As filed with the Securities and Exchange Commission on September 23, 1998
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------------------------
SANTA BARBARA BANCORP
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
California 6022 95-3673456
(State or other jurisdiction of incorporation or (Primary Standard Industrial (I.R.S. Employer Identification No.)
organization) Classification No.)
1021 Anacapa Street
Santa Barbara, California 93101
(805) 564-6298
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Jay D. Smith, Esq.
1021 Anacapa Street
Santa Barbara, California 93101
(805) 564-6310
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
CHARLES E. GREEF, ESQ. JAMES E. TOPINKA, ESQ.
Jenkens & Gilchrist, Preston Gates & Ellis, LLP
a Professional Corporation One Maritime Plaza
1445 Ross Avenue, Suite 3200 Suite 2400
Dallas, Texas 75202 San Francisco, California 94111
(214) 855-4500 (415) 788-8822
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the Securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
---------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CALCULATION OF REGISTRATION FEE
Proposed maximum Proposed maximum
Title of each class of Amount to offering price aggregate Amount of
securities to be registered be registered per unit (2) offering price registration fee
- --------------------------------- --------------------- --------------------- ---------------------- ---------------------
Common Stock, no par value....... 9,345,000 shares(1) $22.53 $210,505,000 (2) $62,100
================================= ===================== ===================== ====================== =====================
<FN>
(1) Based upon the expected maximum number of shares of common stock of the
Registrant issuable to holders of common stock of Pacific Capital Bancorp,
a California corporation ("Pacific"), in the proposed merger of Pacific
into the Registrant.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 (c) and (f)(1) under the Securities Act of 1933,
as amended (the "Securities Act"), based upon the market value as of
September 17, 1998 of all shares of Pacific common stock to be acquired by
the Registrant in the transaction described herein.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Pacific Capital Bancorp
307 South Main Street
Salinas, California 93901
November ___, 1998
TO THE SHAREHOLDERS OF
PACIFIC CAPITAL BANCORP:
You are cordially invited to attend a Special Meeting of Shareholders
of Pacific Capital Bancorp ("Pacific") to be held at Corral de Tierra Country
Club, 81 Corral de Tierra Road, Salinas, California, at ______ p.m., local time,
on ____________, December ___, 1998 (the "Pacific Meeting").
At the Pacific Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated as of July 20, 1998, by and between Pacific
and Santa Barbara Bancorp ("SBB") and a related Agreement and Plan of Merger
(the "Merger Agreement") between Pacific and SBB (collectively, the
"Agreements"), and the transactions contemplated thereby, pursuant to which
Pacific will be merged with and into SBB, with SBB as the surviving corporation
to be operated with the resulting name "Pacific Capital Bancorp" (the "Merger").
The Merger is more fully described in the accompanying Joint Proxy
Statement/Prospectus. Copies of the Agreements are attached to the Joint Proxy
Statement/Prospectus as Appendix A and Appendix B. No other business will be
transacted at the Pacific Meeting other than matters incidental to the conduct
of the Pacific Meeting.
Under the California General Corporation Law, the approval and adoption
of the Agreements and the transactions contemplated thereby requires the
affirmative vote of the holders of a majority of the outstanding shares of
common stock of Pacific. The proposed Merger is also subject to approval by the
shareholders of SBB, certain regulatory approvals and satisfaction of the
conditions contained in the Reorganization Agreement.
As a result of the Merger, each share of common stock, no par value, of
Pacific (the "Pacific Common Stock") outstanding at the effective time of the
Merger (other than shares with respect to which dissenters' rights are perfected
in accordance with the California General Corporation Law) will be converted
into the right to receive 1.935 shares of the fully paid and nonassessable
common stock, no par value, of SBB (the "SBB Common Stock"). No fractional
shares of SBB Common Stock will be issued in the Merger, and, in lieu thereof,
cash will be paid to Pacific shareholders in accordance with the terms of the
Reorganization Agreement.
The Board of Directors of Pacific has carefully considered the terms
and conditions of the Agreements and the proposed Merger with SBB. Van Kasper &
Company, Pacific's financial advisor, has delivered to the Board of Directors of
Pacific its opinion, dated as of ___________, 1998, that the terms of the Merger
are fair, from a financial point of view, to the shareholders of Pacific. A copy
of this opinion is attached as Appendix E to the Joint Proxy
Statement/Prospectus.
