the aggregate, a material adverse
effect upon the business, financial condition or results of operations of Coast
on a consolidated basis, or the transactions contemplated hereby, or which may
involve a judgment against Coast or CCB in excess of $50,000. Also, except as
disclosed in the Coast Litigation List, there are no material judgments,
decrees, stipulations or orders against Coast or CCB or enjoining their
respective directors, officers or employees in respect of, or the effect of
which is to prohibit, any business practice or the acquisition of any property
or the conduct of business in any area.
4.11. TAXES.
(a) Except as set forth in a list furnished by Coast to GBB
(the "Coast Tax List"), (i) all Tax Returns required to be filed by or on behalf
of Coast, CCB or the Affiliated Group(s) of which any of them is or was a
member, have been duly and timely filed with the appropriate taxing authorities
in all jurisdictions in which such Tax Returns are required to be filed (after
giving effect to any valid extensions of time in which to make such filings),
and all such Tax Returns were true, complete and correct in all material
respects; (ii) all Taxes due and
18
<PAGE>
payable by or on behalf of Coast or CCB, either directly, as part of an
Affiliated Group Tax Return, or otherwise, have been fully and timely paid,
except to the extent adequately reserved therefor in accordance with
generally accepted accounting principles and/or applicable regulatory
accounting principles or banking regulations consistently applied on the
Coast balance sheet, and adequate reserves or accruals for Taxes have been
provided in the Coast balance sheet with respect to any period through the
date thereof for which Tax Returns have not yet been filed or for which Taxes
are not yet due and owing; and (iii) no agreement, waiver or other document
or arrangement extending or having the effect of extending the period for
assessment or collection of Taxes (including, but not limited to, any
applicable statute of limitation) has been executed or filed with any taxing
authority by or on behalf of Coast, CCB or any Affiliated Group(s) of which
any of them is or was a member.
(b) Coast and CCB have complied in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have duly and timely withheld from employee salaries,
wages and other compensation and have paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.
(c) GBB has received complete copies of (i) all income or
franchise Tax Returns of Coast and CCB relating to the taxable periods since
January 1, 1995 and (ii) any audit report issued within the last three years
relating to any Taxes due from or with respect to Coast or CCB with respect to
their respective income, assets or operations.
(d) Except as set forth in the Coast Tax List, no written claim
has been made by a taxing authority in a jurisdiction where Coast or CCB do not
file an income or franchise Tax Return such that Coast or CCB are or may be
subject to taxation by that jurisdiction.
(e) Except as set forth in the Coast Tax List: (i) all
deficiencies asserted or assessments made as a result of any examinations by any
taxing authority of the Tax Returns of or covering or including Coast or CCB
have been fully paid, and, to the best of Coast's knowledge, there are no other
audits or investigations by any taxing authority in progress, nor have Coast or
CCB received any written notice from any taxing authority that it intends to
conduct such an audit or investigation; (ii) no requests for a ruling or a
determination letter are pending with any taxing authority; and (iii) no issue
has been raised in writing by any taxing authority in any current or prior
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency against Coast or CCB
for any subsequent taxable period that could be material.
(f) Except as set forth in the Coast Tax List, neither Coast or
CCB nor any other Person on behalf of Coast or CCB has (i) filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Coast or CCB (ii) agreed to
or is required to make any adjustments pursuant to Section 481(a) of the Code or
any similar provision of state, local or foreign law by reason of a change in
accounting method
19
<PAGE>
initiated by Coast or CCB or has any knowledge that the Internal Revenue
Service has proposed in writing any such adjustment or change in accounting
method, or has any application pending with any taxing authority requesting
permission for any changes in accounting methods that relate to the business
or operations of Coast or CCB or (iii) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law with respect
to Coast or CCB.
(g) Except as set forth in the Coast Tax List, no property
owned by Coast or CCB is (i) property required to be treated as being owned
by another Person pursuant to provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes "tax exempt use
property" within the meaning of Section 168(h)(1) of the Code or (iii) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of
the Code.
(h) Neither Coast (except with CCB) nor CCB (except with Coast)
is a party to any tax sharing agreement or similar agreement or arrangement
(whether written or not written) pursuant to which it will have any obligation
to make any payments after the Closing.
(i) Except as set forth in the Coast Tax List, there is no
contract, agreement, plan or arrangement covering any Person that, individually
or collectively, could give rise to the payment of any amount that would not be
deductible by Coast or CCB or their respective affiliates by reason of Section
280G of the Code, or would constitute compensation in excess of the limitation
set forth in Section 162(m) of the Code.
(j) There are no liens as a result of any due and unpaid Taxes
upon any of the assets of Coast or CCB.
(k) Except as set forth in the Coast Tax List, neither Coast
nor CCB has any elections in effect for federal income tax purposes under
Sections 108, 168, 338, 441, 472, 1017, 1033, or 4977 of the Code.
(l) Except as set forth in the Coast Tax list, none of the
members of Coast's Affiliated Group has any net operating loss carryovers.
(m) Coast agrees, and agrees to cause CCB, to cooperate with
tax counsel in furnishing reasonable and customary written tax representations
to tax counsel for purposes of supporting tax counsel's opinion that the Merger
qualifies as a tax-deferred reorganization within the meaning of Section 368(a)
of the Code as contemplated in Section 9.6 hereof. Coast acknowledges that its,
CCB's inability or unwillingness to provide such reasonable and customary
written representations could preclude tax counsel from rendering such opinion,
with consequences specified elsewhere herein.
4.12. COMPLIANCE WITH LAWS AND REGULATIONS.
20
<PAGE>
(a) Neither Coast nor CCB is in default under or in breach or
violation of (i) any provision its Articles of Incorporation, as amended, or
Bylaws, as amended, or (ii) law, ordinance, rule or regulation promulgated by
any Governmental Entity, except, with respect to this clause (ii), for such
violations as would not have, individually or in the aggregate, a material
adverse effect on the business, financial condition, results of operations or
prospects of Coast on a consolidated basis or CCB, as the case may be.
(b) Except as set forth on a list furnished by Coast to GBB
(the "Coast Environmental Compliance List"), to the best of Coast's knowledge
without further investigation, (i) each of Coast and CCB is in compliance with
all Environmental Regulations; (ii) there are no Tanks on or about Coast
Property; (iii) there are no Hazardous Materials on, below or above the surface
of, or migrating to or from Coast Property; (iv) neither Coast nor CCB has loans
outstanding secured by real property that is not in compliance with
Environmental Regulations or which has a leaking Tank or upon which there are
Hazardous Materials on or migrating to or from; and (v) without limiting Section
4.10 or the foregoing representations and warranties contained in clauses (i)
through (iv), as of the date of this Agreement, there is no claim, action, suit,
or proceeding or notice thereof before any Governmental Entity pending against
Coast or CCB or concerning property securing Coast or CCB loans and there is no
outstanding judgment, order, writ, injunction, decree, or award against or
affecting Coast Property or property securing Coast or CCB loans, relating to
the foregoing representations (i) - (iv), in each case the noncompliance with
which, or the presence of which would have a material adverse effect on the
business, financial condition, results of operations or prospects of Coast on a
consolidated basis. For purposes of this Agreement, the term "Environmental
Regulations" shall mean all applicable statutes, regulations, rules, ordinances,
codes, licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises, and similar items, of all Governmental Entities and all applicable
judicial, administrative, and regulatory decrees, judgments, and orders relating
to the protection of human health or the environment, including, without
limitation: all requirements, including, but not limited to those pertaining to
reporting, licensing, permitting, investigation, and remediation of emissions,
discharges, releases, or threatened releases of Hazardous Materials, chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials or wastes whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
chemical substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature and all
requirements pertaining to the protection of the health and safety of employees
or the public. "Coast Property" shall mean real estate currently owned, leased,
or otherwise used by Coast or CCB, or in which Coast or CCB has an investment or
security interest (by mortgage, deed of trust, sale and lease-back or
otherwise), including, without limitation, properties under foreclosure and
properties held by Coast or CCB in its capacity as a trustee or otherwise.
"Tank" shall mean treatment or storage tanks, sumps, or water, gas or oil wells
and associated piping transportation devices. "Hazardous Materials" shall mean
any substance the presence of which requires investigation or remediation under
any federal, state or local statute, regulation, ordinance, order, action,
policy or common law; or which is or becomes defined as a hazardous
21
<PAGE>
waste, hazardous substance, hazardous material, used oil, pollutant or
contaminant under any federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601, ET SEQ.); the Resource Conservation and Recovery Act (42
U.S.C. Section 6901, ET SEQ.); the Clean Air Act, as amended (42 U.S.C.
Section 7401, ET SEQ.); the Federal Water Pollution Control Act, as amended
(33 U.S.C. Section 1251, ET SEQ.); the Toxic Substances Control Act, as
amended (15 U.S.C. Section 9601, ET SEQ.); the Occupational Safety and Health
Act, as amended (29 U.S.C. Section 651; the Emergency Planning and Community
Right-to-Know Act of 1986 (42 U.S.C. Section 11001, ET SEQ.); the Mine Safety
and Health Act of 1977, as amended (30 U.S.C. Section 801, ET SEQ.); the Safe
Drinking Water Act (42 U.S.C. Section 300f, ET SEQ.); and all comparable
state and local laws, including without limitation, the
Carpenter-Presley-Tanner Hazardous Substance Account Act (State Superfund),
the Porter-Cologne Water Quality Control Act, Section 25140, 25501(j) and
(k), 25501.1,25281 and 25250.1 of the California Health and Safety Code
and/or Article I of Title 22 of the California Code of Regulations, Division
4, Chapter 30; laws of other jurisdictions or orders and regulations; or the
presence of which causes or threatens to cause a nuisance, trespass or other
common law tort upon real property or adjacent properties or poses or
threatens to pose a hazard to the health or safety of persons or without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons; polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde
foam insulation.
(c) Coast has provided to GBB phase I environmental assessments
with respect to each interest in real property set forth on the Coast Real
Property List as to which such a phase I environmental investigation has been
prepared by or on behalf of Coast or CCB. The Coast Real Property list shall
disclose each such property as to which such an assessment has not been prepared
on behalf of Coast or CCB.
4.13. PERFORMANCE OF OBLIGATIONS. Each of Coast and CCB has performed
in all material respects all of the obligations required to be performed by it
to date and is not in default under or in breach of any term or provision of any
covenant, contract, lease, indenture or any other agreement to which it is a
party, is subject or is otherwise bound, and no event has occurred that, with
the giving of notice or the passage of time or both, would constitute such
default or breach, where such default or breach would have, individually or in
the aggregate, a material adverse effect on the business, financial condition,
results of operations or prospects of Coast on a consolidated basis. Except for
loans and leases made by Coast or CCB in the ordinary course of business, to the
best of Coast's knowledge, no party with whom Coast or CCB has an agreement that
is of material importance to the business of Coast or CCB is in default
thereunder.
4.14. EMPLOYEES. There are no controversies pending or, to the best of
Coast's knowledge, threatened between either Coast or CCB and any of its
employees that are likely to have a material adverse effect on the business,
financial condition, results of operations or prospects of Coast on a
consolidated basis. Neither Coast nor CCB is a party to any collective
bargaining agreement with respect to any of its employees or any labor
organization to which its employees or any of them belong.
22
<PAGE>
4.15. BROKERS AND FINDERS. Except for the obligation to Sandler O'Neill
& Partners, L.P set forth in the Sandler O'Neill Agreement, a copy of which has
been delivered to GBB, neither Coast nor CCB is a party to or obligated under
any agreement with any broker or finder relating to the transactions
contemplated hereby, and neither the execution of this Agreement nor the
consummation of the transactions provided for herein will result in any
liability to any broker or finder.
4.16. MATERIAL CONTRACTS. Except as set forth in a list furnished by
Coast to GBB (the "Coast Contract List") hereto (all items listed or required to
be listed in such Coast Contract List being referred to herein as "Scheduled
Contracts"), neither Coast nor CCB is a party or otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract that (i) has a remaining term, as of the date of this Agreement, of
more than one year in length of obligation on the part of Coast or CCB and is
not terminable by Coast or CCB within one year without penalty or (ii) requires
payment by Coast or CCB of $50,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by Coast or
CCB of $50,000 or more per annum;
(c) any contract or agreement that restricts Coast or CCB (or
would restrict any Affiliate of Coast or CCB or the Surviving Corporation
(including GBB and the GBB Subsidiaries) after the Effective Time of the Merger)
from competing in any line of business with any Person or using or employing the
services of any Person;
(d) any lease of real or personal property providing for annual
lease payments by or to Coast or CCB in excess of $50,000 per annum other than
(A) financing leases entered into in the ordinary course of business in which
Coast or CCB is lessor and (B) leases of real property presently used by CCB as
banking offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of Coast or CCB (other than as mortgagor or pledgor in the ordinary course of
its banking business or as mortgagee, secured party or deed of trust beneficiary
in the ordinary course of its business) in personal property having a value of
$50,000 or more;
(f) other than as described in the Coast Filings or as set
forth in the Coast Employee Plan List, any stock purchase, stock option, stock
bonus, stock ownership, profit sharing, group insurance, bonus, deferred
compensation, severance pay, pension, retirement, savings or other incentive,
welfare or employment plan or material agreement providing benefits to any
present or former employees, officers or directors of Coast or CCB;
23
<PAGE>
(g) any agreement to acquire equipment or any commitment to
make capital expenditures of $50,000 or more;
(h) other than agreements entered into in the ordinary course
of business, including sales of other real estate owned, any agreement for the
sale of any property or assets in which Coast or CCB has an ownership interest
or for the grant of any preferential right to purchase any such property or
asset;
(i) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of its banking
business and reflected in the financial records of Coast or CCB);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by Coast or CCB (as lessee) that materially
restricts the use, transferability or value of such property;
(k) any guarantee or indemnification which involves the sum of
$50,000 or more, other than letters of credit or loan commitments issued in the
normal course of business;
(l) any supply, maintenance or landscape contracts not terminable
by Coast or CCB without penalty on 30 days' or less notice and which provides
for payments in excess of $50,000 per annum;
(m) any material agreement which would be terminable other than by
Coast or CCB as a result of the consummation of the transactions contemplated by
this Agreement;
(n) any contract of participation with any other bank in any loan
in excess of $50,000 or any sales of assets of Coast or CCB with recourse of any
kind to Coast or CCB except the sale of mortgage loans, servicing rights,
repurchase or reverse repurchase agreements, securities or other financial
transactions in the ordinary course of business;
(o) any agreement providing for the sale or servicing of any loan
or other asset which constitutes a "recourse arrangement" under applicable
regulation or policy promulgated by a Governmental Entity (except for agreements
for the sale of guaranteed portions of loans guaranteed in part by the U. S.
Small Business Administration and related servicing agreements);
(p) any contract relating to the provision of data processing
services to Coast or CCB; or
(q) any other agreement of any other kind which involves future
payments or receipts or performances of services or delivery of items requiring
payment of $50,000 or more to or by Coast or CCB other than payments made under
or pursuant to loan agreements, participation agreements and other agreements
for the extension of credit in the ordinary course of their business.
24
<PAGE>
True copies of all Scheduled Contracts, including all amendments and
supplements thereto, have been delivered to GBB.
4.17. CERTAIN MATERIAL CHANGES. Except as specifically required,
permitted or effected by this Agreement, since December 31, 1998, there has not
been, occurred or arisen any of the following (whether or not in the ordinary
course of business unless otherwise indicated):
(a) any change in any of the assets, liabilities, permits,
methods of accounting or accounting practices, business, or manner of conducting
business, of Coast or CCB or any other event or development that has had or may
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of Coast on a consolidated basis;
(b) any damage, destruction or other casualty loss (whether or
not covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, results of operations or prospects of Coast on a consolidated basis
or that may involve a loss of more than $50,000 in excess of applicable
insurance coverage;
(c) any amendment, modification or termination of any existing,
or entry into any new, material contract or permit that has had or may
reasonably be expected to have a material adverse effect on the assets,
liabilities, business, financial condition, results of operations or prospects
of Coast on a consolidated basis;
(d) any disposition by Coast or CCB of an asset the lack of
which has had or may reasonably be expected to have a material adverse effect on
the assets, liabilities, business, financial condition, results of operations or
prospects of Coast on a consolidated basis; or
(e) any direct or indirect redemption, purchase or other
acquisition by Coast or CCB of any equity securities or any declaration, setting
aside or payment of any dividend or other distribution on or in respect of Coast
Stock whether consisting of money, other personal property, real property or
other things of value (except for the payment of quarterly cash dividends of
$0.08 per share to shareholders of record as of February 5, 1999, May 7, 1999,
August 6, 1999 and November 4, 1999.
4.18. LICENSES AND PERMITS. Each of Coast and CCB has all material
licenses and permits that are necessary for the conduct of its business, and
such licenses are in full force and effect, except for any failure to be in full
force and effect that would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of Coast on a consolidated basis. Except with respect
to properties classified as other real estate owned, the respective properties,
assets, operations and businesses of Coast and CCB are and have been maintained
and conducted, in all material respects, in compliance with all applicable (a)
licenses and permits; and (b) laws and regulations.
25
<PAGE>
4.19. UNDISCLOSED LIABILITIES. Neither Coast nor CCB has any
liabilities or obligations, either accrued or contingent, that are material to
Coast and that have not been: (a) reflected or disclosed in the Financial
Statements of Coast; (b) incurred subsequent to December 31, 1998 in the
ordinary course of business consistent with past practices; or (c) disclosed in
a list furnished by Coast to GBB (the "Undisclosed Liabilities List") or on any
other Coast List. Coast does not know of any basis for the assertion against it
or CCB of any liability, obligation or claim (including, without limitation,
that of any regulatory authority) that is likely to result in or cause a
material adverse change in the business, financial condition, results of
operations or prospects of Coast on a consolidated basis that is not fairly
reflected in the Financial Statements of Coast or otherwise disclosed in this
Agreement.
4.20. EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed in a list furnished by Coast to GBB
(the "Coast Employee Plan List"), all Employee Plans were in effect for
substantially all of 1999, and there has been no material amendment thereof
(other than amendments required to comply with applicable law) or increase in
the cost thereof or benefits thereunder on or after January 1, 1999. Except as
provided in the Coast Employee Plan List, Coast has previously made available to
GBB copies of each "employee benefit plan," as defined in Section 3(3) of ERISA,
of which Coast or any member of the same controlled group of corporations,
trades or businesses as Coast within the meaning of Section 4001(a)(14) of ERISA
("ERISA Affiliates") is a sponsor or participating employer or as to which Coast
or any of its ERISA Affiliates makes contributions or is required to make
contributions and which is subject to any provision of ERISA and covers any
employee, whether active or retired, of Coast or any of its ERISA Affiliates,
together with all amendments thereto, all currently effective and related
summary plan descriptions (to the extent one is required by law), the
determination letter from the IRS, the annual reports for the most recent three
years (Form 5500 including, if applicable, Schedule B thereto) and a summary of
material modifications and all material employee communications prepared in
connection with any such plan. Such plans are hereinafter referred to
collectively as the "Employee Plans." Coast does not participate in an employee
benefit pension plan that is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA. Each Employee Plan which is intended to be qualified in
form and operation under Section 401(a) of the Code is so qualified and the
associated trust for each such Employee Plan is exempt from tax under
Section 501(a) of the Code. No event has occurred that will subject such
Employee Plans to a material amount of tax under Section 511 of the Code. All
amendments required to bring each Employee Plan into conformity with all of the
applicable provisions of ERISA, the Code and all other applicable laws which are
required to have been made as of the date hereof have been made.