THE BOARD OF DIRECTORS OF PACIFIC HAS UNANIMOUSLY APPROVED THE
AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AT
THE PACIFIC MEETING.
The accompanying Notice of Special Meeting of Shareholders and Joint
Proxy Statement/Prospectus describe the matters to be acted upon at the Pacific
Meeting. Shareholders are urged to review carefully the attached Joint Proxy
Statement/Prospectus, which describes the Merger and the background to the
transaction, including the Appendices thereto. The Board of Directors of Pacific
has fixed the close of business on _________, 1998 as the record date (the
"Pacific Record Date") for the Pacific Meeting. Accordingly, only shareholders
of record on the Pacific Record Date will be entitled to notice of, and to vote
at, the Pacific Meeting or any adjournments or postponements thereof.
BECAUSE OF THE SIGNIFICANCE OF THE PROPOSED MERGER TO PACIFIC CAPITAL
BANCORP, YOUR PARTICIPATION IN THE PACIFIC MEETING, IN PERSON OR BY PROXY, IS
<PAGE>
ESPECIALLY IMPORTANT. AN ABSTENTION OR FAILURE TO VOTE AT THE PACIFIC MEETING OR
FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE
REORGANIZATION AGREEMENT. ACCORDINGLY, PLEASE SIGN, DATE AND MAIL THE ENCLOSED
PROXY PROMPTLY IN THE POSTAGE-PAID ENVELOPE THAT HAS BEEN PROVIDED FOR YOUR
CONVENIENCE. IF YOU ATTEND THE PACIFIC MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
We look forward to seeing you at the Pacific Meeting.
Sincerely,
Clayton C. Larson
President
<PAGE>
Pacific Capital Bancorp
307 South Main Street
Salinas, California 93901
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER ___, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Pacific Capital Bancorp ("Pacific") will be held at Corral de Tierra Country
Club, 81 Corral de Tierra Road, Salinas, California, on __________, December
___, 1998 at _____ p.m., local time, (the "Pacific Meeting"), for the following
purpose, which is more fully described in the accompanying Joint Proxy
Statement/Prospectus:
Approval of Merger. To consider and vote upon a proposal to approve
and adopt an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of July 20, 1998, by and between Pacific and
Santa Barbara Bancorp ("SBB"), and a related Agreement and Plan of
Merger (the "Merger Agreement") between Pacific and SBB (collectively,
the "Agreements") and the transactions contemplated thereby, pursuant
to which Pacific will be merged with and into SBB, with SBB as the
surviving corporation (the "Merger") and with the resulting name
"Pacific Capital Bancorp", upon the terms and subject to the
conditions set forth in the Reorganization Agreement, as more fully
described in the accompanying Joint Proxy Statement/Prospectus.
A copy of the Agreements are attached as Appendix A and Appendix B to
the accompanying Joint Proxy Statement/Prospectus.
No other business will be transacted at the Pacific Meeting other than
matters incidental to the conduct of the Pacific Meeting.
The Pacific Board of Directors has fixed the close of business on
_____________, 1998 (the "Record Date"), as the record date for the Pacific
Meeting. Only holders of record of shares of Pacific common stock, no par value
per share (the "Pacific Common Stock"), at the close of business on the Record
Date are entitled to notice of, and to vote at, the Pacific Meeting or any
adjournment(s) thereof. Approval of the Merger requires the affirmative vote of
the holders of not less than a majority of the outstanding shares of Pacific
Common Stock.
In connection with the Merger, shareholders of Pacific may be entitled
to exercise dissenters' rights and to receive cash in an amount equal to the
fair market value of their shares of Pacific Common Stock in lieu of receiving
the SBB Common Stock in the Merger by complying with certain procedures
specified by California law. See "THE MERGER--Rights of Dissenting Shareholders"
in the accompanying Joint Proxy Statement/Prospectus.
Your vote is important regardless of the number of shares of Pacific
Common Stock you own. Each shareholder, even though he or she may not plan to
attend the Pacific Meeting in person, is requested to sign, date and return the
enclosed Proxy in the enclosed postage-paid envelope. You may revoke your Proxy
at any time prior to its exercise. Any shareholder present in person at the
Pacific Meeting or at any adjournment or postponements thereof may revoke his or
her Proxy and vote personally on each matter brought before the Pacific Meeting.
By order of the Board of Directors,
James L. Gattis
Corporate Secretary
Salinas, California
November ___, 1998
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101
November ____, 1998
TO THE SHAREHOLDERS OF
SANTA BARBARA BANCORP:
You are cordially invited to attend a Special Meeting of Shareholders
of Santa Barbara Bancorp ("SBB") to be held at the Lobero Theater, 33 East Canon
Perdido, Santa Barbara, California, at 2:00 p.m., local time, on Tuesday,
December 15, 1998 (the "SBB Meeting").
At the SBB Meeting, you will be asked to consider and vote upon the
following matters:
1. A proposal to approve and adopt an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), dated as of July 20, 1998, by
and between SBB and Pacific Capital Bancorp ("Pacific") and a related Agreement
and Plan of Merger (the "Merger Agreement") between SBB and Pacific
(collectively, the "Agreements"), and the transactions contemplated thereby,
pursuant to which Pacific will be merged with and into SBB, with SBB as the
surviving corporation to be operated with the resulting name "Pacific Capital
Bancorp" (the "Merger"). The Merger is more fully described in the accompanying
Joint Proxy Statement/Prospectus. Copies of the Agreements are attached to the
Join Proxy Statement/Prospectus as Appendix A and Appendix B.
2. A proposal to approve an amendment to the Bylaws of SBB to increase
the range of the size of the Board of Directors from (i) a minimum of seven (7)
persons and a maximum of thirteen (13) persons to (ii) a minimum of nine (9)
persons and a maximum of seventeen (17) persons, with the exact number of
directors within the foregoing range to be determined by the Board of Directors
(the "Bylaw Amendment").
3. A proposal to approve an amendment to the Articles of Incorporation
of SBB to eliminate cumulative voting in the election of directors (the "Article
Amendment").
No other business will be transacted at the SBB Meeting other than
matters incidental to the conduct of the SBB Meeting.
Under the California General Corporation Law, the approval and adoption
of the Agreements and the transactions contemplated thereby, including the
Merger (Proposal 1), requires the affirmative vote of the holders of a majority
of the outstanding shares of common stock of SBB. The proposed Merger is also
subject to approval by the shareholders of Pacific, certain regulatory approvals
and satisfaction of the conditions contained in the Reorganization Agreement.
Approval of the Bylaw Amendment (Proposal 2) and approval of the Article
Amendment (Proposal 3) requires the affirmative vote of the holders of a
majority of the outstanding shares of SBB Common Stock. More detailed
information about the Bylaw Amendment and the Article Amendment is included in
the attached Joint Proxy Statement/Prospectus.
As a result of the Merger, each share of common stock, no par value, of
Pacific (the "Pacific Common Stock") outstanding at the effective time of the
Merger (other than shares with respect to which dissenters' rights are perfected
in accordance with the California General Corporation Law) will be converted
into the right to receive 1.935 shares of the fully paid and nonassessable
common stock, no par value, of SBB (the "SBB Common Stock"). No fractional
shares of SBB Common Stock will be issued in the Merger, and, in lieu thereof,
cash will be paid to Pacific shareholders in accordance with the terms of the
Reorganization Agreement. Based on the number of shares of SBB Common Stock
outstanding as of the record date for the SBB Meeting, the shares of SBB Common
Stock to be issued to the shareholders of Pacific in the Merger will represent
approximately ____% of the shares of SBB Common Stock outstanding following the
Merger.
The Board of Directors of SBB has carefully considered the terms and
conditions of the Agreements and the proposed Merger with Pacific. The Bank
Advisory Group, Inc., as financial advisor to SBB, has delivered its opinion,
dated as of __________, 1998, to the Board of Directors of SBB that the terms of
the Merger are fair, from a financial point of view, to the shareholders of SBB.
A copy of this opinion is attached as Appendix F to the Joint Proxy
Statement/Prospectus.
<PAGE>
THE BOARD OF DIRECTORS OF SBB HAS UNANIMOUSLY APPROVED THE AGREEMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AT THE SBB MEETING. IN
ADDITION, THE BOARD OF DIRECTORS OF SBB APPROVED THE BYLAW AMENDMENT AND THE
ARTICLE AMENDMENT AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF EACH OF THE BYLAW AMENDMENT AND THE ARTICLE AMENDMENT.