(b) Coast has previously made available to GBB copies or
descriptions of each plan or arrangement maintained or otherwise contributed to
by Coast or any of its ERISA Affiliates which is not an Employee Plan and which
(exclusive of base salary and base wages) provides for any form of current or
deferred compensation, bonus, stock option, stock awards, stock-based
compensation or other forms of incentive compensation or post-termination
26
<PAGE>
insurance, profit sharing, benefit, retirement, group health or insurance,
disability, workers' compensation, welfare or similar plan or arrangement for
the benefit of any employee or class of employees, whether active or retired, of
Coast or any of its ERISA Affiliates (such plans and arrangements being
collectively referred to herein as "Benefit Arrangements"). Except as disclosed
in the Coast Employee Plan List hereto, all Benefit Arrangements which are in
effect were in effect for substantially all of 1999 and to date. Except as
disclosed in the Coast Employee Plan List, there has been no material amendment
thereof or increase in the cost thereof or benefits payable thereunder since
January 1, 1998. Except as set forth in the Coast Employee Plan List, there has
been no material increase in the compensation of or benefits payable to any
senior executive employee of Coast since December 31, 1998, nor any employment,
severance or similar contract entered into with any such employee, nor any
amendment to any such contract, since December 31, 1998.
(c) With respect to all Employee Plans and Benefit
Arrangements, Coast and its ERISA Affiliates are in compliance (other than
noncompliance the cost or liability for which is not material) with the
requirements prescribed by any and all statutes, governmental or court orders,
or governmental rules or regulations currently in effect, including but not
limited to ERISA and the Code, applicable to such plans or arrangements. Except
as provided in the Coast Employee Plan List, all government reports and filings
required by law have been properly and timely filed, all information required to
be distributed to participants or beneficiaries has been distributed with
respect to each Employee Plan and Coast and its ERISA Affiliates have performed
all of their obligations under all such Employee Plans and Benefit Arrangements
in all material aspects. There is no pending or, to the best of Coast's
knowledge, threatened legal action, proceeding or investigation against or
involving any Employee Plan or Benefit Arrangement which could result in a
material amount of liability to such Employee Plan, Coast or its ERISA
Affiliates. No condition exists that could constitute grounds for the
termination of any Employee Plan under Section 4042 of ERISA. No "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of the Code,
has occurred with respect to any Employee Plan, or any other employee benefit
plan maintained by Coast or any of its ERISA Affiliates which is covered by
Title I of ERISA, which could subject any person (other than a person for whom
Coast is not directly or indirectly responsible) to a material amount of
liability under Title I of ERISA or to the imposition of a material amount of
tax under Section 4975 of the Code. No Employee Plan subject to Part III of
Subtitle B of Title I of ERISA or Section 412 of the Code, or both, has incurred
any "accumulated funding deficiency," as defined in Section 412 of the Code,
whether or not waived, nor has Coast failed to make any contribution or pay any
amount due and owing as required by the terms of any Employee Plan or Benefit
Arrangement. No "reportable event" as defined in ERISA has occurred with
respect to any of the Employee Plans. Neither Coast nor any of its ERISA
Affiliates has incurred nor expects to incur, directly or indirectly, a material
amount of liability under Title IV of ERISA arising in connection with the
termination of, or a complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA which could constitute a liability of
GBB or of any of its Affiliates (including Coast and CCB) at or after the
Effective Time of the Merger.
27
<PAGE>
(d) Neither Coast nor any of its ERISA Affiliates has provided
or is required to provide security to any Employee Plan pursuant to
Section 401(a)(29) of the Code. Each of the Employee Plans which is intended to
be a qualified plan under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and neither Coast nor CCB
knows of any fact which could adversely affect the qualified status of any such
Employee Plan. All contributions required to be made to each of the Employee
Plans under the terms of the Employee Plan, ERISA, the Code or any other
applicable laws have been timely made. The Financial Statements of Coast
properly reflect all amounts required to be accrued as liabilities to date under
each of the Employee Plans. The fair market value of the assets of each
Employee Plan and Benefit Arrangement that is funded, or required to be funded
under the terms of the Employee Plan or Benefit Arrangement, ERISA, the Code or
any other applicable law, equals or exceeds the liabilities, including the
present value of benefit obligations, of such Employee Plan or Benefit
Arrangement.
(e) Except for Scheduled Contracts set forth in the Coast
Contract List or as set forth in the Coast Employee Plan List, as the case may
be, each Employee Plan or Benefit Arrangement and each personal services
contract, fringe benefit, consulting contract or similar arrangement with or for
the benefit of any officer, director, employee or other person can be terminated
by Coast within a period of 30 days following the Effective Time of the Merger,
without payment of any specified amount as a penalty, bonus, premium, severance
pay or other compensation for such termination.
(f) Except as provided in the Coast Employee Plan List, all
group health plans of Coast have been operated in compliance with the group
health plan continuation coverage requirements of Section 4980B of the Code and
with the group health plan portability, access and renewability requirements of
Sections 9801 through 9833 of the Code, and corresponding provisions of ERISA,
in all material respects.
(g) Neither Coast nor CCB has used the services of (i)
workers who have been provided by a third party contract labor supplier for
more than six months or who may otherwise be eligible to participate in any
of the Employee Plans or to an extent that would reasonably be expected to
result in the disqualification of any of the Employee Plans or the imposition
of penalties or excise taxes with respect to the IRS, the Department of
Labor, the Pension Benefit Guaranty Corporation or any other Governmental
Entity; (ii) temporary employees who have worked for more than six months or
who may otherwise be eligible to participate in any of the Employee Plans or
to an extent that would reasonably be expected to result in the
disqualification of any of the Employee Plans or the imposition of penalties
or excise taxes with respect to the IRS, the Department of Labor, the Pension
Benefit Guaranty Corporation or any other Governmental Entity; (iii)
individuals who have provided services to Coast or CCB as independent
contractors for more than six months or who may otherwise be eligible to
participate in the Employee Plans or to an extent that would reasonably be
expected to result in the disqualification of any of the Employee Plans or
the imposition of penalties or excise taxes with respect to the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation or any
28
<PAGE>
other Governmental Entity or (iv) leased employees, as that term is defined
in section 414(n) of the Code.
(h) Except as set forth in the Coast Employee Plan List, with
respect to each Employee Plan that is funded wholly or partially through an
insurance policy, there will be no liability of Coast or CCB, as of the Closing
Date, under any such insurance policy or ancillary agreement with respect to
such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Closing Date.
4.21. CORPORATE RECORDS. The minute books of each of Coast and CCB
accurately reflect all material actions taken to this date by the respective
shareholders, board of directors and committees of each of Coast and CCB.
4.22. ACCOUNTING RECORDS. Each of Coast and CCB maintains accounting
records which fairly and accurately reflect, in all material respects, its
transactions and accounting controls exist sufficient to provide reasonable
assurances that such transactions are, in all material respects, (i) executed in
accordance with its management's general or specific authorization, and (ii)
recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles. Such records, to the
extent they contain important information pertaining to Coast or CCB which is
not easily and readily available elsewhere, have been duplicated, and such
duplicates are stored safely and securely.
4.23. OFFICES AND ATMS. Coast has furnished to GBB a list (the "Coast
Offices List") setting forth the headquarters of each of Coast and CCB
(identified as such) and each of the offices and automated teller machines
("ATMs") maintained and operated by Coast or CCB (including, without limitation,
representative and loan production offices and operations centers) and the
location thereof. Except as set forth on the Coast Offices List, neither Coast
nor CCB maintains any other office or ATM or conducts business at any other
location, and neither Coast nor CCB has applied for or received permission to
open any additional branch or operate at any other location.
4.24. OPERATING LOSSES. Coast has furnished to GBB a list (the "Coast
Operating Losses List") setting forth any Operating Loss (as herein defined)
which has occurred at Coast during the period after December 31, 1998 to the
date of the Agreement. To the best of Coast's knowledge, no action has been
taken or omitted to be taken by any employee of Coast that has resulted in the
incurrence by Coast of an Operating Loss or that might reasonably be expected to
result in the incurrence of any individual Operating Loss which, net of any
insurance proceeds payable in respect thereof, would exceed $50,000 on an
individual basis or in the aggregate. For purposes of this section "Operating
Loss" means any loss resulting from cash shortages, lost or misposted items,
disputed clerical and accounting errors, forged checks, payment of checks over
stop payment orders, counterfeit money, wire transfers made in error, theft,
robberies, defalcations, check kiting, fraudulent use of credit cards or ATMs,
civil money penalties, fines, litigation, claims or other similar acts or
occurrences.
29
<PAGE>
4.25. LOAN PORTFOLIO. Coast has furnished to GBB a list (the "Coast
Loan List") that sets forth (a) as of September 30, 1999, a description of, by
type and classification, if any, each loan, lease, other extension of credit or
commitment to extend credit by Coast or CCB; (b) sets forth as of September 30,
1999, by type and classification, all loans, leases, other extensions and
commitments to extend credit of Coast or CCB that have been classified by its
bank examiners or auditors (external or internal) as "Watch List,"
"Substandard," "Doubtful," "Loss" or any comparable classification; and (c) all
consumer loans due to Coast or CCB as to which any payment of principal,
interest or any other amount is 90 days or more past due.
4.26. INVESTMENT SECURITIES. Coast has furnished to GBB a list (the
"Coast Investment Securities List") setting forth a description of each
Investment Security held by Coast or CCB on September 30, 1999. The Coast
Investment Securities List sets forth, with respect to each such Investment
Security: (i) the issuer thereof; (ii) the outstanding balance or number of
shares; (iii) the maturity, if applicable; (iv) the title of issue; and (v) the
classification under SFAS No. 115. Neither Coast nor CCB has any Investment
Security classified as trading.
4.27. POWER OF ATTORNEY. Neither Coast nor CCB has granted any Person a
power of attorney or similar authorization that is presently in effect or
outstanding.
4.28. FACTS AFFECTING REGULATORY APPROVALS. To the best knowledge of
Coast, there is no fact, event or condition applicable to Coast or CCB which
will, or reasonably could be expected to, adversely affect the likelihood of
securing the requisite approvals or consents of any Governmental Entity to the
Merger and the transactions contemplated by this Agreement.
4.29. ACCOUNTING AND TAX MATTERS. To the best of Coast's knowledge,
neither Coast nor CCB has through the date hereof taken or agreed to take any
action that would prevent GBB from accounting for the business combination to be
effected by the Merger as a pooling-of-interests or would prevent the Merger
from qualifying as a tax-free reorganization under the Code.
4.30. INDEMNIFICATION. Other than pursuant to the provisions of their
respective Articles of Incorporation or Bylaws, and the Sandler O'Neill
Agreement, neither Coast nor CCB is a party to any indemnification agreement
with any of its present officers, directors, employees, agents or other persons
who serve or served in any other capacity with any other enterprise at the
request of Coast or CCB (a "Covered Person"), and to the best knowledge of
Coast, there are no claims for which any Covered Person would be entitled to
indemnification by Coast or CCB if such provisions were deemed in effect, except
as set forth in a list furnished by Coast to GBB (the "Coast Indemnification
List").
4.31. COMMUNITY REINVESTMENT ACT. CCB has received a rating of
"outstanding" in its most recent examination or interim review with respect to
the Community Reinvestment Act. CCB has not been advised of any supervisory
concerns regarding its compliance with the Community Reinvestment Act.
30
<PAGE>
4.32. DERIVATIVE TRANSACTIONS. Except as set forth in a list furnished
by Coast to GBB (the "Coast Derivatives List"), neither Coast nor CCB is a party
to or has agreed to enter into an exchange traded or over-the-counter equity,
interest rate, foreign exchange or other swap, forward, future, option, cap,
floor or collar or any other contract that is not included on the balance sheet
and is a derivative contract (including various combinations thereof) or owns
securities that are referred to generically as "structured notes," "high risk
mortgage derivatives," "capped floating rate notes," or "capped floating rate
mortgage derivatives."
4.33. TRUST ADMINISTRATION. Neither Coast nor CCB presently
maintains trusts or exercises trust powers, including, but not limited to,
trust administration, and neither of them nor any predecessor has maintained
any trusts or exercised such trust powers for a period of at least three
years prior to the date hereof. The term "trusts" as used in this Section
4.33 includes (i) any and all common law or other trusts between an
individual, corporation or other entities and Coast or CCB or any of their
predecessors, as trustee or co-trustee, including, without limitation,
pension or other qualified or nonqualified employee benefit plans,
compensation, testamentary, inter vivos, and charitable trust indentures;
(ii) any and all decedents' estates where Coast or CCB or any of their
predecessors is serving or has served as a co-executor or sole executor,
personal representative or administrator, administrator de bonis non,
administrator de bonis non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar
positions where Coast or CCB or any of their predecessors is serving or has
served as a co-grantor or a sole grantor or a conservator or co-conservator
of the estate, or any similar fiduciary capacity; and (iv) any and all agency
and/or custodial accounts and/or similar arrangements, including plan
administrator for employee benefit accounts, under which Coast or CCB or any
of their predecessors is serving or has served as an agent or custodian for
the owner or other party establishing the account with or without investment
authority.
4.34. DISCLOSURE DOCUMENTS AND APPLICATIONS. None of the information
supplied or to be supplied by or on behalf of Coast ("Coast Supplied
Information") for inclusion in (a) the Registration Statement on Form S-4 and
the Joint Proxy Statement and Prospectus and (b) any other documents to be filed
with the SEC, the FRB, the DFI or any other Governmental Entity in connection
with the transactions contemplated in this Agreement, will, at the respective
times such documents are filed or become effective, or with respect to the Joint
Proxy Statement and Prospectus when mailed, contain any untrue statement of a
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.35. INTELLECTUAL PROPERTY. Except as set forth in a list furnished by
Coast to GBB (the "Coast Intellectual Property List"), Coast and CCB own or
possess valid and binding licenses and other rights to use without payment all
material patents, copyrights, trade secrets, trade names, service marks and
trademarks used in their respective businesses; and neither Coast nor CCB has
received any notice with respect thereto that asserts the rights of others.
Coast and CCB have in all material respects performed all the obligations
required to be performed by
31
<PAGE>
them, and are not in default in any material respect under any license,
contract, agreement, arrangement or commitment relating to any of the
foregoing.
4.36. YEAR 2000. The mission critical computer software operated by
Coast and CCB is currently capable of providing, or is being adapted to provide,
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such mission critical software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999. The costs of the adaptations referred to in this clause will
not have a material adverse effect on the business, financial condition, results
of operations or prospects of Coast on a consolidated basis. Neither Coast nor
CCB has received, or reasonably expects to receive, a "Year 2000 Deficiency
Notification Letter" (as such term is employed by the FDIC). Coast has
disclosed to GBB a complete and accurate copy of its plan, including an estimate
of the anticipated associated costs, for addressing the issues set forth in all
Federal Financial Institutions Examination Council Interagency Statements as
such issues affect Coast and CCB. Between the date of this Agreement and the
Effective Time, Coast shall use commercially practicable efforts to implement
such plan.
4.37. INSIDER LOANS; OTHER TRANSACTIONS. Coast has previously provided
GBB or its agent with a listing, current as of September 30, 1999, of all
extensions of credit made by Coast and CCB to each of its executive officers and
directors and their related interests (all as defined under Federal Reserve
Board Regulation O), all of which have been made in compliance with Regulation
O, and Section 23B under the Federal Reserve Act which listing is true, correct
and complete in all material respects. Neither Coast nor CCB owes any amount
to, or has any contract or lease with or commitment to, any of the present
executive officers or directors of Coast or CCB (other than for compensation for
current services not yet due and payable, reimbursement of expenses arising in
the ordinary course of business, options or awards available under the Coast
Stock Option Plans or any amounts due pursuant to Coast's Employee Plans).
4.38. REGISTRATION OBLIGATION. Neither Coast nor CCB is under any
obligation, contingent or otherwise, to register any of their respective
securities under the Securities Act.
4.39. ACCURACY AND CURRENTNESS OF INFORMATION FURNISHED. The
representations and warranties made by Coast hereby or in the Coast Lists or
schedules hereto do not contain any untrue statement of a material fact or omit
to state any material fact which is necessary under the circumstances under
which they were made to prevent the statements contained herein or in such
schedules from being misleading.
ARTICLE 5.
32
<PAGE>
REPRESENTATIONS AND WARRANTIES OF GBB
GBB represents and warrants to Coast as follows:
5.1. INCORPORATION, STANDING AND POWER. GBB has been duly organized,
is validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. GBB has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. GBB is duly qualified and in good standing as a foreign corporation,
and is authorized to do business, in all states or other jurisdictions in which
such qualification or authorization is necessary, except where the failure to be
so qualified or authorized would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis. True and correct copies
of the Articles of Incorporation and Bylaws of GBB have been delivered to Coast.
Such Articles of Incorporation and Bylaws are in full force and effect as of the
date hereof.
5.2. CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of GBB consists of 24,000,000 shares of common stock,
of which 12,268,381 shares are outstanding as of December 8, 1999, and 4,000,000
shares of preferred stock, no par value, of which no shares are outstanding.
All of the outstanding shares of GBB Stock are duly authorized, validly issued,
fully paid and nonassessable. The GBB Stock to be used in the Merger will be
duly authorized, validly issued, fully paid and nonassessable. As of the date
of this Agreement, except for GBB Stock Options granted pursuant to the GBB
Stock Option Plan, rights to acquire shares of GBB Stock pursuant to GBB's
Employee Stock Purchase Plan, GBB 401(k) Plan, GBB dividend reinvestment plan
and the Agreement and Plan of Reorganization, dated as of September 15, 1999,
between GBB and Mt. Diablo Bancshares, and preferred share purchase rights
issued pursuant to the Rights Agreement, dated as of November 17, 1998, between
GBB and Norwest Bank Minnesota, N.A., there are no outstanding options, warrants
or other rights in or with respect to the unissued shares of GBB Stock nor any
securities convertible into such stock, and GBB is not obligated to issue any
additional shares of its common stock or any additional options, warrants or
other rights in or with respect to the unissued shares of such stock or any
other securities convertible into such stock.
5.3. FINANCIAL STATEMENTS. GBB has previously furnished to Coast a
copy of the Financial Statements of GBB. The Financial Statements of GBB:
(a) present fairly in all material respects the consolidated financial condition
of GBB as of the respective dates indicated and its consolidated results of
operations and changes in cash flows, as applicable, for the respective periods
then ended, subject, in the case of the unaudited consolidated interim financial
statements, to normal recurring adjustments; (b) have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as otherwise indicated therein); (c) set forth as of the respective
dates indicated adequate reserves for loan losses and other contingencies; and
(d) are based upon the books and records of GBB and the GBB Subsidiaries.