The accompanying Notice of Special Meeting of Shareholders and Joint
Proxy Statement/Prospectus describe each of the matters to be acted upon at the
SBB Meeting. Shareholders are urged to review carefully the attached Joint Proxy
Statement/Prospectus, which describes the Merger and the background to the
transaction, including the Appendices thereto. The Board of Directors of SBB has
fixed the close of business on _________, 1998 as the record date (the "SBB
Record Date") for the SBB Meeting. Accordingly, only shareholders of record on
the SBB Record Date will be entitled to notice of, and to vote at, the SBB
Meeting or any adjournments or postponements thereof.
BECAUSE OF THE SIGNIFICANCE OF THE PROPOSED MERGER TO SANTA BARBARA
BANCORP, YOUR PARTICIPATION IN THE SBB MEETING, IN PERSON OR BY PROXY, IS
ESPECIALLY IMPORTANT. AN ABSTENTION OR FAILURE TO VOTE AT THE SBB MEETING OR
FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE
REORGANIZATION AGREEMENT. ACCORDINGLY, PLEASE SIGN, DATE AND MAIL THE ENCLOSED
PROXY PROMPTLY IN THE POSTAGE-PAID ENVELOPE THAT HAS BEEN PROVIDED FOR YOUR
CONVENIENCE. IF YOU ATTEND THE SBB MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
We look forward to seeing you at the SBB Meeting.
Sincerely,
Donald M. Anderson David W. Spainhour William S. Thomas, Jr.
Chairman of the Board President and Chief Vice Chairman and
Executive Officer Chief Operating Officer
Santa Barbara, California
November ___, 1998
<PAGE>
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 15, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Santa
Barbara Bancorp ("SBB") will be held at the Lobero Theater, 33 East Canon
Perdido, Santa Barbara, California, on Tuesday, December 15, 1998 at 2:00 p.m.,
local time, (the "SBB Meeting"), for the following purposes, each of which is
more fully described in the accompanying Joint Proxy Statement/Prospectus:
1. Approval of Merger. To consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of July 20, 1998, by and between SBB and Pacific
Capital Bancorp ("Pacific"), and a related Agreement and Plan of Merger
(the "Merger Agreement") between SBB and Pacific (collectively, the
"Agreements") and the transactions contemplated thereby, pursuant to which
Pacific will be merged with and into SBB, with SBB as the surviving
corporation (the "Merger") and with the resulting name "Pacific Capital
Bancorp", upon the terms and subject to the conditions set forth in the
Reorganization Agreement, as more fully described in the accompanying Joint
Proxy Statement/Prospectus. A copy of the Agreements are attached as
Appendix A and Appendix B to the accompanying Joint Proxy Statement/
Prospectus.
2. Amendment to Bylaws. To consider and vote upon a proposal to approve an
amendment to the Bylaws of SBB to increase the range of the size of the
Board of Directors from (i) a minimum of seven (7) persons and a maximum of
thirteen (13) persons to (ii) a minimum of nine (9) persons and a maximum
of seventeen (17) persons, with the exact number of directors within the
foregoing range to be determined by the Board of Directors.
3. Amendment to Articles of Incorporation. To consider and vote upon a
proposal to approve an amendment to the Articles of Incorporation of SBB to
eliminate cumulative voting with respect to the election of directors.
No other business will be transacted at the SBB Meeting other than
matters incidental to the conduct of the SBB Meeting.
The SBB Board of Directors has fixed the close of business on
_____________, 1998 (the "Record Date"), as the record date for the SBB Meeting.
Only holders of record of shares of SBB common stock, no par value per share
(the "SBB Common Stock"), at the close of business on the Record Date are
entitled to notice of, and to vote at, the SBB Meeting or any adjournment(s)
thereof. Approval of the each of the matters to be voted upon at the SBB Meeting
requires the affirmative vote of the holders of not less than a majority of the
outstanding shares of SBB Common Stock.
In connection with the Merger, shareholders of SBB may be entitled to
exercise dissenters' rights and to receive cash in an amount equal to the fair
market value of their shares of SBB Common Stock by complying with certain
procedures specified by California law. See "THE MERGER -- Rights of Dissenting
Shareholders" in the accompanying Joint Proxy Statement/Prospectus.
Your vote is important regardless of the number of shares of SBB Common
Stock you own. Each shareholder, even though he or she may not plan to attend
the SBB Meeting in person, is requested to sign, date and return the enclosed
Proxy in the enclosed postage-paid envelope. You may revoke your Proxy at any
time prior to its exercise. Any shareholder present in person at the SBB Meeting
or at any adjournment or postponements thereof may revoke his or her Proxy and
vote personally on each matter brought before the SBB Meeting.
By order of the Board of Directors,
Jay D. Smith
Corporate Secretary
Santa Barbara, California
November ___, 1998
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
PROSPECTUS
OF
Santa Barbara Bancorp
--------------
[Santa Barbara [Pacific Capital
Bancorp Logo] JOINT PROXY STATEMENT Bancorp Logo]
FOR
Santa Barbara Bancorp
Special Meeting of Shareholders to be held on December 15, 1998
AND
Pacific Capital Bancorp
Special Meeting of Shareholders to be held on December __, 1998
This Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") of Santa Barbara Bancorp, a California corporation
("SBB"), and Pacific Capital Bancorp, a California corporation ("Pacific"), is
being furnished to holders of the shares of common stock, no par value per
share, of SBB (the "SBB Common Stock"), and to holders of the shares of common
stock, no par value per share, of Pacific (the "Pacific Common Stock"), in
connection with the solicitation of Proxies by the Board of Directors of SBB
(the "SBB Board") for use at the Special Meeting of Shareholders of SBB to be
held at the Lobero Theater, 33 East Canon Perdido, Santa Barbara, California, on
Tuesday, December 15, 1998 at 2:00 p.m., local time, and at any adjournments or
postponements thereof (the "SBB Meeting"), and the solicitation of Proxies by
the Board of Directors of Pacific (the "Pacific Board") for use at the Special
Meeting of Shareholders of Pacific to be held at Corral de Tierra Country Club,
81 Corral de Tierra Road, Salinas, California, on __________, December ___, 1998
at ______ p.m., local time, and at any adjournments or postponements thereof
(the "Pacific Meeting").
At the meetings referred to above, the shareholders of SBB and Pacific
will consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Reorganization, dated as of July 20, 1998 (the "Reorganization
Agreement"), by and between SBB and Pacific and a related Agreement and Plan of
Merger by and between SBB and Pacific (the "Merger Agreement") (collectively,
the Reorganization Agreement and the Merger Agreement are referred to herein as
the "Agreements"), and the transactions contemplated thereby as more fully
described herein. Copies of the Agreements are attached to this Joint Proxy
Statement/Prospectus as Appendix A and Appendix B. The Agreements provide for
the merger of Pacific with and into SBB (the "Merger"), with SBB continuing as
the surviving corporation in the Merger (the "Surviving Corporation"). The
Agreements also provide that the Articles of Incorporation of SBB shall be
amended to change its name such that the Surviving Corporation will operate
under the name "Pacific Capital Bancorp". Pursuant to the terms of the
Agreements, upon consummation of the Merger, each share of Pacific Common Stock
outstanding at the Effective Time (as defined herein) of the Merger (other than
shares with respect to which dissenters' rights have been perfected) will be
converted into 1.935 shares (the "Exchange Ratio") of SBB Common Stock. No
fractional shares of SBB shall be issued in the Merger, and, in lieu thereof,
cash will be paid to shareholders of Pacific in accordance with the terms of the
Agreements. The shares of common stock of the Surviving Corporation to be issued
to Pacific shareholders in connection with the Merger will continue to be
referred to herein as "SBB Common Stock", and the aggregate amount of all such
consideration to be received by shareholders of Pacific upon consummation of the
Merger is referred to herein as the "Merger Consideration."
This Joint Proxy Statement/Prospectus and the accompanying letter to
shareholders, Notice of Special Meeting and Proxy are first being mailed to
shareholders of SBB and Pacific on or about November ___, 1998.
See "RISK FACTORS" on page 17 for a discussion of certain factors that
should be considered by holders of SBB Common Stock and Pacific Common Stock.
THE SECURITIES TO BE ISSUED IN THE MERGER PURSUANT TO THIS JOINT PROXY STATEMENT
/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND OR ANY OTHER FEDERAL OR STATE
GOVERNMENTAL AGENCY.