33
<PAGE>
5.4. REPORTS AND FILINGS. Since January 1, 1996, GBB and each of the
GBB Subsidiaries have filed all reports, returns, registrations and statements
(collectively, "GBB Filings"), together with any amendments required to be made
with respect thereto, that were required to be filed with (a) the SEC, (b) the
FRB, (c) the DFI, and (d) any other applicable Governmental Entity, including
taxing authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis. No administrative
actions have been taken or orders issued in connection with such GBB Filings.
As of their respective dates, each of such GBB Filings (y) complied in all
material respects with all laws and regulations enforced or promulgated by the
Governmental Entity with which it was filed (or was amended so as to be in such
compliance promptly following discovery of any such noncompliance); and (z) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Any
financial statement contained in any of such GBB Filings that was intended to
present the financial position of GBB on a consolidated basis fairly presented
the financial position of GBB on a consolidated basis and was prepared in
accordance with generally accepted accounting principles or banking regulations
consistently applied, except as stated therein, during the periods involved.
5.5. AUTHORITY. The execution and delivery by GBB of this Agreement
and the Agreement of Merger, and, subject to the approval of the shareholders of
GBB of this Agreement, the increase in the number of shares reserved for
issuance under the GBB Stock Option Plan and the transactions contemplated
hereby, the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of GBB. This Agreement is, and the Agreement of Merger will be, upon due
execution and delivery by the respective parties hereto, valid and binding
obligations of GBB enforceable in accordance with their respective terms, except
as the enforceability thereof may be limited by bankruptcy, liquidation,
receivership, conservatorship, insolvency, moratorium or other similar laws
affecting the rights of creditors generally and by general equitable principles.
Except as set forth in a list furnished by GBB to Coast (the "GBB Conflicts and
Consents List"), neither the execution and delivery by GBB of this Agreement or
the Agreement of Merger, the consummation of the transactions contemplated
herein or therein, nor compliance by GBB with any of the provisions hereof or
thereof, will: (a) conflict with or result in a breach of any provision of its
Articles of Incorporation, as amended, or Bylaws, as amended; (b) constitute a
breach of or result in a default (or give rise to any rights of termination,
cancellation or acceleration, or any right to acquire any securities or assets)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, franchise, license, permit, agreement or other instrument or
obligation to which GBB or any of the GBB Subsidiaries is a party, or by which
GBB or any of the GBB Subsidiaries or any of its properties or assets is bound;
(c) result in the creation or imposition of any Encumbrance on any of the
respective properties or assets of GBB or any of the GBB Subsidiaries; or
(d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to GBB or any of the GBB Subsidiaries or any of its respective
properties or assets. Except as set forth in the GBB Conflicts and
34
<PAGE>
Consents List, no consent of, approval of, notice to or filing with any
Governmental Entity having jurisdiction over any aspect of the business or
assets of GBB or any of the GBB Subsidiaries, and no consent of, approval of
or notice to any other Person, is required in connection with the execution
and delivery by GBB of this Agreement or the Agreement of Merger, or the
consummation by GBB of the Merger or the transactions contemplated hereby or
thereby, except (i) such approvals as may be required by the FRB and the DFI;
(ii) the filing of the Joint Proxy Statement and Prospectus and Registration
Statement on Form S-4 with the SEC and the issuance by the SEC of an order
declaring the Registration Statement on Form S-4 effective; (iii) the
approval of this Agreement and the transactions contemplated hereby by the
shareholders of GBB (including the increase of the shares of GBB Stock
reserved under the GBB Stock Option Plan); (iv) the filing of the Agreement
of Merger with the Secretary of State; and (v) such approvals as may be
required to approve for inclusion on the Nasdaq National Market System of the
GBB Stock to be issued in the Merger.
5.6. SUBSIDIARIES. As of the date of this Agreement, GBB owns 100% of
the outstanding stock of each of the GBB Subsidiaries. As of the date of this
Agreement, and except for its investments in the GBB Subsidiaries, GBB Capital I
and GBB Capital II, GBB does not own, directly or indirectly (except as a
pledgee pursuant to loans or upon acquisition in satisfaction of debt previously
contracted), the outstanding stock or equity or other voting interest in any
other Person. GBB and Mt. Diablo Bancshares entered into an Agreement and Plan
of Reorganization, dated as of September 15, 1999, pursuant to which Mt. Diablo
Bancshares will merge with and into GBB and Mt. Diablo National Bank, a wholly
owned subsidiary of Mt. Diablo Bancshares, will become a wholly owned subsidiary
of GBB.
5.7. INSURANCE. Each of GBB and the GBB Subsidiaries has policies of
insurance and bonds with respect to its assets and business against such
casualties and contingencies and in such amounts, types and forms as are
customarily appropriate for its business, operations, properties and assets.
All such insurance policies and bonds are in full force and effect. No insurer
under any such policy or bond has canceled or indicated an intention to cancel
or not to renew any such policy or bond or generally disclaimed liability
thereunder. Neither GBB nor any GBB Subsidiaries is in default under any such
policy or bond and all material claims thereunder have been filed in a timely
fashion.
5.8. LITIGATION. There is no private or governmental suit, claim,
action or proceeding pending, nor to GBB's knowledge threatened, against GBB or
any of the GBB Subsidiaries or against any of their respective directors,
officers or employees relating to the performance of their duties in such
capacities or against or affecting any properties of GBB or any of the GBB
Subsidiaries which, if adversely determined, would have, individually or in the
aggregate, a material adverse effect upon the business, financial condition or
results of operations of GBB on a consolidated basis, or the transactions
contemplated hereby.
5.9. COMPLIANCE WITH LAWS AND REGULATIONS.
35
<PAGE>
(a) Neither GBB nor any of the GBB Subsidiaries is in default
under or in breach or violation of (i) any provision its Articles of
Incorporation, as amended, or Bylaws, as amended, or (ii) law, ordinance, rule
or regulation promulgated by any Governmental Entity, except, with respect to
this clause (ii), for such violations as would not have, individually or in the
aggregate, a material adverse effect on the business, financial condition,
results of operations or prospects of GBB on a consolidated basis.
(b) Except as set forth on a list furnished by GBB to Coast
(the "GBB Environmental Compliance List"), to the best of GBB's knowledge
without further investigation, (i) each of GBB and the GBB Subsidiaries is in
compliance with all Environmental Regulations; (ii) there are no Tanks on or
about GBB Property; (iii) there are no Hazardous Materials on, below or above
the surface of, or migrating to or from GBB Property; (iv) neither GBB nor any
of the GBB Subsidiaries has loans outstanding secured by real property that is
not in compliance with Environmental Regulations or which has a leaking Tank or
upon which there are Hazardous Materials on or migrating to or from; and
(v) without limiting Section 5.8 or the foregoing representations and warranties
contained in clauses (i) through (iv), as of the date of this Agreement, there
is no claim, action, suit, or proceeding or notice thereof before any
Governmental Entity pending against GBB or any of the GBB Subsidiaries or
concerning property securing GBB's or any of the GBB Subsidiaries' loans and
there is no outstanding judgment, order, writ, injunction, decree, or award
against or affecting GBB Property or property securing GBB's or any of the GBB
Subsidiaries' loans, relating to the foregoing representations (i) - (iv), in
each case the noncompliance with which, or the presence of which would have a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis. "GBB Property" shall
mean real estate currently owned, leased, or otherwise used by GBB or any of the
GBB Subsidiaries, or in which GBB or any of the GBB Subsidiaries has an
investment or security interest (by mortgage, deed of trust, sale and lease-back
or otherwise), including, without limitation, properties under foreclosure and
properties held by GBB or any of the GBB Subsidiaries in its capacity as a
trustee or otherwise.
5.10. PERFORMANCE OF OBLIGATIONS. Each of GBB and the GBB Subsidiaries
has performed in all material respects all of the obligations required to be
performed by it to date and is not in default under or in breach of any term or
provision of any covenant, contract, lease, indenture or any other agreement to
which it is a party, is subject or is otherwise bound, and no event has occurred
that, with the giving of notice or the passage of time or both, would constitute
such default or breach, where such default or breach would have, individually or
in the aggregate, a material adverse effect on the business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
Except for loans and leases made by GBB or any of the GBB Subsidiaries in the
ordinary course of business, to the best of GBB's knowledge, no party with whom
GBB or any of the GBB Subsidiaries has an agreement that is of material
importance to the business of GBB or any of the GBB Subsidiaries is in default
thereunder.
5.11 MATERIAL CONTRACTS. Neither GBB nor any of the GBB Subsidiaries
is a party or otherwise subject to any material agreement which would be
terminable other than by GBB or
36
<PAGE>
one of the GBB Subsidiaries as a result of the consummation of the
transactions contemplated by this Agreement where such termination would have
a material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis.
5.12. UNDISCLOSED LIABILITIES. As of the date of this Agreement,
neither GBB nor any of the GBB Subsidiaries has any liabilities or obligations,
either accrued or contingent, that are material to GBB and that have not been:
(a) reflected or disclosed in the Financial Statements of GBB; (b) incurred
subsequent to December 31, 1998 in the ordinary course of business consistent
with past practices; or (c) disclosed in a list furnished by GBB to Coast (the
"GBB Undisclosed Liabilities List") or on any other GBB List. GBB does not know
of any basis for the assertion against it or any of the GBB Subsidiaries of any
liability, obligation or claim (including, without limitation, that of any
regulatory authority) that is likely to result in or cause a material adverse
change in the business, financial condition, results of operations or prospects
of GBB on a consolidated basis that is not fairly reflected in the Financial
Statements of GBB or otherwise disclosed in this Agreement.
5.13. COMMUNITY REINVESTMENT ACT. Each of the Banks has received a
rating of either "outstanding" or "satisfactory" in its most recent examination
or interim review with respect to the Community Reinvestment Act. None of the
Banks has not been advised of any supervisory concerns regarding its compliance
with the Community Reinvestment Act.
5.14. BROKERS AND FINDERS. Except for the obligation to First Security
Van Kasper, as set forth in a letter agreement dated September 22, 1999, a copy
of which has been delivered to Coast, GBB is not a party to or obligated under
any agreement with any broker or finder relating to the transactions
contemplated hereby, and neither the execution of this Agreement nor the
consummation of the transactions provided for herein will result in any
liability to any broker or finder.
5.15. CERTAIN MATERIAL CHANGES. Except as specifically required,
permitted or effected by this Agreement or as disclosed in any GBB Filings,
since December 31, 1998, there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated):
(a) any change in any of the assets, liabilities, permits,
methods of accounting or accounting practices, business, or manner or conducting
business, of GBB or the GBB Subsidiaries or any other event or development that
has had or may reasonably be expected to have a material adverse effect on the
assets, liabilities, permits, business, financial condition, results of
operations or prospects of GBB on a consolidated basis;
(b) any damage, destruction or other casualty loss (whether or
not covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of GBB on a consolidated basis;
37
<PAGE>
(c) any amendment, modification or termination of any existing,
or entry into any new, material contract or permit that has had or may
reasonably be expected to have a material adverse effect on the assets,
liabilities, permits, business, financial condition, results of operations or
prospects of GBB on a consolidated basis; or
(d) any disposition by GBB or any of the GBB Subsidiaries of an
asset the lack of which has had or may reasonably be expected to have a material
adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
5.16. LICENSES AND PERMITS. GBB and each of the GBB Subsidiaries have
all material licenses and permits that are necessary for the conduct of their
respective businesses, and such licenses are in full force and effect, except
for any failure to be in full force and effect that would not, individually or
in the aggregate, have a material adverse effect on the business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
The properties, assets, operations and businesses of GBB and each subsidiary of
GBB are and have been maintained and conducted, in all material respects, in
compliance with all applicable licenses and permits. The properties and
operations of GBB and each subsidiary of GBB are and have been maintained and
conducted, in all material respects, in compliance with all applicable laws and
regulations.
5.17 CORPORATE RECORDS. The minute books of GBB and each of the GBB
Subsidiaries reflect all material actions taken to this date by its
shareholders, boards of directors and committees.
5.18. ACCOUNTING RECORDS. GBB and the GBB Subsidiaries maintain
accounting records which fairly and accurately reflect, in all material
respects, their transactions and accounting controls exist sufficient to provide
reasonable assurances that such transactions are, in all material respects,
(i) executed in accordance with their management's general or specific
authorization, and (ii) recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting
principles. Such records, to the extent they contain important information
pertaining to GBB and the GBB Subsidiaries which is not easily and readily
available elsewhere, have been duplicated, and such duplicates are stored safely
and securely.
5.19. FACTS AFFECTING REGULATORY APPROVALS. To the best knowledge of
GBB, there is no fact, event or condition applicable to GBB or any of the GBB
Subsidiaries which will, or reasonably could be expected to, adversely affect
the likelihood of securing the requisite approvals or consents of any
Governmental Entity to the Merger and the transactions contemplated by this
Agreement.
5.20. ACCOUNTING AND TAX MATTERS. To the best knowledge of GBB, GBB has
not through the date hereof taken or agreed to take any action that would
prevent it from accounting
38
<PAGE>
for the business combination to be effected by the Merger as a
pooling-of-interests or would prevent the Merger from qualifying as a
tax-free reorganization under the Code.
5.21. DISCLOSURE DOCUMENTS AND APPLICATIONS. None of the information
supplied or to be supplied by or on behalf of GBB or any of the GBB Subsidiaries
("GBB Supplied Information") for inclusion in (a) the Registration Statement on
Form S-4 and the Joint Proxy Statement and Prospectus to be mailed to the
shareholders of Coast in connection with obtaining the approval of the
shareholders of Coast of this Agreement, the Merger and the other transactions
contemplated hereby, and (b) any other documents to be filed with the SEC, the
FRB, the DFI or any other Governmental Entity in connection with the
transactions contemplated in this Agreement, will, at the respective times such
documents are filed or become effective, or with respect to the Joint Proxy
Statement and Prospectus when mailed, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
5.22. NASDAQ LISTING. As of the date hereof, GBB Stock is listed on the
Nasdaq National Market System.
5.23. YEAR 2000. The mission critical computer software operated by GBB
and the GBB Subsidiaries is currently capable of providing, or is being adapted
to provide, uninterrupted millennium functionality to record, store, process and
present calendar dates falling on or after January 1, 2000 in substantially the
same manner and with the same functionality as such mission critical software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999. The costs of the adaptations referred to in this clause will
not have a material adverse effect on the business, financial condition, results
of operations or prospects of GBB on a consolidated basis. Neither GBB nor any
of the GBB Subsidiaries has received, or reasonably expects to receive, a "Year
2000 Deficiency Notification Letter" (as such term is employed by the FDIC).
5.24. DERIVATIVE TRANSACTIONS. As of the date of this Agreement,
except as set forth in a list furnished by GBB to Coast (the "GBB Derivatives
List"), neither GBB nor any of the Banks is a party to or has agreed to enter
into an exchange traded or over-the-counter equity, interest rate, foreign
exchange or other swap, forward, future, option, cap, floor or collar or any
other contract that is not included on the balance sheet and is a derivative
contract (including various combinations thereof) or owns securities that are
referred to generically as "structured notes," "high risk mortgage derivatives,"
"capped floating rate notes," or "capped floating rate mortgage derivatives."
5.25. INVESTMENT SECURITIES. GBB has furnished to Coast a list (the
"GBB Investment Securities List") setting forth a description of the Investment
Securities held by GBB or any of the Banks on October 29, 1999.
39
<PAGE>
5.26. ACCURACY AND CURRENTNESS OF INFORMATION FURNISHED. The
representations and warranties made by GBB hereby or in the GBB Lists or
Schedules hereto do not contain any untrue statement of material fact or omit to
state any material fact which is necessary under the circumstances under which
they were made to prevent the statements contained herein or in such schedules
from being misleading.
ARTICLE 6.
COVENANTS OF COAST
PENDING EFFECTIVE TIME OF THE MERGER
Coast covenants and agrees with GBB as follows:
6.1. LIMITATION ON CONDUCT PRIOR TO EFFECTIVE TIME OF THE MERGER.
Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and
regulation, Coast agrees to conduct its business (and to cause CCB to conduct
its business) in the ordinary course in substantially the manner heretofore
conducted and in accordance with sound banking practices, and Coast and CCB
shall not, without the prior written consent of GBB, which consent GBB shall not
unreasonably withhold or delay:
(a) issue, sell or grant any Coast Stock (except pursuant to
the exercise of Coast Options outstanding as of the date hereof), any other
securities (including long term debt) of Coast or CCB, or any rights, stock
appreciation rights, options or securities to acquire any Coast Stock, or any
other securities (including long term debt) of Coast or CCB;
(b) declare, set aside or pay any dividend or make any other
distribution upon or split, combine or reclassify any shares of capital stock or
other securities of Coast or CCB, provided, however, that subject to Section
6.10, Coast may pay to its shareholders its regular cash dividend in amounts
and in a manner consistent with past practices;
(c) purchase, redeem or otherwise acquire any capital stock or
other securities of Coast or CCB or any rights, options, or securities to
acquire any capital stock or other securities of Coast or CCB;
(d) except as may be required to effect the transactions
contemplated herein, amend its Articles of Incorporation or Bylaws;
(e) grant any general or uniform increase in the rate of pay of
employees or employee benefits;
(f) grant any increase in salary, incentive compensation or
employee benefits or pay any bonus to any Person or voluntarily accelerate the
vesting of any employee benefits; except that Coast and CCB may grant such
increases and pay bonuses to employees at the vice
40
<PAGE>
president level or below in a manner and in amounts consistent with past
practices without obtaining GBB's prior written consent;
(g) make any capital expenditure or commitments with respect
thereto in excess of $50,000 in the aggregate, except for ordinary repairs,
renewals and replacements;
(h) compromise or otherwise settle or adjust any assertion or
claim of a deficiency in taxes (or interest thereon or penalties in connection
therewith), extend the statute of limitations with any tax authority or file any
pleading in court in any tax litigation or any appeal from an asserted
deficiency, or file or amend any federal, foreign, state or local tax return, or
make any tax election;
(i) grant, renew or commit to grant or renew any extension of
credit if such extension of credit, together with all other credit then
outstanding to the same Person and all Affiliated Persons, would exceed $500,000
on an unsecured basis, or $1,000,000 if secured by a lien on real estate or cash
and if such real estate secured extension of credit is in compliance with
Coast's or CCB's underwriting guidelines in effect on the date hereof (consent
shall be deemed granted if within two Business Days of written notice, together
with a copy of the applicable loan write-up report and any other relevant
documents, delivered to GBB's Chief Credit Officer, written notice of objection
is not received by Coast);
(j) change its tax or accounting policies and procedures or
any method or period of accounting unless required by generally accepted
accounting principles or a Governmental Entity;
(k) grant or commit to grant any extension of credit or
amend the terms of any such credit outstanding on the date hereof to any
executive officer, director or holder of 10% or more of the outstanding Coast
Stock, or any Affiliate of such Person, if such credit would exceed $50,000;
(l) close any offices at which business is conducted or open
any new offices;
(m) adopt or enter into any new employment agreement or
other employee benefit plan or arrangement or amend or modify any employment
agreement or employee benefit plan or arrangement of any such type except for
such amendments as are required by law;
(n) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Competing Transaction (as such
term is defined below), or negotiate with any person in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of its or CCB's officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or any other representative retained by it or any of its
Affiliates to take any such action, and Coast shall promptly notify GBB
(orally and in writing) of all of the
41
<PAGE>
relevant details relating to all inquiries and proposals which it may receive
relating to any of such matters. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following involving Coast or CCB: any
merger, consolidation, share exchange or other business combination; a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets of
Coast or CCB representing 10% or more of the consolidated assets of Coast; a
sale of shares of capital stock (or securities convertible or exchangeable
into or otherwise evidencing, or any agreement or instrument evidencing, the
right to acquire capital stock), representing 10% or more of the voting power
of Coast or CCB; a tender offer or exchange offer for at least 10% of the
outstanding shares of Coast; a solicitation of proxies in opposition to
approval of the Merger by Coast's shareholders; or a public announcement of
an unsolicited BONA FIDE proposal, plan, or intention to do any of the
foregoing. Coast and CCB will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties (other
than GBB) conducted heretofore with respect to any of the foregoing. Coast
and CCB shall take the necessary steps to inform promptly the appropriate
individuals or entities referred to above of the obligations undertaken in
this Section. Coast and CCB agree that they shall notify GBB immediately if
any such inquiries, proposals or offers are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated or continued with Coast and CCB. Coast and CCB also agree that
they shall promptly request each other person, other than GBB, that has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring Coast and CCB to return all confidential
information heretofore furnished to such person by or on behalf of Coast and
CCB and enforce any such confidentiality agreements. Notwithstanding any
other provision in this Section 6.1(n), nothing in this Agreement shall
prevent Coast from (i) engaging in any discussions or negotiations with, or
providing any information to, any Person in response to an unsolicited BONA
FIDE written proposal concerning a Competing Transaction by any such Person
or (ii) recommending such an unsolicited BONA FIDE written proposal
concerning a Competing Transaction to the holders of Coast Stock if and only
if, prior to participating in any of the foregoing, (A) the Board of
Directors of Coast concludes in good faith that the Competing Transaction, if
consummated, would result in a transaction more favorable to holders of Coast
Stock than the transaction contemplated by this Agreement (any such more
favorable Competing Transaction being referred to in this Agreement as a
"Superior Proposal"); (B) the Board of Directors of Coast determines in good
faith based upon the advice of outside counsel that participating in any such
action is necessary for it to act in a manner not inconsistent with its
fiduciary duties under applicable law; and (C) at least forty-eight (48)
hours prior to providing any information or data to any person or entering
into discussions or negotiations with any Person, the Board of Directors of
Coast notifies GBB of such inquiries, proposals or offers received by, any
such information requested from, or any such discussions or negotiations
sought to be initiated or continued with Coast and CCB;
(o) change any basic policies and practices with respect to
liquidity management and cash flow planning, marketing, deposit origination,
lending, budgeting, profit and tax planning, personnel practices or any other
material aspect of Coast's or CCB's business or operations, except such changes
as may be required in the opinion of Coast's or CCB's
42
<PAGE>
management to respond to economic or market conditions or as may be required
by any Governmental Entity;
(p) grant any Person a power of attorney or similar authority;
(q) make any investment by purchase of stock or securities
(including an Investment Security), contributions to capital, property transfers
or otherwise in any other Person, except for federal funds, obligations of the
United States Treasury or an agency of the United States Government the
obligations of which are entitled to or implied to have the full faith and
credit of the United States government and which have an original maturity not
in excess of one year, bank qualified investment grade municipal bonds, and
mortgage-backed securities that are investment grade, in any case, in the
ordinary course of business consistent with past practices and which are not
designated as trading (consent shall be deemed granted if within two Business
Days of written notice together with all relevant documents delivered to GBB's
Chief Financial Officer or Controller, written notice of objection is not
received by Coast);
(r) amend or modify any Scheduled Contract or enter into any
agreement or contract that would be a Scheduled Contract under Section 4.16;
(s) sell, transfer, mortgage, encumber or otherwise dispose of
any assets or release or waive any claim, except in the ordinary course of
business and consistent with past practices;
(t) take any action which would or is reasonably likely to
(i) adversely affect the ability of GBB or Coast to obtain any necessary
approval of any Governmental Entity required for the transactions contemplated
hereby; (ii) adversely affect Coast's ability to perform its covenants and
agreements under this Agreement; or (iii) result in any of the conditions to the
performance of GBB's or Coast's obligations hereunder, as set forth in Articles
9, 10 or 11 herein not being satisfied;
(u) make any special or extraordinary payments to any Person;
(v) reclassify any Investment Security from held-to-maturity or
available for sale to trading;
(w) sell any security other than in the ordinary course of
business, or engage in gains trading;
(x) take title to any real property without conducting prior
thereto an environmental investigation, which investigation shall disclose the
absence of any suspected environmental contamination;
43
<PAGE>
(y) take or cause to be taken any action which would disqualify
the Merger as a "reorganization" within the meaning of Section 368 of the Code
or prevent GBB from accounting for the business combination to be effected by
the Merger as a pooling-of-interests;
(z) settle any claim, action or proceeding involving any
material liability for monetary damages or enter into any settlement agreement
containing material obligations;
(aa) make, acquire a participation in, or voluntarily reacquire
an interest in a participation sold of, any loan that is not in compliance with
its normal credit underwriting standards, policies and procedures as in effect
on December 31, 1998; or renew, extend the maturity of, or alter any of the
material terms of any such loan for a period of greater than six months;
(bb) incur any indebtedness for borrowed money or assume,
guaranty, endorse or otherwise as an accommodation become responsible for the
obligations of any other person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or
(ii) short-term borrowings made at prevailing market rates and terms; or
(cc) agree or make any commitment to take any actions prohibited
by this Section 6.1.
6.2 AFFIRMATIVE CONDUCT PRIOR TO EFFECTIVE TIME OF THE MERGER.
Between the date hereof and the Effective Time of the Merger, Coast shall (and
shall cause CCB to):
(a) use its commercially reasonable efforts consistent with
this Agreement to maintain and preserve intact its present business organization
and to maintain and preserve its relationships and goodwill with account
holders, borrowers, employees and others having business relationships with
Coast or CCB;
(b) use its commercially reasonable efforts to keep in full
force and effect all of the existing material permits and licenses of Coast and
CCB;
(c) use its commercially reasonable efforts to maintain
insurance coverage at least equal to that now in effect on all properties which
it owns or leases and on its business operations;
(d) perform its material contractual obligations and not become
in material default on any such obligations;
(e) duly observe and conform in all material respects to all
lawful requirements applicable to its business;
(f) maintain its assets and properties in good condition and
repair, normal wear and tear excepted;
44
<PAGE>
(g) promptly upon learning of such information, advise GBB in
writing of any event or any other transaction within its knowledge whereby any
Person or Related Group of Persons acquires, directly or indirectly, record or
beneficial ownership or control (as defined in Rule 13d-3 promulgated by the SEC
under the Exchange Act) of 5% or more of the outstanding Coast Stock prior to
the record date fixed for the Coast Shareholders' Meeting or any adjourned
meeting thereof to approve this Agreement and the transactions contemplated
herein;
(h) promptly notify GBB regarding receipt from any tax
authority of any notification of the commencement of an audit, any request to
extend the statute of limitations, any statutory notice of deficiency, any
revenue agent's report, any notice of proposed assessment, or any other similar
notification of potential adjustments to the tax liabilities of Coast, or any
actual or threatened collection enforcement activity by any tax authority with
respect to tax liabilities of Coast;
(i) make available to GBB monthly unaudited balance sheets and
income statements of Coast within 25 days after the close of each calendar
month;
(j) not later than the 30th day of each calendar month, amend
or supplement the Coast Lists prepared and delivered pursuant to Article 4 to
ensure that the information set forth in the Coast Lists accurately reflects the
then-current status of Coast and CCB;
(k) use its commercially reasonable efforts to obtain any third
party consent with respect to any contract, agreement, lease, license,
arrangement, permit or release that is material to the business of Coast or CCB
or that is contemplated in this Agreement as required in connection with the
Merger;
(l) maintain an allowance for loan and lease losses consistent
with practices and methodology as in effect on the date of the execution of
this Agreement; and
(m) furnish to Manatt, Phelps & Phillips, LLP promptly upon its
written request written representations and certificates as deemed reasonably
necessary or appropriate for purposes of enabling Manatt, Phelps & Phillips, LLP
to render the tax opinion referred to in Section 9.6 hereof.
6.3 ACCESS TO INFORMATION.
(a) Coast will afford, upon reasonable notice, to GBB and its
representatives, counsel, accountants, agents and employees reasonable access
during normal business hours to all of their business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
GBB and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, business, assets and
properties of Coast and CCB and the condition thereof and to update such
examination at such intervals as GBB shall deem appropriate. Such examination
shall be conducted in cooperation
45
<PAGE>
with the officers of Coast and CCB and in such a manner as to minimize any
disruption of, or interference with, the normal business operations of Coast
and CCB. Upon the request of GBB, Coast will request Deloitte & Touche to
provide reasonable access to representatives of PwC working on behalf of GBB
to auditors' work papers with respect to the business and properties of Coast
and CCB, including tax accrual work papers prepared for Coast and CCB during
the preceding 36 months, other than (a) books, records and documents covered
by the attorney-client privilege, or that are attorneys' work product, and
(b) books, records and documents that Coast or CCB is legally obligated to
keep confidential. No examination or review conducted under this section
shall constitute a waiver or relinquishment on the part of GBB of the right
to rely upon the representations and warranties made by Coast herein;
provided, that GBB shall disclose to Coast any fact or circumstance it may
discover which GBB believes renders any representation or warranty made by
Coast hereunder incorrect in any respect. GBB covenants and agrees that it,
the GBB Subsidiaries, and their respective representatives, counsel,
accountants, agents and employees will hold in strict confidence all
documents and information concerning Coast and CCB so obtained from any of
them (except to the extent that such documents or information are a matter of
public record or require disclosure in the Joint Proxy Statement and
Prospectus or any of the public information of any applications required to
be filed with any Governmental Entity to obtain the approvals and consents
required to effect the transactions contemplated hereby), and if the
transactions contemplated herein are not consummated, such confidence shall
be maintained and all such documents shall be returned to Coast.
(b) A representative of GBB, selected by GBB in its sole
discretion, shall be authorized and permitted to review each loan, lease, or
other credit funded or renewed by Coast or CCB after the date hereof, and all
information associated with such loan, lease or other credit, such review to
take place, if possible, on Coast's premises.
(c) A representative of GBB, selected by GBB in its sole
discretion, shall be permitted by Coast and CCB to attend all regular and
special Board of Directors' and committee meetings of Coast and CCB from the
date hereof until the Effective Time of the Merger; provided, however, that
the attendance of such representative shall not be permitted at any meeting,
or portion thereof, for the sole purpose of discussing the transactions
contemplated by this Agreement or the obligations of Coast under this
Agreement.
6.4 FILINGS. Coast agrees that through the Effective Time of the
Merger, each of Coast's or CCB's reports, registrations, statements and other
filings required to be filed with any applicable Governmental Entity will comply
in all material respects with all the applicable statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration,
statement or other filing that is intended to present the financial position of
the entity to which it relates will fairly present the financial position of
such entity and will be prepared in accordance with generally accepted
accounting principles or applicable banking regulations consistently applied
during the periods involved.
46
<PAGE>
6.5 NOTICES; REPORTS. Coast will promptly notify GBB of any event of
which Coast obtains knowledge which has had or may have a materially adverse
effect on the financial condition, operations, business or prospects of Coast on
a consolidated basis, or in the event that Coast determines that it is unable to
fulfill any of the conditions to the performance of GBB's obligations hereunder,
as set forth in Articles 9 or 11 herein, and Coast will furnish GBB (i) as soon
as available, and in any event within one Business Day after it is mailed or
delivered to the Board of Directors of Coast or CCB or committees thereof, any
report by Coast or CCB for submission to the Board of Directors of Coast or CCB
or committees thereof, provided, however, that Coast need not furnish to GBB
communications of Coast's legal counsel regarding Coast's rights and obligations
under this Agreement or the transactions contemplated hereby, or books, records
and documents covered by confidentiality agreements or the attorney-client
privilege, or which are attorneys' work product, (ii) as soon as available, all
proxy statements, information statements, financial statements, reports, letters
and communications sent by Coast to its shareholders or other security holders,
and all reports filed by Coast or CCB with the FRB, the FDIC or the DFI, and
(iii) such other existing reports as GBB may reasonably request relating to
Coast or CCB.
6.6 COAST SHAREHOLDERS' MEETING. Promptly after the execution of this
Agreement, Coast will take action necessary in accordance with applicable law
and its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby so as to permit the consummation of the transactions
contemplated hereby. The Board of Directors of Coast shall, subject to its
fiduciary duties, recommend that its shareholders approve this Agreement and the
transactions contemplated hereby, and the Board of Directors of Coast shall,
subject to its fiduciary duties, use its best efforts to obtain the affirmative
vote of the holders of the largest possible percentage of the outstanding Coast
Stock to approve this Agreement and the transactions contemplated hereby.
6.7 CERTAIN LOANS AND OTHER EXTENSIONS OF CREDIT. Coast will promptly
inform GBB of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any bank regulatory authority
or by any unit of Coast or CCB or by any other Person as "Criticized,"
"Specially Mentioned," "Substandard," "Doubtful," "Loss" or any comparable
classification ("Classified Credits"). Coast will furnish GBB, as soon as
practicable, and in any event within 20 days after the end of each calendar
month, schedules including the following: (a) Classified Credits (including
with respect to each credit its classification category and the originating
unit); (b) nonaccrual credits (including the originating unit); (c) accrual
exception credits that are delinquent 90 or more days and have not been placed
on nonaccrual status (including its originating unit); (d) credits delinquent as
to payment of principal or interest (including its originating unit), including
an aging into current-to-29, 30-59, 60-89, and 90+ day categories; (e)
participating loans and leases, stating, with respect to each, whether it is
purchased or sold and the originating unit; (f) loans or leases (including any
commitments) by Coast or CCB to any Coast or CCB director, officer at or above
the senior vice president level, or shareholder holding 10% or more of the
capital stock of Coast, including with respect to each
47
<PAGE>
such loan or lease the identity and, to the knowledge of Coast, the relation
of the borrower to Coast or CCB, and the outstanding and undrawn amounts; (g)
letters of credit (including the originating unit); (h) loans or leases
wholly or partially charged off during the previous month (including with
respect to each loan or lease, the originating amount, the write-off amount
and its originating unit); and (i) other real estate or assets acquired in
satisfaction of debt.
6.8 APPLICATIONS. Subject to Section 7.5, Coast will promptly prepare
or cause to be prepared the portions of the Joint Proxy Statement and Prospectus
as it pertains to Coast or CCB and any other applications necessary to
consummate the transactions contemplated hereby, and further agrees to provide
any information requested by GBB for the preparation of any applications
necessary to consummate the transactions contemplated hereby. Coast shall
afford GBB a reasonable opportunity to review the portions of the Joint Proxy
Statement and Prospectus pertaining to Coast or CCB and all such applications
and all amendments and supplements thereto before the filing thereof. Coast
covenants and agrees that, with respect to the information relating to Coast or
CCB, the Joint Proxy Statement and Prospectus will comply in all material
respects with the provisions of applicable law, and will not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. Coast will use
its commercially reasonable efforts to obtain all regulatory approvals or
consents necessary to effect the Merger and the transactions contemplated
herein.
6.9 AFFILIATE AGREEMENTS. Concurrently with the execution of this
Agreement, (a) Coast shall deliver to GBB a letter identifying all persons who
are then "affiliates" of Coast for purposes of ASR 130 and 135 and Rule 145
under the Securities Act and (b) Coast shall advise the persons identified in
such letter of the resale restrictions imposed by applicable securities laws and
shall use reasonable efforts to obtain from each person identified in such
letter a written agreement substantially in the form attached hereto as
EXHIBIT B. Coast shall use reasonable efforts to obtain from any person who
becomes an affiliate of Coast after Coast's delivery of the letter referred to
above, and on or prior to the date of the Coast Shareholders' Meeting to approve
this Agreement, a written agreement substantially in the form attached as
EXHIBIT B hereto as soon as practicable after obtaining such status.
6.10 COORDINATION OF DIVIDENDS. Coast shall coordinate with GBB the
declaration of any dividends that may be allowed pursuant to Section 6.1(b)
hereof, and the record date and the payment dates relating thereto, it being the
intention of the parties that holders of Coast Stock shall not receive two
dividends, or fail to receive one dividend, for any applicable dividend period
with respect to their shares of Coast Stock and any shares of GBB Stock any such
holder will receive in exchange therefor in the Merger.
6.11 D&O COVERAGE. In the event that GBB is unable to have Coast's and
CCB's directors and officers added to GBB's directors' and officers' liability
insurance policy pursuant to Section 7.2(d) hereof and upon GBB's request, Coast
shall use commercially reasonable efforts to obtain (i) coverage for a period of
at least 36 months following the Effective Time of the
48
<PAGE>
Merger for the directors and officers of Coast and CCB under a directors' and
officers' liability insurance policy which is no less protective in terms of
coverage or limitations than now possessed by GBB covering acts or omissions
occurring prior to the Effective Time of the Merger and actions related to
this Agreement, and (ii) coverage for a period of at least 36 months
following the Effective Time of the Merger under a bankers' blanket bond
which is no less protective in terms of coverage or limitations than now
possessed by Coast and CCB covering acts or omissions occurring prior to the
Effective Time of the Merger and actions related to this Agreement.
ARTICLE 7.
COVENANTS OF GBB
PENDING EFFECTIVE TIME OF THE MERGER
GBB covenants and agrees with Coast as follows:
7.1. LIMITATION ON CONDUCT PRIOR TO EFFECTIVE TIME OF THE MERGER.
Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and regulation
generally applicable to bank holding companies and banks, each of GBB and the
GBB Subsidiaries shall not, without the prior written consent of Coast, which
consent Coast shall not unreasonably withhold or delay:
(a) take any action which would or is reasonably likely to
(i) adversely affect the ability of GBB to obtain any necessary approvals of any
Governmental Entity required for the transactions contemplated hereby;
(ii) adversely affect GBB's ability to perform its covenants and agreements
under this Agreement; or (iii) result in any of the conditions to the
performance of GBB's obligations hereunder, as set forth in Articles 9 or 11
herein not being satisfied;
(b) take or cause to be taken any action which would disqualify
the Merger as a "reorganization" within the meaning of Section 368 of the Code
or prevent GBB from accounting for the business combination to be effected by
the Merger as a pooling-of-interests;
amend its articles of incorporation in any respect which would
materially and adversely affect the rights and privileges attendant to the GBB
Stock;
(d) enter into a GBB Acquisition Transaction that includes as a
condition precedent to such GBB Acquisition Transaction that GBB terminate this
Agreement; provided, however, notwithstanding the foregoing, nothing in this
Agreement shall prevent GBB from entering into such a GBB Acquisition
Transaction if the Board of Directors of GBB determines in good faith based upon
the advice of counsel that taking such action is necessary for it to act in a
manner not inconsistent with its fiduciary duties under applicable law;
provided, however, that nothing herein shall prohibit Coast from terminating
this Agreement pursuant to Section 13.1(l); or
49
<PAGE>
(e) agree or make any commitment to take any actions prohibited
by this Section 7.1.