-----------------
The date of this Joint Proxy Statement/Prospectus is November ___, 1998.
(continued on next page)
1
<PAGE>
SBB Common Stock and Pacific Common Stock are quoted on the Nasdaq
National Market ("Nasdaq") under the respective symbols "SABB" and "PABN." The
closing sales price of SBB Common Stock and Pacific Common Stock as reported on
Nasdaq was $32.25 and $49.00, respectively, on July 17, 1998 (the last trading
day prior to public announcement of the Merger), and $______ and $_____,
respectively, on November __, 1998 (the last practicable trading date before the
printing of this Joint Proxy Statement/Prospectus).
At the SBB Special Meeting, the shareholders of SBB will also be asked
to consider and vote on the following two additional proposals: (a) To consider
and vote upon a proposal to approve an amendment to the Bylaws of SBB to
increase the range of the size of the SBB Board from (i) a minimum of seven (7)
persons and a maximum of thirteen (13) persons to (ii) a minimum of nine (9)
persons and a maximum of seventeen (17) persons, with the exact number of
directors within the foregoing range to be determined by the SBB Board; and (b)
To consider and vote upon a proposal to approve an amendment to the Articles of
Incorporation of SBB to eliminate cumulative voting with respect to the election
of directors.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY STATEMENT/
PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. SHAREHOLDERS ARE
STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT/
PROSPECTUS IN ITS ENTIRETY.
This Joint Proxy Statement/ Prospectus does not cover any resales of
Common Stock of the Surviving Corporation to be received by shareholders of
Pacific upon consummation of the Merger, and no person is authorized to make use
of this Joint Proxy Statement/Prospectus in connection with any such resale.
No person is authorized to give any information or to make any
representations other than those contained in this Joint Proxy
Statement/Prospectus or incorporated by reference herein and, if given or made,
such other information or representations must not be relied upon as having been
authorized by SBB or Pacific. This Joint Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any security
other than the securities covered by this Joint Proxy Statement/Prospectus, or
the solicitation of a proxy to or from any person in any jurisdiction where it
is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this Joint Proxy Statement/Prospectus nor
any distribution of securities made hereunder shall, under any circumstances,
create any implication that there has been no change in the information about
SBB or Pacific contained in this Joint Proxy Statement/Prospectus since the date
hereof.
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION............................................................................................iv
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION......................................................iv
INFORMATION INCORPORATED BY REFERENCE.............................................................................v
SUMMARY .........................................................................................................1
The Companies............................................................................................1
The Special Meetings.....................................................................................2
Risk Factors.............................................................................................4
Merger ................................................................................................4
The Reorganization Agreement.............................................................................7
Mutual Stock Option Agreements...........................................................................9
Management and Operations after Merger..................................................................10
Comparison of Shareholder Rights........................................................................10
Comparative Stock Prices................................................................................11
SELECTED COMPARATIVE PER SHARE DATA.....................................................................13
SELECTED CONSOLIDATED FINANCIAL DATA....................................................................14
RISK FACTORS.....................................................................................................17
Prospects of the Surviving Corporation After the Merger.................................................17
Market Trading and Liquidity; Possible Volatility of Prices.............................................17
Credit Risk.............................................................................................18
Interest Rate Risk......................................................................................18
Impact of Year 2000.....................................................................................18
Competition.............................................................................................18
Government Regulation and Monetary Policy...............................................................19
Common Stock Dividends..................................................................................19
Economic Conditions and Geographic Concentration........................................................19
THE SBB MEETING..................................................................................................19
Date, Time and Place....................................................................................19
Matters to be Considered................................................................................19
Record Date.............................................................................................22
Quorum, Voting and Revocation of Proxies................................................................22
Vote Required to Approve the Merger.....................................................................23
Vote Required to Approve the Bylaw Amendment............................................................23
Vote Required to Approve the Article Amendment..........................................................23
THE PACIFIC MEETING..............................................................................................24
Date, Time and Place....................................................................................24
Matters to be Considered................................................................................24
Record Date.............................................................................................24
Quorum, Voting and Revocation of Proxies................................................................24
Vote Required...........................................................................................25
INFORMATION ABOUT THE PARTIES....................................................................................25
SBB ...............................................................................................25
Security Ownership of Principal Shareholders and Management of SBB......................................26
Pacific ...............................................................................................28
Security Ownership of Management of Pacific.............................................................28
i
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THE MERGER.......................................................................................................30
General ...............................................................................................30
Structure of the Merger.................................................................................31
Merger Consideration....................................................................................31
Background of the Merger................................................................................31
Reasons for the Merger; Recommendation of the SBB Board.................................................33
Reasons for the Merger; Recommendation of the Pacific Board.............................................33
Opinion of Financial Advisors...........................................................................34
Exchange of Stock Certificates; Fractional Shares.......................................................44
Share Adjustments.......................................................................................45
Effective Date..........................................................................................45
Regulatory Approvals....................................................................................45
Representations and Warranties..........................................................................47
Conduct of Business Pending the Merger and Certain Other Agreements.....................................47
Certain Conditions to Consummation of the Merger........................................................49
Termination of the Reorganization Agreement.............................................................51
Effect of Merger on Employee Benefit and Stock Option Plans.............................................53
Interests of Certain Persons in the Merger..............................................................53
Management and Operations After the Merger..............................................................56
Accounting Treatment....................................................................................59
Rights of Dissenting Shareholders.......................................................................61
Waiver and Amendment....................................................................................64
Expenses and Fees.......................................................................................64
Dividends...............................................................................................64
Nasdaq Listing..........................................................................................64
Resale of SBB Common Stock..............................................................................64
Mutual Stock Option Agreements..........................................................................65
PRO FORMA FINANCIAL DATA.........................................................................................67
DESCRIPTION OF SBB CAPITAL STOCK.................................................................................71
General ...............................................................................................71
Voting Rights...........................................................................................71
Nomination of Directors.................................................................................71
Dividend Rights.........................................................................................71
Preemptive Rights.......................................................................................72
Liquidation Rights......................................................................................72
Assessment and Redemption...............................................................................72
Restriction on Ownership................................................................................72
COMPARISON OF SHAREHOLDER RIGHTS.................................................................................72
General ...............................................................................................72
Authorized Capital Stock................................................................................72
Shareholder Matters.....................................................................................73
Directors...............................................................................................74
Amendment of Articles of Incorporation and Bylaws.......................................................74
Fair Price Provision....................................................................................75
Anti-Takeover Provisions................................................................................75
LEGAL OPINION....................................................................................................76
EXPERTS ........................................................................................................76
Independent Public Accountants for SBB..................................................................76
Independent Auditors for Pacific........................................................................76
SOLICITATION OF PROXIES..........................................................................................76
ii
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SHAREHOLDER PROPOSALS............................................................................................76
OTHER BUSINESS...................................................................................................77
</TABLE>
APPENDICES
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION
APPENDIX B AGREEMENT AND PLAN OF MERGER
APPENDIX C SANTA BARBARA BANCORP STOCK OPTION AGREEMENT
APPENDIX D PACIFIC CAPITAL BANCORP STOCK OPTION AGREEMENT
APPENDIX E FAIRNESS OPINION OF VAN KASPER & COMPANY
APPENDIX F FAIRNESS OPINION OF THE BANK ADVISORY GROUP, INC.
APPENDIX G DISSENTERS' RIGHTS UNDER THE CALIFORNIA GENERAL CORPORATION LAW
iii
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AVAILABLE INFORMATION
SBB and Pacific are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information as filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at the Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
at Seven World Trade Center, New York, New York 10048. Copies of such documents
may also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information filed electronically with the Commission, including such
information filed by SBB and Pacific. SBB Common Stock and Pacific Common Stock
are quoted on Nasdaq under the respective symbols "SABB" and "PABN." Reports,
proxy statements and other information concerning SBB and Pacific may also be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
SBB has filed a Registration Statement (together with all amendments,
schedules and exhibits thereto, the "Registration Statement") on Form S-4 (No.
333-_____) under the Securities Act of 1933, as amended (the "Securities Act"),
with the Commission covering the shares of SBB Common Stock to be issued in
connection with the Merger. As permitted by the rules and regulations of the
Commission, this Joint Proxy Statement/Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. The
Registration Statement is available for inspection and copying as set forth
above. Statements contained in this Joint Proxy Statement/Prospectus, or in any
document incorporated in this Joint Proxy Statement/Prospectus by reference, as
to the contents of any contract or other document referred to herein or therein
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
This Joint Proxy Statement/Prospectus constitutes both the proxy
statement of SBB and Pacific relating to the solicitation of proxies for their
use at their respective special meetings and the Prospectus filed as part of the
Registration Statement. This Joint Proxy Statement/Prospectus and the related
proxies and other materials are first being provided to the shareholders of SBB
and Pacific on or about November ___, 1998.