7.2. AFFIRMATIVE CONDUCT OF GBB AND SUBSIDIARIES PRIOR TO EFFECTIVE
TIME OF THE MERGER. Between the date hereof and the Effective Time of the
Merger, GBB shall:
(a) duly observe and conform in all material respects to all
lawful requirements applicable to the business of GBB or any subsidiary of GBB;
(b) use its commercially reasonable efforts to obtain any third
party consent with respect to any contract, agreement, lease, license,
arrangement, permit or release that is material to the business of GBB on a
consolidated basis and that is contemplated in this Agreement as required in
connection with the Merger;
(c) not later than the 30th day of each calendar month, amend
or supplement the GBB Lists prepared and delivered pursuant to Article 5 to
ensure that the information set forth in the GBB Lists accurately reflects the
then-current status of GBB and the GBB Subsidiaries. GBB shall further amend or
supplement the GBB Lists as of the Closing Date if necessary to reflect any
additional information that needs to be included in the GBB Lists; and
(d) use its commercially reasonable efforts to have Coast's and
CCB's directors and officers added to GBB's directors' and officers' liability
insurance policy, providing for coverage for a period of at least 36 months
following the Effective Time of the Merger and covering acts or omissions
occurring prior to the Effective Time of the Merger and actions related to this
Agreement.
7.3. ACCESS TO INFORMATION. Upon reasonable request by Coast, GBB
shall (i) make its Chief Executive Officer, Chief Administrative Officer/Chief
Financial Officer, Chief Credit Officer and Controller available to discuss with
Coast and its representatives GBB's operations; and (ii) shall provide Coast
with written information which is (a) similar to the written information that
Coast reviewed in connection with this Agreement, and (b) related to GBB's
business condition, operations and prospects on a consolidated basis. No
examination or review conducted under this section shall constitute a waiver or
relinquishment on the part of Coast of the right to rely upon the
representations and warranties made by GBB herein; provided, that Coast shall
disclose to GBB any fact or circumstance it may discover which Coast believes
renders any representation or warranty made by GBB hereunder incorrect in any
respect. Coast covenants and agrees that it and its representatives, counsel,
accountants, agents and employees will hold in strict confidence all documents
and information concerning GBB so obtained (except to the extent that such
documents or information are a matter of public record or require disclosure in
the Joint Proxy Statement and Prospectus or any of the public information of any
applications required to be filed with any Governmental Entity to obtain the
approvals and consents required to effect the transactions contemplated hereby),
and if the transactions contemplated herein are not consummated, such confidence
shall be maintained and all such documents shall be returned to GBB.
50
<PAGE>
7.4. FILINGS. GBB agrees that through the Effective Time of the
Merger, each of its reports, registrations, statements and other filings
required to be filed with any applicable Governmental Entity will comply in all
material respects with all the applicable statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration,
statement or other filing that is intended to present the financial position of
the entities or entity to which it relates will fairly present the financial
position of such entities or entity and will be prepared in accordance with
generally accepted accounting principles or applicable banking regulations
consistently applied during the periods involved.
7.5. APPLICATIONS. GBB will promptly prepare and file or cause to be
prepared and filed (i) an application for approval of the Merger with the FRB;
(ii) an application for approval of the Merger with the DFI; (iii) in
conjunction with Coast, the Registration Statement on Form S-4 and the Joint
Proxy Statement and Prospectus as it pertains to GBB; and (iv) any other
applications necessary to consummate the transactions contemplated hereby. GBB
shall afford Coast a reasonable opportunity to review the Joint Proxy Statement
and Prospectus and all such applications and all amendments and supplements
thereto before the filing thereof. GBB covenants and agrees that the
Registration Statement on Form S-4 and the Joint Proxy Statement and Prospectus
and all applications to the appropriate regulatory agencies for approval or
consent to the Merger, with respect to information relating to GBB or the GBB
Subsidiaries, will comply in all material respects with the provisions of
applicable law, and will not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading. GBB will use its commercially reasonable
efforts to obtain all regulatory approvals or consents necessary to effect the
Merger.
7.6. BLUE SKY. GBB agrees to use commercially reasonable efforts to
have the shares of GBB Stock to be issued in connection with the Merger
qualified or registered for offer and sale, to the extent required, under the
securities laws of each jurisdiction in which shareholders of Coast reside.
7.7. NOTICES; REPORTS. GBB will promptly notify Coast of any event of
which GBB obtains knowledge which has had or may have a material adverse affect
on the financial condition, operations, business or prospects of GBB on a
consolidated basis or in the event that GBB determines that it is unable to
fulfill any of the conditions to the performance of Coast's obligations
hereunder, as set forth in Articles 9 or 10 herein.
7.8. REMOVAL OF CONDITIONS. In the event of the imposition of a
condition to any regulatory approvals which GBB deems to materially adversely
affect it or to be materially burdensome, GBB shall use its commercially
reasonable efforts for purposes of obtaining the removal of such condition.
51
<PAGE>
7.9. STOCK OPTIONS.
(a) At and as of the Effective Time of the Merger, GBB shall
assume each and every outstanding option to purchase shares of Coast Stock
("Coast Stock Option") and all obligations of Coast under the Coast Stock Option
Plan. Each and every Coast Stock Option so assumed by GBB under this Agreement
shall continue to have, and be subject to, the same terms and conditions set
forth in the Coast Stock Option Plan and in the other documents governing such
Coast Stock Option immediately prior to the Effective Time of the Merger, except
that: (i) such Coast Stock Option shall be exercisable for that number of whole
shares of GBB Stock equal to the product of (A) the number of shares of Coast
Stock that were purchasable under such Coast Stock Option immediately prior to
the Effective Time of the Merger multiplied by (B) the Conversion Ratio, with
such product rounded down to the nearest whole number of shares of GBB Stock;
and (ii) the per share exercise price for the shares of GBB Stock issuable upon
exercise of such Coast Stock Option shall be equal to the quotient determined by
dividing (A) the exercise price per share of Coast Stock at which such Coast
Stock Option was exercisable immediately prior to the Effective Time of the
Merger by (B) the Conversion Ratio. As soon as reasonably practicable after the
Effective Time of the Merger, GBB shall issue to each holder of an outstanding
Coast Stock Option a document evidencing the assumption of such Coast Stock
Option by GBB pursuant to this Section 7.9.
(b) GBB shall use its commercially reasonable efforts to comply
with the terms of the Coast Stock Option Plans and insure, to the extent
required by, and subject to the provisions of, such Plans, that Coast Stock
Options which qualify as incentive stock options prior to the Effective Time of
the Merger qualify as incentive stock options of GBB after the Effective Time of
the Merger.
(c) At or prior to the Effective Time of the Merger, GBB shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of GBB Stock for delivery upon exercise of GBB Stock Options assumed
by it in accordance with this Section 7.9. At the Effective Time of the Merger,
or as soon as practicable thereafter, GBB shall, if necessary, file a
registration statement on Form S-8 (or any successor or other appropriate form)
with respect to the shares of GBB Stock (as increased in accordance with this
Agreement) subject to such options and shall use all reasonable efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.
7.10 RESERVATION, ISSUANCE AND REGISTRATION OF GBB STOCK. GBB shall
reserve and make available for issuance in connection with the Merger and in
accordance with the terms and conditions of this Agreement such number of shares
of GBB Stock to be issued to the shareholders of Coast in the Merger pursuant to
Article 2 hereof.
52
<PAGE>
7.11 NASDAQ LISTING. GBB shall use its commercially reasonable efforts
to cause the shares of GBB Stock to be issued in the Merger to be approved for
listing on the Nasdaq National Market System, subject to official notice of
issuance, prior to the Effective Time of the Merger.
7.12 GBB SHAREHOLDERS' MEETING. Promptly after the execution of this
Agreement, GBB will take action necessary in accordance with applicable law and
its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby and an increase in the number of shares of GBB Stock
reserved for issuance under the GBB Stock Option Plan so as to permit the
consummation of the transactions hereby. The Board of Directors of GBB shall,
subject to its fiduciary duties, recommend that its shareholders approve this
Agreement and the transactions contemplated hereby and the increase in such
shares, and the Board of Directors of GBB shall, subject to its fiduciary
duties, use its best efforts to obtain the affirmative vote of the holders of
the largest possible percentage of the outstanding GBB Stock to approve this
Agreement and the transactions contemplated hereby and the increase in such
shares.
ARTICLE 8.
ADDITIONAL COVENANTS
The parties hereto hereby mutually covenant and agree with each other as
follows:
8.1. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each party will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement as
promptly as practical.
8.2. PUBLIC ANNOUNCEMENTS. No press release or other public disclosure
of matters related to this Agreement or any of the transactions contemplated
hereby shall be made by GBB or Coast unless the other party shall have provided
its prior consent to the form and substance thereof; provided, however, that
nothing herein shall be deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations imposed by law.
8.3. ENVIRONMENTAL ASSESSMENT AND REMEDIATION. GBB may cause to be
prepared at GBB's sole cost and expense within 45 days of the date of this
Agreement one or more phase I environmental investigations with respect to the
Real Property set forth on the Coast Real Property List. In the event any such
phase I environmental investigation report, or any such report which Coast or
CCB has already obtained on any of the Real Property set forth on Coast's Real
Property List, discloses facts which, in the sole discretion of GBB, warrant
further investigation, GBB shall provide written notice to Coast, and Coast
shall be required to cause to be completed within 60 days of such written
notice, at the sole cost and expense of GBB, a phase II environmental
investigation and report with respect to such property. The consultant engaged
53
<PAGE>
by Coast to conduct such investigation and provide such report shall be
reasonably acceptable to GBB. GBB shall have 10 days from the receipt of such
investigation report to reasonably object thereto, which objection shall be by
written notice. In the event of any such objection, GBB shall engage an
environmental consultant reasonably satisfactory to Coast who shall provide an
estimate of the cost of taking any remedial action recommended or suggested in
such phase II environmental investigation report, or which is required by law,
or which is determined to be prudent by GBB, in its sole discretion, and, unless
the estimated cost of such Remediation is in excess of $500,000 or is not
reasonably determinable by such consultant (and written notice thereof provided
by Coast to GBB) Coast shall immediately commence such Remediation, all at the
sole cost and expense of Coast. In the event such environmental consultant
determines that the estimated cost of such remediation is in excess of $500,000
or is not reasonably determinable, GBB shall have the right to terminate the
Agreement pursuant to Section 13.1(k) hereof before the expiration of 21 days
from the date of such written notice.
GBB agrees to keep confidential and not to disclose any nonpublic
information obtained in the course of such environmental investigation relating
to environmental contamination or suspected contamination of any property on the
Coast Real Property List, except as required by law.
8.4 APPOINTMENT OF DIRECTOR. GBB agrees to take all necessary action,
including, if necessary, increasing the authorized number of it directors, to
appoint as contemplated by Section 2.6 hereof one member of Coast's Board of
Directors to the Board of Directors of GBB effective at Effective Time of the
Merger, or as soon thereafter as practicable.
ARTICLE 9.
CONDITIONS PRECEDENT TO THE MERGER
The obligations of each of the parties hereto to consummate the
transactions contemplated herein are subject to the satisfaction, on or before
the Closing Date, of the following conditions:
9.1. SHAREHOLDER APPROVAL. The Agreement and the transactions
contemplated hereby, including the increase of shares reserved for issuance
under the GBB Stock Option Plan, shall have received all requisite approvals of
the shareholders of Coast and GBB.
9.2. NO JUDGMENTS OR ORDERS. No judgment, decree, injunction, order or
proceeding shall be outstanding or threatened by any Governmental Entity which
prohibits or restricts the effectuation of, or threatens to invalidate or set
aside, the Merger substantially in the form contemplated by this Agreement,
unless counsel to the party against whom such action or proceeding was
instituted or threatened renders to the other parties hereto a favorable opinion
that such judgment, decree, injunction, order or proceeding is without merit.
54
<PAGE>
9.3. REGULATORY APPROVALS. To the extent required by applicable law or
regulation, all approvals or consents of any Governmental Entity, including,
without limitation, those of the FRB and the DFI shall have been obtained or
granted for the Merger and the transactions contemplated hereby and the
applicable waiting period under all laws shall have expired. All other
statutory or regulatory requirements for the valid completion of the
transactions contemplated hereby shall have been satisfied.
9.4. SECURITIES LAWS. The Registration Statement on Form S-4 shall
have been declared effective by the SEC and shall not be the subject of any stop
order or proceedings seeking or threatening a stop order. GBB shall have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the GBB Stock to consummate the Merger.
9.5. LISTING. The GBB Stock issuable in the Merger shall have been
included for listing on the Nasdaq National Market System.
9.6. TAX OPINION. GBB and Coast shall have received from Manatt,
Phelps & Phillips, LLP an opinion reasonably satisfactory to GBB and Coast to
the effect that the Merger shall not result in the recognition of gain or loss
for federal income tax purposes to GBB or Coast, nor shall the issuance of the
GBB Stock result in the recognition of gain or loss by the holders of Coast
Stock who receive such stock, nor shall the substitution of options under
Section 7.9 result in any income or gain to the option holder or disqualify any
such options as incentive stock options in connection with the Merger, dated
prior to the date the Joint Proxy Statement and Prospectus is first mailed to
the shareholders of Coast and GBB and such opinions shall not have been
withdrawn or modified in any material respect.
9.7. POOLING OF INTERESTS. Prior to the Effective Time of the Merger,
GBB shall have received from PwC a written confirmation that the Merger will
qualify for pooling-of-interests accounting treatment. Additionally, prior to
the Effective Time of the Merger, Deloitte & Touche LLP shall have delivered a
letter to Coast to the effect that, as of the Effective Time of the Merger, no
conditions exist with respect to either Coast or CCB that would preclude
accounting for the Merger as a pooling-of-interests. In making their
determinations that the Merger will qualify for such treatment, PwC and Deloitte
& Touche LLP shall be entitled to assume that cash will be paid with respect to
all shares held of record by any holder of Dissenting Shares.
ARTICLE 10.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF COAST
All of the obligations of Coast to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by Coast:
55
<PAGE>
10.1. LEGAL OPINION. Coast shall have received the opinion of Linda M.
Iannone, General Counsel of GBB, dated as of the Closing Date, and in form and
substance satisfactory to the counsel of Coast and CCB, to the effect that: (a)
GBB is a corporation validly existing under the laws of the State of California
with full corporate power and authority to enter into this Agreement and the
Agreement of Merger and to consummate the transactions contemplated hereby and
thereby; (b) all corporate proceedings on the part of GBB necessary to be taken
in connection with the Merger in order to make the same effective have been duly
and validly taken; (c) this Agreement and the Agreement of Merger have been
duly and validly authorized, executed and delivered on behalf of GBB and
constitute (subject to standard exceptions of enforceability arising from the
bankruptcy laws and rules of equity) valid and binding agreements of GBB; and
(d) the shares of GBB Stock to be issued in the Merger will, when issued, be
duly authorized, validly issued, fully paid and nonassessable.
10.2. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS. All the
covenants, terms and conditions of this Agreement to be complied with and
performed by GBB on or before the Closing Date shall have been complied with and
performed in all material respects. Each of the representations and warranties
of GBB contained in Article 5 hereof shall have been true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects) on and as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date or for changes expressly contemplated by this Agreement) on and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of the Closing Date. It is understood and acknowledged
that the representations being made on and as of the Closing Date shall be made
without giving effect to any update with respect to the GBB Lists in accordance
with Section 7.2(c).
10.3. AUTHORIZATION OF MERGER. All actions necessary to authorize the
execution, delivery and performance of this Agreement and the Agreement of
Merger by GBB and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors of GBB,
as required by applicable law, and GBB shall have full power and right to merge
pursuant to the Agreement of Merger.
10.4. ABSENCE OF CERTAIN CHANGES. Between the date of this Agreement
and the Effective Time of the Merger, there shall not have occurred any event
that has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, results of operations or prospects of GBB
on a consolidated basis, whether or not such event, change or effect is
reflected in the GBB Lists as amended or supplemented after the date of this
Agreement. Without limiting the generality of the foregoing, any failure of
GBB's or the Banks' mission critical computer systems or software to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such mission critical systems and
software records, stores, processes and presents such calendar dates falling on
or before December 31, 1999, shall constitute such a material adverse effect.
56
<PAGE>
10.5 THIRD PARTY CONSENTS. GBB shall have obtained all consents of
other parties to their respective mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the Merger and
the transactions contemplated herein to be consummated without a material
default, acceleration, breach or loss of rights or benefits thereunder.
10.6 OFFICERS' CERTIFICATE. There shall have been delivered to Coast
on the Closing Date a certificate executed by the Chief Executive Officer and
the Chief Financial Officer of GBB certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 10.2, 10.3, 10.4 and 10.5.
10.7 FAIRNESS OPINION. Coast shall have received a letter from Sandler
O'Neill & Partners, L.P., dated as of a date within five Business Days of the
mailing of the Joint Proxy Statement and Prospectus to the shareholders of
Coast, to the effect that the transactions contemplated by this Agreement are
fair from a financial point of view to the shareholders of Coast.
ARTICLE 11.
CONDITIONS PRECEDENT TO OBLIGATIONS OF GBB
All of the obligations of GBB to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by GBB:
11.1. LEGAL OPINION. GBB shall have received the opinion of Lillick &
Charles LLP, attorneys for Coast, and in form and substance satisfactory to the
counsel of GBB, to the effect that: (a) Coast is a corporation validly existing
under the laws of the State of California with full corporate power and
authority to enter into this Agreement and the Agreement of Merger and to
consummate the transactions contemplated hereby and thereby; (b) all corporate
proceedings on the part of Coast necessary to be taken in connection with the
Merger in order to make the same effective have been duly and validly taken; and
(c) this Agreement and the Agreement of Merger have been duly and validly
authorized, executed and delivered on behalf of Coast, and constitute (subject
to standard exceptions of enforceability arising from the bankruptcy laws and
rules of equity) valid and binding agreements of Coast.
11.2. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS. All the
covenants, terms and conditions of this Agreement to be complied with and
performed by Coast at or before the Closing Date shall have been complied with
and performed in all material respects. Each of the representations and
warranties of Coast contained in Article 4 hereof shall have been true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects) on and as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date or for changes expressly contemplated by this
Agreement) on and as of the Closing Date, with the same effect as though such
representations
57
<PAGE>
and warranties had been made on and as of the Closing Date. It is understood
and acknowledged that the representations being made on and as of the Closing
Date shall be made without giving effect to any update with respect to the
Coast Lists in accordance with Section 6.2(j).
11.3. AUTHORIZATION OF MERGER. All actions necessary to authorize the
execution, delivery and performance of this Agreement and the Agreement of
Merger by Coast and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors and
shareholders of Coast, and Coast shall have full power and right to merge
pursuant to the Agreement of Merger.
11.4. THIRD PARTY CONSENTS. Coast shall have obtained all consents of
other parties to their respective mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the Merger and
the transactions contemplated herein to be consummated without a material
default, acceleration, breach or loss of rights or benefits thereunder.
11.5. ABSENCE OF CERTAIN CHANGES. Between the date of this Agreement
and the Effective Time of the Merger, there shall not have occurred any event
that has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, results of operations or prospects of
Coast on a consolidated basis whether or not such event, change or effect is
reflected in the Coast Lists as amended or supplemented after the date of this
Agreement. Without limiting the generality of the foregoing, any failure of
Coast's or CCB's mission critical computer systems or software to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such mission critical systems and
software records, stores, processes and presents such calendar dates falling on
or before December 31, 1999, shall constitute such a material adverse effect.
11.6. OFFICERS' CERTIFICATE. There shall have been delivered to GBB on
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of Coast certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 11.2, 11.3, 11.4 and 11.5.
11.7. FAIRNESS OPINION. GBB shall have received a letter from First
Security Van Kasper dated as of a date within five Business Days of the mailing
of the Joint Proxy Statement and Prospectus to the shareholders of GBB, to the
effect that the transactions contemplated by this Agreement are fair from a
financial point of view to the shareholders of GBB.
11.8. SHAREHOLDER'S AGREEMENTS. Concurrently with the execution of this
Agreement, each director of Coast and CCB shall have executed and delivered to
GBB agreements substantially in the form of EXHIBIT D hereto.
58
<PAGE>
11.9. AGREEMENTS NOT TO COMPETE. Concurrently with the execution of
this Agreement, the directors of Coast and CCB shall have executed and delivered
to GBB agreements substantially in the form of EXHIBIT C hereto.
11.10. AFFILIATES AGREEMENTS. Concurrently with the execution of this
Agreement, GBB shall have received from each person named in the letter or
otherwise referred to in Section 6.9 an executed copy of an agreement
substantially in the form on EXHIBIT B hereto.
11.11. EMPLOYEE BENEFIT PLANS. GBB shall have received satisfactory
evidence that all of Coast's employee benefit plans, programs and arrangements,
including, without limitation, the Coast 401(k) Plan, have been treated as
provided in Article 12 of this Agreement.
11.12. DISSENTING SHARES. The number of shares of Coast Stock and GBB
Stock for which demand is made to be Coast Perfected Dissenting Shares and GBB
Perfected Dissenting Shares shall not exceed an amount which, when combined with
other amounts payable in connection with the Merger, would result in the Merger
being disqualified from pooling of interest accounting treatment.
11.13. REMEDIATION. All remediation of environmental contamination or
conditions on any Coast Property shall have been completed to the satisfaction
of GBB.
11.14. COAST ADJUSTED BOOK VALUE. At least five Business Days prior to
the Effective Time of the Merger, Coast shall provide GBB with Coast's
consolidated financial statements as of the close of business on the last day of
the month prior to the Effective Time of the Merger. Such financial statements
shall have been prepared in all material respects in accordance with generally
accepted accounting principles and other applicable legal and accounting
requirements, and reflect all period-end accruals and other adjustments. At the
close of business on the last day of the month preceding the Effective Time of
the Merger, the Coast Adjusted Book Value shall be not less than:
(a) $33,330,000 if the Merger occurs in March 2000;
(b) $34,000,000 if the Merger occurs in April 2000;
(c) $34,417,000 if the Merger occurs in May 2000;
(d) $34,834,000 if the Merger occurs in June 2000; and
(e) $35,251,000 if the Merger occurs in July 2000.
11.15. TERMINATION OF COAST STOCK OPTION PLAN. GBB shall have received
satisfactory evidence that the Coast Stock Option Plan has been terminated prior
to the Effective Time of the Merger.
59
<PAGE>
11.16 ALLOWANCE FOR LOAN LOSSES. Coast's allowance for loan and lease
losses, as reflected on the consolidated financial statements referred to in
Section 11.14, shall equal the greater of:
(a) 1.65% of Coast's total gross loans or $3,467,000 if the
Merger occurs in March 2000;
(b) 1.65% of Coast's total gross loans or $3,500,000 if the
Merger occurs in April 2000;
(c) 1.65% of Coast's total gross loans or $3,533,000 if the
Merger occurs in May 2000;
(d) 1.65% of Coast's total gross loans or $3,567,000 if the
Merger occurs in June 2000; and
(e) 1.65% of Coast's total gross loans or $3,600,000 if the
Merger occurs in July 2000.
11.17 REGULATORY APPROVALS. Any and all approvals or consents of any
Governmental Entity which are necessary to consummate the Merger and the
transactions contemplated hereby shall have been granted without the imposition
of (a) any conditions which would, in the reasonable opinion of GBB, be unduly
burdensome on the business and operations of GBB as conducted and as anticipated
by GBB to be conducted subsequent to the Effective Time of the Merger, or (b)
any condition or requirement which, in the reasonable opinion of GBB so
materially and adversely affects the anticipated economic and business benefits
to GBB of the transactions contemplated by this Agreement as to render
consummation of such transaction inadvisable (in which case GBB shall promptly
notify Coast).
60
<PAGE>
ARTICLE 12.
EMPLOYEE BENEFITS
12.1 EMPLOYEE BENEFITS. Prior to the Effective Time of the Merger,
Coast shall do any of the following at the direction of GBB: (a) continue to
maintain the Coast 401(k) Plan, (b) discontinue one or more types of
contributions to the Coast 401(k), or (c) divide the Coast 401(k) Plan into
separate employee stock ownership and 401(k) component plans and continue or
discontinue contributions to any or all of such component plans or, with respect
to the 401(k) component, terminate such component plan. If GBB determines in
its sole discretion that the 401(k) component of the Coast 401(k) Plan should be
terminated prior to the Effective Time of the Merger, Coast agrees to use its
best efforts to have that component terminated prior to the Effective Time of
the Merger, provided that any such termination shall be expressly conditioned
upon consummation of the Merger and shall provide, by its terms, that such
termination shall automatically be rescinded without the necessity of any action
by Coast in the event that the Merger is not consummated, and to obtain an IRS
determination that such component continues to be qualified upon termination.
If Coast continues to maintain the Coast 401(k) Plan, or any portion of it,
through the Effective Time of the Merger, GBB may elect, thereafter, to
continue, modify or merge the Coast 401(k), to discontinue contributions to the
Coast 401(k) Plan as GBB determines in its sole discretion or terminate the
401(k) component of the Coast 401(k) Plan, in each case in a manner consistent
with the pooling accounting rules.
As soon as practicable after the Effective Time of the Merger, all other
Employee Plans will be discontinued or merged into GBB plans, in the discretion
of GBB, and employees of Coast and CCB shall become eligible for the employee
benefit plans of GBB on the same terms as such plans and benefits are generally
offered from time to time to employees of GBB and the Banks in comparable
positions with GBB or the Banks. For purposes of determining such employment
eligibility and vesting under the employee benefit plans of GBB, GBB shall
recognize such employees' years of service with Coast or CCB beginning on the
date such employees commenced employment with Coast or CCB through the Effective
Time of the Merger.
ARTICLE 13.
TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time of the Merger upon the occurrence of any of the following:
(a) By mutual agreement of the parties, in writing;
(b) By Coast (unless Coast's Board of Directors shall have
withdrawn or modified in a manner adverse to GBB in any respect its
recommendation of the Merger to the holders of Coast Stock) or GBB (unless GBB's
Board of Directors shall have withdrawn or
61
<PAGE>
modified in a manner adverse to Coast in any respect its recommendation of
the Merger to the holders of GBB Stock) upon the failure of the shareholders
of Coast or GBB to give the requisite approval of this Agreement;
(c) By Coast promptly following the expiration of 20 days from
delivery of written notice by Coast to GBB of GBB's breach of or failure to
satisfy any covenant or agreement contained herein resulting in a material
impairment of the benefit reasonably expected to be derived by Coast from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by Coast or cured by GBB prior to expiration of such
20 day period);
(d) By GBB promptly following the expiration of 20 days from
delivery of written notice by GBB to Coast of Coast's breach of or failure to
satisfy any covenant or agreement contained herein resulting in a material
impairment of the benefit reasonably expected to be derived by GBB from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by GBB or cured by Coast prior to expiration of such
20 day period);
(e) By Coast or GBB upon the expiration of 30 days after any
Governmental Entity denies or refuses to grant any approval, consent or
authorization required to be obtained in order to consummate the transactions
contemplated by this Agreement unless, within said 30 day period after such
denial or refusal, all parties hereto agree to resubmit the application or
appeal the decision to the regulatory authority that has denied, or refused to
grant the approval, consent or qualification requested;
(f) By Coast or GBB if any conditions set forth in Article 9
shall not have been met by July 31, 2000; provided, however, that this Agreement
shall not be terminated pursuant to this Section 13.1(f) if the relevant
condition shall have failed to occur as a result of any act or omission of the
party seeking to terminate;
(g) By Coast if any of the conditions set forth in Article 10
shall not have been met by July 31, 2000, or such earlier time as it becomes
apparent that such condition shall not be met, provided, however, that this
Agreement shall not be terminated pursuant to this Section 13.1(g) if the
relevant condition shall have failed to occur as a result of any act or omission
of Coast;
(h) By GBB if any of the conditions set forth in Article 11
shall not have been met by July 31, 2000, or such earlier time as it becomes
apparent that such condition shall not be met, provided, however, that this
Agreement shall not be terminated pursuant to this Section 13.1(g) if the
relevant condition shall have failed to occur as a result of any act or omission
of GBB;
(i) By GBB if Coast or CCB shall have breached any of the
obligations contained in Section 6.1(n);
62
<PAGE>
(j) By GBB if (i) Coast shall have exercised a right specified
in the last sentence of Section 6.1(n) with respect to any Superior Proposal and
shall, directly or through agents or representatives, continue any discussions
with any third party concerning such Superior Proposal for more than ten (10)
Business Days after the date of receipt of such Superior Proposal; or (ii) a
Superior Proposal that is publicly disclosed shall have been commenced, publicly
proposed or communicated to Coast which contains a proposal as to price (without
regard to the specificity of such price proposal) and Coast shall not have
rejected such proposal within ten (10) Business Days of receipt of the date its
existence first becomes publicly disclosed, if earlier;
(k) By GBB under the circumstances set forth in Section 8.3;
By Coast if GBB shall have entered into a GBB Acquisition Transaction that
includes as a condition precedent to such GBB Acquisition Transaction that GBB
terminate this Agreement; or
(m) By Coast under the circumstances set forth in Section
2.2(a)(iii).
13.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Coast or GBB as provided in Section 13.1, neither Coast nor
GBB shall have any further obligation or liability to the other party except
(a) with respect to the last sentences of each of Section 6.3(a), Section 7.3
and Section 8.3, (b) with respect to Section 14.1; (c) to the extent such
termination results from a party's willful and material breach of the warranties
and representations made by it, or willful and material failure in performance
of any of its covenants, agreements or obligations hereunder; and (d) as
provided in the Stock Option Agreement, the form of which is attached hereto as
Exhibit E and which is governed by its own terms as to termination.
13.3. FORCE MAJEURE. Coast and GBB agree that, notwithstanding anything
to the contrary in this Agreement, in the event this Agreement is terminated as
a result of a failure of a condition, which failure is due to a natural disaster
or other act of God, or an act of war, and provided neither party has materially
failed to observe the obligations of such party under this Agreement, neither
party shall be obligated to pay to the other party to this Agreement any
expenses or otherwise be liable hereunder.
ARTICLE 14.
MISCELLANEOUS
14.1. EXPENSES.
63
<PAGE>
(a) GBB hereby agrees that if this Agreement is terminated by
Coast or GBB pursuant to Section 13.1(b) with respect to the failure of GBB
shareholders to approve the Agreement an the transactions contemplated hereby,
or pursuant to Section 13.1(c), GBB shall promptly and in any event within 10
days after such termination pay Coast all Expenses (as defined in Section
14.1(e) below) of Coast, but not to exceed $175,000.
(b) Coast hereby agrees that if the Agreement is terminated by
GBB or Coast pursuant to Section 13.1(b) with respect to the failure of Coast
shareholders to approve the Agreement and the transactions contemplated hereby,
or by GBB pursuant to Section 13.1(d), 13.1(i) 13.1(j), Coast shall promptly and
in any event within 10 days after such termination pay GBB all Expenses of GBB,
but not to exceed $250,000.
(c) As an inducement to Coast to enter into this Agreement, (i)
in the event this Agreement is terminated by Coast pursuant to Section 13.1(l)
or (ii) if GBB consummates a GBB Acquisition Transaction within 12 months
following termination by Coast of this Agreement pursuant to Section 13.1(c),
(g) or (m), GBB shall wire to Coast within three Business Days of the date of
termination in the case of clause (i) and concurrent with the consummation of
the GBB Acquisition Transaction in the case of clause (ii), an amount equal to
the lesser of $2,700,000 or 2% of the assumed value of the Merger on the date
the Agreement is terminated, calculated by multiplying the amount the Conversion
Ratio would have been on that date times the Average Closing Price (for purposes
of this Section 14.1(c), determined based on the 20 consecutive trading days
immediately prior to the date of termination of the Agreement) times the number
of shares of Coast Stock outstanding on the date of this Agreement (plus any
outstanding shares resulting from the exercise of Coast Stock Options between
the date of this Agreement and the termination thereof), which amount the
parties acknowledge as representing (x) Coast's Expenses incurred in negotiating
and undertaking to carry out the transactions contemplated by this Agreement,
including Coast's management time devoted to negotiation and preparation for the
transactions contemplated by this Agreement; (y) Coast's indirect expenses
incurred in connection with the transactions contemplated by this Agreement; and
(z) Coast's loss as a result of the transactions contemplated by this Agreement
not being consummated. Any payment previously made by GBB pursuant to Section
14.1(a) hereof shall be credited against any amount due under this Section
14.1(c). If any payment is made to Coast pursuant to this Section 14.1(c), GBB
shall have no further obligation to make any payment pursuant to Section
14.1(a).
(d) Except as otherwise provided herein, all Expenses incurred
by GBB and Coast in connection with or related to the authorization, preparation
and execution of this Agreement, the solicitation of shareholder approvals and
all other matters related to the closing of the transactions contemplated
hereby, including, without limitation of the generality of the foregoing, all
fees and expenses of agents, representatives, counsel and accountants employed
by either such party or its affiliates, shall be borne solely and entirely by
the party which has
64
<PAGE>
incurred the same. Notwithstanding the foregoing, GBB and Coast shall share
equally the cost of printing the Joint Proxy Statement and Prospectus.
(e) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of attorneys,
accountants, investment bankers, experts and consultants to the party and its
affiliates) incurred by the party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
14.2 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another shall be in writing and delivered
personally or by confirmed facsimile transmission or sent by registered or
certified mail, postage prepaid, with return receipt requested, addressed as
follows:
To GBB: Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Attention: Steven C. Smith
Facsimile Number: (415) 494-9220
With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To Coast: Coast Bancorp
740 Front Street, Suite 240
Santa Cruz, California 95060
Attention: Harvey J. Nickelson
Facsimile Number: (831) 458-0460
With a copy to: Lillick & Charles LLP
Two Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Steven M. Plevin, Esq.
Facsimile Number: (415) 984-8300
Any such notice, request, instruction or other document shall be deemed
received (i) on the date delivered personally or delivered by confirmed
facsimile transmission, (ii) on the next Business Day after it was sent by
overnight courier, postage prepaid; or (iii) on the third Business Day after it
was sent by registered or certified mail, postage prepaid. Any of the persons
shown above may change its address for purposes of this section by giving notice
in accordance herewith.
65
<PAGE>
14.3. SUCCESSORS AND ASSIGNS. All terms and conditions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns; provided,
however, that this Agreement and all rights, privileges, duties and obligations
of the parties hereto may not be assigned or delegated by any party hereto and
any such attempted assignment or delegation shall be null and void.
14.4. COUNTERPARTS. This Agreement and any exhibit hereto may be
executed in one or more counterparts, all of which, taken together, shall
constitute one original document and shall become effective when one or more
counterparts have been signed by the appropriate parties and delivered to each
party hereto.
14.5. EFFECT OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Agreement or in any List shall terminate
immediately after the Effective Time of the Merger.
14.6. THIRD PARTIES. Each party hereto intends that this Agreement
shall not benefit or create any right or cause of action to any person other
than parties hereto. As used in this Agreement the term "parties" shall refer
only to GBB and Coast as the context may require.
14.7. LISTS; EXHIBITS; INTEGRATION. Each List, exhibit and letter
delivered pursuant to this Agreement shall be in writing and shall constitute a
part of the Agreement, although Lists and letters need not be attached to each
copy of this Agreement. This Agreement, together with such Lists, exhibits and
letters, constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
14.8. KNOWLEDGE. Except as otherwise provided herein, whenever any
statement herein or in any list, certificate or other document delivered to any
party pursuant to this Agreement is made "to the knowledge" or "to the best
knowledge" of any party or another Person, such party or other Person shall make
such statement only after conducting an investigation reasonable under the
circumstances of the subject matter thereof, and each such statement shall
constitute a representation that such investigation has been conducted.
14.9 GOVERNING LAW. This Agreement is made and entered into in the
State of California, except to the extent that the provisions of federal law are
mandatorily applicable, and the laws of the State of California shall govern the
validity and interpretation hereof and the performance of the parties hereto of
their respective duties and obligations hereunder.
14.10. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement and shall
not affect the interpretation hereof.
14.11. SEVERABILITY. If any portion of this Agreement shall be deemed by
a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable
66
<PAGE>
only if, after excluding the portion deemed to be unenforceable, the
remaining terms hereof shall provide for the consummation of the transactions
contemplated herein in substantially the same manner as originally set forth
at the date this Agreement was executed.
14.12. WAIVER AND MODIFICATION; AMENDMENT. No waiver of any term,
provision or condition of this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
Except as otherwise required by law, this Agreement and the Agreement of Merger,
when executed and delivered, may be modified or amended by action of the Boards
of Directors of GBB and Coast without action by their respective shareholders.
This Agreement may be modified or amended only by an instrument of equal
formality signed by the parties or their duly authorized agents.
14.13 ATTORNEYS' FEES. If any legal action or any arbitration upon
mutual agreement is brought for the enforcement of this Agreement or because of
an alleged dispute, controversy, breach, or default in connection with this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs and expenses incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
67
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly executed this
Agreement as of the day and year first above written.
ATTEST: GREATER BAY BANCORP
/s/ Linda M. Iannone By: /s/ David L. Kalkbrenner
- -------------------- ------------------------
Secretary David L. Kalkbrenner
President and Chief Executive
Officer
ATTEST: COAST BANCORP
/s/ Bruce H. Kendall By: /s/ Harvey J. Nickelson
- -------------------- -----------------------
Assistant Secretary Harvey J. Nickelson
President and Chief Executive Officer
68
<PAGE>
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of December 14, 1999 (the
"Agreement"), is made by and between Coast Bancorp, a California corporation
("Issuer"), and Greater Bay Bancorp, a California corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization dated December 14, 1999 (the "Reorganization Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee
(the "Merger"), with Grantee being the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Reorganization Agreement, Issuer has agreed to grant to Grantee the Option (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Reorganization Agreement, and intending to be legally bound hereby, Issuer
and Grantee agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the
Reorganization Agreement. As used in this Agreement, the following terms shall
have the meanings indicated:
(a) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(b) "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System.
(c) "Holder" means Grantee and, to the extent Grantee
has assigned its rights and obligations under this Agreement as permitted
herein, any subsidiary or direct or indirect transferee of Grantee.
(d) "Person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder.
(e) "Securities Act" means the Securities Act of 1933,
as amended.
<PAGE>
2. GRANT OF OPTION. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 958,897shares (the "Option Shares") of common stock,
no par value ("Issuer Common Stock"), of Issuer at a purchase price per Option
Share of $21.25 (the "Purchase Price"), but in no event shall the number of
Option Shares exceed 19.9% of the issued and outstanding shares of Issuer Common
Stock. The Purchase Price and the number of Option Shares that may be received
upon the exercise of the Option are subject to adjustment as set forth below.
3. EXERCISE OF OPTION.
(a) The Holder may exercise the Option, in whole or in
part, at any time and from time to time but only following the occurrence of a
Purchase Event (as defined below); PROVIDED THAT the Option shall terminate and
be of no further force and effect upon the earliest to occur of (such earliest
date the "Expiration Date"):
(i) the Effective Time of the Merger; or
(ii) 15 months after the first occurrence of a
Purchase Event; or
(iii) 15 months after the termination of the
Reorganization Agreement on or following (x) the occurrence of a Preliminary
Purchase Event (as defined below) or Purchase Event or (y) a termination by
Grantee pursuant to Section 13.1(d), 13.1(i) or 13.1(j) of the Reorganization
Agreement; or
(iv) termination of the Reorganization Agreement
in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event other than a termination by Grantee
pursuant to Section 13.1(d), 13.1(i) or 13.1(j) of the Reorganization
Agreement.
Notwithstanding anything to the contrary contained herein, any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable law, including, without limitation, the Bank Holding Company Act of
1956, as amended.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) The Board of Directors of Issuer shall have
approved, or recommended to the Issuer's shareholders that they approve, a
proposal received by Issuer from a person (other than Grantee or any subsidiary
of Grantee) to effect an Acquisition Transaction (as defined below), Tender
Offer (as defined below) or Exchange Offer (as defined below); or
(ii) Issuer, without having received Grantee's
prior written consent, shall have entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) to effect an Acquisition
Transaction; or
(iii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act and the rules and regulations promulgated thereunder) shall
2
<PAGE>
have been formed which beneficially owns or has the right to acquire beneficial
ownership of twenty percent (20%) or more of the then outstanding shares of
Issuer Common Stock.
As used herein, the term "Acquisition Transaction" shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its subsidiaries
(other than internal mergers, reorganizations, consolidations or dissolutions
involving only Issuer and/or existing subsidiaries and other than a merger,
consolidation or similar transaction in which the common shareholders of Issuer
immediately prior thereto in the aggregate own at least seventy-five percent
(75%) of the common stock of the surviving or successor corporation immediately
after the consummation thereof), (B) the disposition, by sale, lease, exchange
or otherwise, of twenty (20%) or more of the consolidated assets or deposit
liabilities of Issuer and its subsidiaries, or (C) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or any
similar transaction), other than by Issuer or its subsidiaries, of securities
representing twenty percent (20%) or more of the voting power of Issuer or any
of its subsidiaries.
(c) As used herein, a "Preliminary Purchase Event"
means any of the following events:
(i) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership of, or the
right to acquire beneficial ownership of, or any "group" (as defined under the
Exchange Act and the rules and regulations thereunder) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
ten percent (10%) or more of the then outstanding shares of Issuer Common
Stock; or
(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act), or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control ten percent (10%)
or more of the then outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively); or
(iii) Issuer, without having received Grantee's
prior written consent, shall have entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) with respect to, or the
Board of Directors of Issuer shall have recommended that the shareholders of
Issuer approve or accept, a purchase or other acquisition (including by way
of merger, consolidation, share exchange or any similar transaction), other
than by Issuer or its subsidiaries, representing ten percent (10%) or more of
the voting power of Issuer or any of its subsidiaries; or
(iv) any person (other than Grantee or any
subsidiary of Grantee) shall have filed an application or notice with the
Federal Reserve Board or other federal or state regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction; or
(v) the holders of Issuer Common Stock shall
not have approved the Reorganization Agreement at the meeting of such
shareholders held for the purpose of voting on
3
<PAGE>
the Reorganization Agreement, such meeting shall not have been held or shall
have been canceled prior to termination of the Reorganization Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors with
respect to the Reorganization Agreement, in each case after it shall have
been publicly announced that any person (other than Grantee or any subsidiary
of Grantee) shall have (A) made or disclosed an intention to make a proposal
to engage in an Acquisition Transaction or (B) commenced a Tender Offer or
filed a registration statement under the Securities Act with respect to an
Exchange Offer.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Purchase Event or Preliminary Purchase Event; PROVIDED,
HOWEVER, such notice shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event Holder wishes to exercise the Option,
it shall send to Issuer a written notice (dated the date on which it is sent to
Issuer, which date is referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a date not earlier than three (3) business days nor later than fifteen (15)
business days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). The Closing shall be held at the Issuer's
principal office or at such other place as Issuer and Holder may agree. If
prior notification to or approval of the Federal Reserve Board or any other
regulatory authority is required as a condition precedent to such purchase, then
(A) Holder shall promptly file and process the required notice or application
for approval; (B) Issuer shall cooperate with Holder in the filing of the
required notice or application for approval and the obtaining of any such
approval; and (C) the Closing Date shall be subject to extension for such period
of time, not to exceed six (6) months, as may be necessary to permit the Holder
to submit such filing to, and, if necessary, to obtain such approval from, the
Federal Reserve Board or other applicable regulatory authority; PROVIDED,
HOWEVER, that the notice of Option exercise and such governmental filing must be
made, and the Notice Date must be, no later than the date on which the Option
would otherwise terminate. Any exercise of the Option shall be deemed to have
occurred on the Notice Date.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank account
designated by Issuer, an amount equal to the Purchase Price multiplied by the
number of Option Shares to be purchased on such Closing Date and (ii) present
and surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 12(g) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, and (B) if the Option is exercised in part
only, an executed new agreement with the same terms as this Agreement evidencing
the right to purchase the balance of the shares of Issuer Common Stock
purchasable hereunder; and (ii) Holder shall deliver to Issuer a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such
4
<PAGE>
Option Shares in violation of the provisions of this Agreement or
applicable state and federal securities laws.
(c) Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERT1FICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR QUALIFIED OR REGISTERED UNDER THE SECURITIES LAWS OF ANY
STATE. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNTIL THEY HAVE
BEEN QUALIFIED OR REGISTERED UNDER APPLICABLE STATE SECURITIES
LAWS, UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES, REASONABLY SATISFACTORY TO THE ISSUER,
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. THE TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS ALSO SUBJECT TO RESALE RESTRICTIONS ARISING
UNDER THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER
14, 1999, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
OFFICE OF THE SECRETARY OF THE ISSUER.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act or
applicable state securities laws.
5. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF ISSUER.
Issuer hereby represents and warrants to Grantee as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite
corporate power and authority to enter into this Agreement and, subject to any
approvals referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been duly executed
and delivered by Issuer and constitutes a binding agreement of Issuer
enforceable against Issuer in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally or by equitable
principles, whether such enforcement is sought in law or equity.
(b) AUTHORIZED STOCK. Issuer has taken all necessary
corporate action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the
5
<PAGE>
obligation to deliver Issuer Common Stock upon the exercise of the Option
terminates, will have reserved for issuance, upon exercise of the Option,
shares of Issuer Common Stock necessary for Holder to exercise the Option,
and Issuer will take all necessary corporate action to authorize and reserve
for issuance all additional shares of Issuer Common Stock or other securities
which may be issued pursuant to Section 7 upon exercise of the Option. The
shares of Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other securities
which may be issuable pursuant to Section 7, upon issuance pursuant hereto,
shall be duly and validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all liens, claims, charges and encumbrances of
any kind or nature whatsoever, including any preemptive rights of any
stockholder of Issuer.
(c) NO CONFLICT The execution and delivery by Issuer
of this Agreement and the consummation of the transactions contemplated
hereby do not and will not violate or conflict with Issuer's Articles of
Incorporation or Bylaws, or any statute, regulation, judgment, order, writ,
decree or injunction applicable to Issuer (other than as may be effected by
Grantee's ownership of Issuer Common Stock exceeding certain limits set forth
by statute or regulation) or its properties or assets and do not and will not
violate, conflict with, result in a breach of, constitute a default (or an
event which with due notice and/or lapse of time would constitute a default)
under, result in a termination of, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or
other encumbrance upon any of the properties or assets of Issuer under the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, or loan agreement or other agreement, instrument or obligation to
which Issuer is a party, or by which Issuer or any of its properties or
assets may be bound or affected.
(d) OBSERVANCE OF COVENANTS. Issuer agrees that it
will not, by amendment of its Articles of Incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid, or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer.
(e) COMPLIANCE. Issuer shall promptly take all
action as may from time to time be required (including, complying with all
premerger notification, reporting and waiting period requirements of any
federal or state regulatory authority, as necessary, before the Option may be
exercised, and cooperating fully with Holder in preparing such applications
or notices and providing such information to the Federal Reserve Board, the
Federal Deposit Insurance Corporation, the Department of Financial
Institutions or any other regulatory authority as they may require) in order
to permit Grantee to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto, and to protect the rights of
Grantee against dilution.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that this Option is not being, and any Option
Shares or other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act and applicable state
securities laws.
6
<PAGE>
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
documentation pertaining to such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (whether upon exercise of stock
options or otherwise but excluding any issuance pursuant to an event described
in the first sentence of this Section 7(a)), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, such number of shares, together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option (with any fractional share
being rounded up to the next full share). Issuer agrees that in no event shall
the number of shares of Issuer Common Stock issued after the date of this
Agreement pursuant to the preceding sentence, together with the number of shares
of Issuer Common Stock subject to the Option, adjusted as aforesaid, exceed the
number of available authorized but unissued and unreserved shares of Issuer
Common Stock. Nothing contained in this Section 7(a) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares in breach of any
provision of the Reorganization Agreement.
(b) In the event that Issuer shall, prior to the
occurrence of an event set forth in Section 3(a) terminating the Holder's right
to exercise the Option, enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities of Issuer or
any other person or cash or any other property or the outstanding shares of
Issuer Common Stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or substantially all
of its consolidated assets or deposit liabilities to any person other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the, election of Grantee, of either (A) the Acquiring
Corporation (as defined below), (B) any person that controls the Acquiring
Corporation, (such person being referred to as the "Substitute Option Issuer"),
or (C) in the case of a merger described in clause (ii), Issuer.
(c) The Substitute Option shall have the same terms as
the Option, PROVIDED THAT if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee. The
7
<PAGE>
Substitute Option Issuer shall also enter into an agreement with the then
holder or holders of the Substitute Option in substantially the same form as
this Agreement (after giving effect for such purposes to the provisions of
this Agreement), which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of the Substitute Common Stock (as is hereinafter defined) as
is equal to the Assigned Value (as is hereinafter defined) multiplied by the
number of shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as is hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common Stock
(the "Substitute Purchase Price") shall then be equal to the Purchase Price
multiplied by a fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) As used herein, the following terms have the
meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (B) Issuer in a merger in which Issuer is the
continuing or surviving person, and (C) the transferee of all or any
substantial part of the Issuer's assets (or the assets of its subsidiaries).
(ii) "Substitute Common Stock" shall mean the
common stock issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest of
(A) the price per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person (other than Grantee or a
subsidiary of Grantee), (B) the price per share of the Issuer Common Stock to
be paid by any person (other than Grantee or a subsidiary of Grantee)
pursuant to an agreement with Issuer, and (C) the highest closing price per
share of Issuer Common Stock as quoted on The Nasdaq Stock Market (or if
Common Stock is not quoted on The Nasdaq Stock Market, the highest bid price
per share on any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Grantee and reasonably acceptable to Issuer) within the six-month
period immediately preceding the agreement governing the transaction
described in Section 7(b) which gave rise to the Substitute Option; PROVIDED,
HOWEVER, that in the event of a sale of less than all of Issuer's
consolidated assets or deposit liabilities, the Assigned Value shall be the
sum of the price paid in such sale for such assets or deposit liabilities and
the current market value of the remaining consolidated net assets of Issuer
as determined by a nationally recognized investment banking firm selected by
the Holder (or by a majority in interest of the Holders if there shall be
more than one Holder (a "Holder Majority")) and reasonably acceptable to
Issuer, divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale. In the event that an exchange offer is
made for the Issuer Common Stock or an agreement is entered into for a merger
or consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized investment
banking firm selected by Holder (or a Holder Majority) and reasonably
acceptable to Issuer.
8
<PAGE>
(iv) "Average Price" shall mean the average
closing price of the Substitute Common Stock for the one year immediately
preceding the effective date of the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares of the
Substitute Common Stock on the day preceding such consolidation, merger or
sale; PROVIDED THAT if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by Issuer, the person merging into Issuer or by any company which
controls or is controlled by such merging person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 19.9% of
the aggregate of the shares of the Substitute Common Stock outstanding prior to
exercise of the Substitute Option (with any fractional share being rounded up to
the next full share). In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of the Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). The difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee and reasonably acceptable
to the Substitute Option Issuer, whose determination shall be conclusive and
binding on the parties.
(g) Issuer shall not enter into any transaction
described in subsection (b) of this Section 7 unless the Acquiring Corporation
and any person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be necessary
so that the provisions of this Section 7 are given full force and effect
(including, without limitation, any action that may be necessary so that the
shares of Substitute Common Stock are in no way distinguishable from or have
lesser economic value than other shares of common stock issued by the Substitute
Option Issuer).
(h) At the written request of Holder delivered to the
Substitute Option Issuer prior to the occurrence of an event set forth in
Section 3(a) above terminating the Substitute Option, the Substitute Option
Issuer shall repurchase from Holder (i) the Substitute Option and/or (ii) all
Substitute Common Stock theretofore purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 7(h) is referred to as the "Substitute
Option Request Date." Such repurchase shall be at an aggregate price (the
"Substitute Option Repurchase Consideration") equal to the sum of (A) the
excess, if any, of (1) the Highest Closing Price (as defined below) for each
share of Substitute Common Stock over (2) the Substitute Purchase Price per
share of Substitute Common Stock, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be exercised
and as to which Holder has exercised its repurchase right hereunder, plus (B)
the Highest Closing Price for each share of Substitute Common Stock, multiplied
by the number of shares of Substitute Common Stock previously acquired by Holder
upon exercise of the Option or Substitute Option and as to which Holder has
exercised its repurchase right hereunder. The term "Highest Closing Price"
shall mean the highest closing price per share of Substitute Common Stock on the
Nasdaq National Market (or, if Substitute Common Stock is not quoted on The
Nasdaq Stock Market, the highest bid price per share on any day as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by Grantee and reasonably
9
<PAGE>
acceptable to Issuer) or, if such shares are not traded in a trading market
or listed on an exchange, as quoted by the brokerage firms acting as market
makers for the Substitute Common Stock prior to the trading or listing of the
Substitute Common Stock on any national securities exchange and thereafteras
reported by the principal trading market or securities exchange on which such
shares are traded, during the 60 business days preceding the Substitute
Option Request Date.
(i) The provisions of Sections 8(b), 8(c), 11 and 12
shall apply, with appropriate adjustments, to any securities for which the
Option becomes exercisable pursuant to this Section 7 and as applicable,
references in such sections to "Issuer", "Option", "Purchase Price", "Issuer
Common Stock", "Repurchase Consideration", and "Request Date" shall be deemed to
be references to "Substitute Option Issuer", "Substitute Option", "Substitute
Purchase Price", "Substitute Common Stock", "Substitute Option Repurchase
Consideration", and "Substitute Option Request Date", respectively.
8. REPURCHASE AT THE OPTION OF GRANTEE.
(a) At any time after the first occurrence of a
Repurchase Event (as defined in Section 8(e) below), at the written request of
Holder delivered to Issuer prior to the occurrence of an event set forth in
Section 3(a) above terminating the Option, Issuer shall repurchase from Holder
(i) the Option and (ii) all Option Shares theretofore purchased by Holder
pursuant hereto with respect to which Holder then has beneficial ownership. The
date on which Holder exercises its rights under this Section 8 is referred to as
the "Request Date." Such repurchase shall be at an aggregate price (the
"Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by
Holder for any Option Shares acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (A) the Applicable
Price (as defined below) for each Option Share over (B) the Purchase Price
per Option Share (subject to adjustment pursuant to Section 7(a)), multiplied
by the number of Option Shares with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable
Price over the Purchase Price (subject to adjustment pursuant to Section
7(a)) paid (or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable) by Holder
for each Option Share with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten (10) business days after the Request Date, pay the
Repurchase Consideration to Holder in immediately available funds, and Holder
shall surrender to Issuer the Option and the certificates evidencing the Option
Shares purchased thereunder with respect to which Holder then has beneficial
ownership and has designated to be repurchased, and Holder shall warrant that it
has sole record and beneficial ownership of such shares and that the same are
then free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
10
<PAGE>
(c) Notwithstanding the provisions hereof to the
contrary, to the extent that Issuer is prohibited under applicable law,
regulation or administrative policy from repurchasing all or any portion of the
Option or Option Shares, then (i) Issuer shall promptly give notice of such fact
to Holder; (ii) Issuer shall, from time to time subject to the last sentence of
this Section 8(c), deliver to Holder that portion of the Repurchase
Consideration that it is not then so prohibited from paying; (iii) at Holder's
request, Issuer shall promptly file any required notice or application for
approval and expeditiously process the same. After Holder's receipt of such
notice from Issuer, Issuer shall not be in breach of its repurchase obligation
hereunder to the extent it is or remains, despite reasonable efforts to obtain
any required approvals, legally prohibited from repurchasing the Option or
Option Shares. Holder shall have the right (A) to revoke its request for
repurchase with respect to the portion of the Option or Option Shares that
Issuer is prohibited from repurchasing, (B) to require Issuer to deliver to
Holder the Option and/or Option Shares Issuer is prohibited from repurchasing,
and (C) to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the number of such Option Shares
in respect of which the Repurchase Consideration has been lawfully paid.
Notwithstanding anything herein to the contrary, Issuer shall not be obligated
to repurchase all or any part of the Option or Option Shares pursuant to more
than one written request from Holder, except that Issuer shall be obligated to
repurchase, pursuant to more than one written request, any Option or Option
Shares in the event that Holder (1) has revoked its request for repurchase in
accordance with the provisions of this Section 8 prior to the occurrence of an
event set forth in Section 3(a) terminating the Holder's right to exercise the
Option and (2) has delivered, prior to such event, a new written notice
requesting a repurchase. If an event set forth in Section 3(a) terminating the
Holder's right to exercise the Option occurs prior to, or is scheduled to occur
within, 60 days after the date of the notice by Issuer described in clause
8(c)(i) above, then, notwithstanding the occurrence of such terminating event,
Holder shall have the right to receive the Repurchase Consideration to the
extent Issuer is or becomes, within a 60 day period from the date of such notice
by Issuer, legally permitted to repurchase. Except as set forth in the
preceding sentence, Holder's repurchase rights under this Agreement shall
terminate concurrently with the termination of Holder's right to exercise the
Option, pursuant to Section 3(a).
(d) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of Issuer Common
Stock paid for any such share by the person or groups described in Section
8(e)(i), (ii) the price per share of Issuer Common Stock received by holders of
Issuer Common Stock in connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the
highest bid price per share of Issuer Common Stock on The Nasdaq Stock Market or
other principal trading market or securities exchange on which such shares are
traded as reported by a recognized source selected by Holder during the 60
business days preceding the Request Date; PROVIDED, HOWEVER, that in the event
of a sale of less than all of Issuer's assets, the Applicable Price shall be the
sum of the price paid in such sale for such assets or deposit liabilities and
the current market value of the remaining consolidated net assets of Issuer as
determined by a nationally recognized investment banking firm selected by Holder
(or the Holder Majority) and reasonably acceptable to Issuer, divided by the
number of shares of the Issuer Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by
11
<PAGE>
Holder (or the Holder Majority) and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(e) As used herein, a "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee) shall have
acquired beneficial ownership of (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under the Exchange Act and the rules
and regulations promulgated thereunder) shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of, fifty
percent (50%) or more of the then outstanding shares of Issuer Common Stock or
(ii) any of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii)
shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject
to the conditions of Section 9(c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), after
exercise of the Option and prior to an Expiration Date, expeditiously prepare
and file, a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to the Selling Shareholder upon exercise of the
Option in accordance with the intended method of sale or other disposition
stated by the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use its best
efforts to qualify such shares or other securities for sale under any
applicable state securities laws. Issuer shall not be obligated to effect
more than one (1) registration pursuant to this Section 9(a).
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any
time after the exercise of the Option proposes to register any shares of
Issuer Common Stock under the Securities Act in connection with an
underwritten public offering of such Issuer Common Stock, Issuer will
promptly give written notice to the Holders of its intention to do so and,
upon the written request of any Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
the Holder), Issuer will cause all such shares for which a Holder requests
participation in such registration, to be so registered and included in such
underwritten public offering; provided, however, that Issuer may elect to not
cause all of such shares to be so registered (i) if the managing underwriter
imposes a limitation on the number of shares of Issuer Common Stock that may
be included in the registration because, in such underwriter's judgment, such
limitation would be necessary to effect an orderly public distribution, then
Issuer will be obligated to include only such limited portion, if any, of the
Issuer Common Stock with respect to which the Holders have requested
inclusion hereunder, or (ii) in the case of a registration solely to
implement an employee benefit plan or a registration filed on Form S-4 of the
Securities Act or any successor form, in which case Issuer shall not be
required to include any of Holder's shares in the registration; provided,
further, however, that an election pursuant to (i) may be only made one time.
If some but not all the shares of Issuer Common Stock, with respect to which
Issuer shall have received requests for registration pursuant to this Section
9(b), shall be excluded from such registration, Issuer shall make appropriate
allocation of shares to be
12
<PAGE>
registered among the Holders desiring to register their shares pro rata in
the proportion that the number of shares requested to be registered by each
such Holder bears to the total number of shares requested to be registered by
all such Holders then desiring to have Issuer Common Stock registered for
sale. Issuer shall not be obligated to effect more than one (1) registration
pursuant to this Section 9(b).
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer
shall use all reasonable efforts to cause each registration statement
referred to in Section 9(a) above to become effective and to obtain all
consents or waivers of other parties which are required therefor and to keep
such registration statement effective; provided, however, that Issuer may
delay any registration of Option Shares required pursuant to Section 9(a)
above for a period not exceeding 90 days if Issuer determines, in the good
faith exercise of its reasonable business judgment, that such registration
and offering could adversely effect or interfere with bona fide financing
plans of Issuer or would require disclosure of information, the premature
disclosure of which could adversely affect Issuer or any transaction under
active consideration by Issuer. Notwithstanding anything to the contrary
stated herein, Issuer shall not be required to register Option Shares under
the Securities Act pursuant to Section 9(a) above:
(i) on more than one occasion during any
calendar year;
(ii) within 90 days after the effective date of
a registration referred to in Section 9(b) above pursuant to which the
Holders concerned were afforded the opportunity to register or qualify such
shares under the Securities Act and such shares were registered or qualified
as requested, and
(iii) unless a request therefor is made to
Issuer by Holders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares; provided, however, that Issuer shall not
be required to consent to the general jurisdiction or qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such
payments, Issuer will pay the costs of such registration or qualification
expenses, including without limitation registration fees, qualification fees,
blue sky fees and expenses, Issuer's legal expenses, costs of special audits or
"cold comfort" letters, expenses of underwriters, excluding discounts and
commissions, and the reasonable fees and expenses of any necessary special
experts in connection with each registration pursuant to Section 9(a) or (b)
above (including the related offerings and sales by holders of Option Shares)
and all other qualifications, notifications, or exemptions pursuant to Section
9(a) or 9(b) above.
13
<PAGE>
(e) INDEMNIFICATION. In connection with any registration under
Section 9(a) or 9(b) above, Issuer hereby indemnifies the Selling Shareholders,
and each underwriter thereof, including each person, if any, who controls such
holder or underwriter within the meaning of Section 15 of the Securities Act,
against all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such indemnified party or any
underwriter expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Shareholders,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement, that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel reasonably satisfactory
to the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnified
party that may be contrary to the interest of the indemnifying party. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion
14
<PAGE>
as is appropriate to reflect the relative benefits received by Issuer, the
Selling Shareholders and the underwriters from the offering of the securities
and also the relative fault of Issuer, the Selling Shareholders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as
a result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim, provided, however, that in no case shall any
Selling Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any holder to indemnify shall be
several and not joint with other holders.
In connection with any registration pursuant to Section 9(a) or 9(b)
above, Issuer and each Selling Shareholder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply
with all reporting requirements and will do all such other things as may be
necessary to permit the expeditious sale at any time of any Option Shares by
the Selling Shareholders thereof in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time.
Issuer shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules
of any stock exchange.
10. LISTING. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are not then authorized for
quotation on The Nasdaq Stock Market or any securities exchange, Issuer, upon
the request of Holder, will promptly file an application to authorize for
quotation the shares of Issuer Common Stock or other securities to be
acquired upon exercise of the Option on The Nasdaq Stock Market and will use
its commercially reasonable efforts to obtain approval of such listing as
soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of Holder,
upon presentation and surrender of this Agreement at the principal office of
Issuer for other agreements providing for other options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms "other agreements" and "other options" as used in the preceding
sentence mean any other agreements and related options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on
15
<PAGE>
the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
12. LIMITATION ON TOTAL PROFIT AND NOTIONAL TOTAL PROFIT.
(a) Notwithstanding anything to the contrary
contained herein, in no event shall Grantee's Total Profit (as defined below
in Section 12(c) hereof) exceed $5,500,000 and, if it otherwise would exceed
such amount, Grantee, at its sole election, shall either (i) reduce the
number of shares of Issuer common stock subject to the Option, (ii) pay cash
to Issuer, or (iii) any combination thereof, so that Grantee's actually
realized Total Profit shall not exceed $5,500,000 after taking into account
the foregoing actions.
(b) Notwithstanding anything to the contrary
contained herein, the Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total Profit (as
defined below in Section 12(d) hereof) of more than $5,500,000; provided,
that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date on which the Notional Total Profit
would be less than $5,500,000.
(c) As used herein, the term "Total Profit" shall
mean the aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option (or any
portion thereof) pursuant to Section 8 hereof, (ii) (x) the amount received
by Grantee or any affiliate of Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 8 hereof, less (y) Grantee's or any
affiliate of Grantee's purchase price for such Option Shares, (iii) (x) the
net cash amounts received by Grantee or any affiliate of Grantee pursuant to
the sale of Option Shares (or any other securities into which such Option
Shares shall be converted or exchanged) to any unaffiliated party, less (y)
Grantee's or any affiliate of Grantee's purchase price of such Option Shares,
and (iv) any equivalent amounts with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit"
with respect to any number of shares as to which Grantee or any affiliate of
Grantee may propose to exercise the Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that the Option
were exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Grantee or any
affiliate of Grantee as of such date, were sold for cash at the closing
market price for the Issuer Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
(e) Grantee agrees, promptly following any exercise
of all or any portion of the Option, and subject to its rights under Section
8 hereof, to use and cause any wholly owned Subsidiary of Grantee to use
commercially reasonable efforts promptly to maximize the value of Option
Shares purchased taking into account market conditions, the number of Option
Shares, the potential negative impact of substantial sales on the market
price for Issuer Common stock, and the availability of an effective
registration statement to permit public sale of Option Shares.
13. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section
9, each of the parties hereto and any Holder shall bear and pay all costs and
expenses incurred by it or on its behalf in
16
<PAGE>
connection with the transactions contemplated hereunder, including, without
limitation, fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY. This
Agreement, together with the Reorganization Agreement and the other documents
and instruments referred to herein and therein (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and (ii)
is not intended to confer upon any person other than the parties hereto, and
their respective successors and assigns, any rights or remedies hereunder,
except as expressly provided in this Agreement.
(d) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court or a federal or state
regulatory authority of competent jurisdiction to be invalid, void or
unenforceable, such invalid, void or unenforceable term, provision, covenant or
restriction shall, if it is so susceptible, be deemed modified to the minimum
extent necessary to render the same valid and enforceable and, in all events,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. Without limiting the foregoing, if for any reason such
court or regulatory authority determines that Holder may not legally acquire, or
Issuer may not legally repurchase, the full number of shares of Issuer Common
Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section 7), it is
the express intention of Issuer to allow Holder to acquire or to require Issuer
to repurchase the maximum number of shares as may be legally permissible without
any amendment or modification hereof.
(e) 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 rules.
(f) DESCRIPTIVE HEADINGS. The descriptive headings
contained herein are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be given
(and shall be deemed to have been duly received if so given) by personal
delivery, by telecopy (PROVIDED THAT copy is concurrently sent by first class
U.S. mail, postage prepaid), or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the parties as follows:
17
<PAGE>
To Grantee: Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Attention: Steven C. Smith
Facsimile Number: (415) 494-9220
With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To Issuer: Coast Bancorp
740 Front Street, Suite 240
Santa Cruz, California 95060
Attention: Harvey J. Nickelson
Facsimile Number: (831) 458-0460
With a copy to: Lillick & Charles LLP
Two Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Steven M. Plevin, Esq.
Facsimile Number: (415) 984-8300
or to such other address as a party may have furnished to the others in writing
in accordance with this paragraph, except that notices of change of address
shall only be effective upon receipt. Any notice, demand or other communication
given pursuant to the provisions of this Section 11(g) shall be deemed to have
been given on the date actually delivered or on the third day following the date
mailed, whichever first occurs.
(h) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall be considered
one and the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign the same
counterpart.
(i) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be assigned
by any of the parties hereto without the prior written consent of the other
party, except that Grantee may assign this Agreement to a wholly-owned
subsidiary of Grantee and at any time after a Purchase Event occurs, Holder may
assign or transfer its rights and obligations hereunder, in whole or in part, to
any Person or Persons, subject to compliance with applicable laws. In order to
effectuate the foregoing, Grantee shall be entitled to surrender this Agreement
to Issuer in exchange for two or more Agreements entitling the holders thereof
to purchase in the aggregate the same number of shares of Common Stock as may be
purchasable hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and permitted assigns.
18
<PAGE>
(j) FURTHER ASSURANCES. In the event of any exercise of
the Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(k) SPECIFIC PERFORMANCE. The parties hereto agree that
this Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
19
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
GREATER BAY BANCORP COAST BANCORP
By: /s/ David L. Kalkbrenner By: /s/ Harvey J. Nickelson
------------------------ -----------------------
David L. Kalkbrenner Harvey J. Nickelson
President and Chief President and Chief
Executive Officer Executive Officer
20
<PAGE>
FOR INFORMATION CONTACT
- -----------------------
AT COAST BANCORP:
HARVEY NICKELSON, PRESIDENT & CEO
(831) 458-4500
AT GREATER BAY BANCORP:
DAVID L. KALKBRENNER, PRESIDENT & CEO
STEVEN C. SMITH, EVP, CAO & CFO
(650) 813-8222
COASTBANCORP
FOR IMMEDIATE RELEASE
- ---------------------
COAST BANCORP AND
GREATER BAY BANCORP
ANNOUNCE AGREEMENT TO MERGE
SANTA CRUZ, CA; December 14, 1999 -- Coast Bancorp (Nasdaq:CTBP), Santa Cruz,
California, and Greater Bay Bancorp (Nasdaq:GBBK), Palo Alto, California,
announced today the signing of a definitive agreement for a merger of the two
companies. Following the transaction, Coast Commercial Bank, a wholly owned
subsidiary of Coast Bancorp, will operate as a wholly owned subsidiary of
Greater Bay Bancorp. The merger is expected to be completed late in the first
quarter of 2000 or early in the second quarter of 2000.
Coast Bancorp, founded in 1982, has banking offices in Aptos, Capitola, Santa
Cruz, Scotts Valley and Watsonville, California serving individuals and the
small to mid-sized business community. As of September 30, 1999, Coast Bancorp
had total assets of $350.1 million and total deposits of $282.8 million. For the
nine months ended September 30, 1999, net income was $5.0 million.
Harvey Nickelson, President and Chief Executive Officer of Coast Bancorp,
commented, "We are pleased to join Greater Bay Bancorp, a company that has
demonstrated a superior performance record with strong earnings and solid asset
growth. We believe a merger with Greater Bay Bancorp will enhance our ability to
serve our customers and increase our client base with even larger business
organizations through expanded product offerings and increased lending
capabilities. Our shareholders will benefit by receiving enhanced value for
their Coast Bancorp stock and additional liquidity available through a combined
market capitalization of Greater Bay Bancorp of over $650 million. Greater Bay
Bancorp's Super Community Banking strategy is completely compatible with Coast
Commercial Bank's philosophy of a strong, enthusiastic commitment to our local
community."
David Kalkbrenner, President and Chief Executive Officer of Greater Bay Bancorp,
stated, "We are excited to have Coast Bancorp join the Greater Bay super
community banking family. Coast Bancorp is among the top rated California banks
for safety, strength and performance. It is a quality organization with a strong
management team that has demonstrated success year after year. This merger
represents a unique opportunity for us to continue our expansion in the Northern
California markets. We will also be pleased to welcome James Thompson, chairman
of Coast Bancorp, to our Board when the merger closes."
<PAGE>
TERMS OF THE MERGER
The terms of the agreement provide for the shareholders of Coast Bancorp to
receive shares of Greater Bay Bancorp stock. Coast Bancorp currently has
approximately 4,819,000 shares of common stock outstanding. If the average
closing price of Greater Bay Bancorp common stock is between $32.84 and $38.16,
Greater Bay Bancorp will issue 0.675 shares for each outstanding share of common
stock of Coast Bancorp. If the average closing price of Greater Bay Bancorp
common stock is greater than $38.16, the conversion ratio will equal the
quotient obtained by dividing (a) $25.76 plus the product of 0.333 times the
difference between the average closing price of Greater Bay Bancorp stock and
$38.16, by (b) the average closing price of Greater Bay Bancorp stock.
If the average closing price of Greater Bay Bancorp common stock is less than
$32.84, Greater Bay Bancorp may elect to exercise a top up option. In that case,
the conversion ratio will equal the quotient obtained by dividing $22.17 by the
average closing price of Greater Bay Bancorp stock. If Greater Bay Bancorp does
not elect the top up option, Coast Bancorp may terminate the agreement. If Coast
Bancorp does not terminate the agreement, the conversion ratio will be 0.675.
The merger is subject to certain conditions, including the approval of the
shareholders of Greater Bay Bancorp and Coast Bancorp and regulatory approval.
Upon consummation of the merger, former Coast Bancorp shareholders will own
approximately 18% of Greater Bay Bancorp's outstanding shares, assuming
completion of Greater Bay Bancorp's pending merger with Mt. Diablo Bancshares.
Greater Bay Bancorp and its financial services subsidiaries, Bay Area Bank, Bay
Bank of Commerce, Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank
and Peninsula Bank of Commerce, along with its operating divisions, Greater Bay
Corporate Finance Group, Greater Bay Bank Contra Costa Region, Greater Bay Bank
Fremont Region, Greater Bay Bank Santa Clara Commercial Banking Group, Greater
Bay International Banking Division, Greater Bay Trust Company, Pacific Business
Funding and Venture Banking Group, serve clients throughout Silicon Valley, the
San Francisco Peninsula and the Contra Costa Tri Valley Region, with offices
located in Cupertino, Fremont, Hayward, Millbrae, Palo Alto, Redwood City, San
Francisco, San Jose, San Leandro, San Mateo, San Ramon, Santa Clara, and Walnut
Creek.
SAFE HARBOR
CERTAIN MATTERS DISCUSSED IN THIS PRESS RELEASE CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE FORWARD LOOKING STATEMENTS RELATE TO FUTURE FINANCIAL PERFORMANCE
AND CONDITION AND PENDING MERGERS. THESE FORWARD LOOKING STATEMENTS ARE SUBJECT
TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED, SUGGESTED
OR IMPLIED BY THE FORWARD LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS,
INCLUDING, BUT NOT LIMITED TO, WHEN AND IF THE PROPOSED MERGERS ARE CONSUMMATED,
THE SUCCESS OF GREATER BAY BANCORP IN INTEGRATING THE NEW BANKS INTO ITS
ORGANIZATION AND OTHER RISKS DETAILED IN THE GREATER BAY BANCORP AND COAST
BANCORP REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING
THEIR ANNUAL REPORTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998.
<PAGE>
For investor information on Greater Bay Bancorp at no charge, call the automated
shareholder information line at 1-800-PRO-INFO (1-800-776-4636) and enter code
GBBK. For international access, dial 1-201-432-6555.
# # #