All information contained in this Joint Proxy Statement/Prospectus with
respect to SBB has been supplied by SBB, and all information with respect to
Pacific has been supplied by Pacific. Neither SBB nor Pacific warrants the
accuracy or completeness of information relating to the other party. SBB makes
no representation as to the accuracy or completeness of any Pacific documents
filed by Pacific with the Commission pursuant to the Exchange Act.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
CERTAIN INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS,
INCLUDING INFORMATION INCORPORATED BY REFERENCE HEREIN, CONSTITUTES "FORWARD-
LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND
SECTION 21E OF THE EXCHANGE ACT, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-
LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE,"
OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY. CERTAIN STATEMENTS CONTAINED IN THIS JOINT PROXY STATEMENT/
PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS,
INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING
STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
iv
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
This Joint Proxy Statement/Prospectus incorporates documents by
reference which are not presented herein or delivered herewith. Copies of any
such documents, other than exhibits thereto, are available without charge to any
person, including any beneficial owner, to whom this Joint Proxy
Statement/Prospectus is delivered upon written or oral request to the following:
SBB Documents Pacific Documents
- ------------- -----------------
Santa Barbara Bancorp Pacific Capital Bancorp
1021 Anacapa Street 307 South Main Street
Santa Barbara, California 93101-2036 Salinas, California 93901
Attention: Don Lafler Attention: Dennis DeCius
Phone: (805) 564-6312 Phone: (831) 757-4900
Fax: (805) 564-6293 Fax: (831) 757-5061
In order to ensure timely delivery of such documents, a request must be
received no later than December __, 1998.
The following SBB documents are incorporated by reference herein (File
No. 0-11113):
1. SBB's Annual Report on Form 10-K for the year ended December 31,
1997.
2. SBB's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998 and June 30, 1998.
3. SBB's Current Report on Form 8-K dated March 5, 1998.
4. The description of the SBB Common Stock set forth in SBB's
Registration Statement on Form 8-A (Registration No. 0-11113)
filed under the Exchange Act, and any amendment or report
subsequently filed with the Commission for the purpose of
updating such description.
Such incorporation by reference will not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
The following Pacific documents are incorporated by reference herein
(File No. 0-13528):
1. Pacific's Annual Report on Form 10-K for the year ended December
31, 1997.
2. Pacific's Quarterly Reports on Form 10-Q for the quarters ended
March 31, and June 30, 1998.
3. The description of the Pacific Common Stock set forth in
Pacific's Registration Statement on Form S-18 (Registration No.
2-87513) filed under the Securities Act, and any amendment or
report subsequently filed with the Commission for the purpose of
updating such description.
Such incorporation by reference will not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
Pacific's Annual Report on Form 10-K for the year ended December 31,
1997, incorporated by reference specific portions of Pacific's Annual Report to
Shareholders for that year (the "Pacific Annual Report to Shareholders"), but
does not incorporate other portions of the Pacific Annual Report to
Shareholders. Only the portions of the Pacific Annual Report to Shareholders
captioned "Selected Financial Information", "Consolidated Financial Statements",
"Notes to Consolidated Financial Statements", "Independent Auditors' Report",
"Management's Discussion and Analysis", and "Pacific Capital Bancorp Stock
Activity" are incorporated herein. Other portions of the Pacific Annual Report
to Shareholders are not incorporated herein and are not part of this
Registration Statement.
All documents filed with the Commission by SBB and Pacific pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
effectiveness of the Registration Statement of which this Joint Proxy
Statement/Prospectus forms a part and prior to the date of the SBB Meeting and
the Pacific Meeting are incorporated herein by reference and such documents will
be deemed to be a part hereof from the date of filing of such documents. Any
statement contained in this Joint Proxy Statement/Prospectus or in a document
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified or superseded for purposes of this Joint Proxy Statement/Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus.
v
<PAGE>
SUMMARY
The following is a summary of certain significant matters discussed
elsewhere or incorporated by reference in this Joint Proxy Statement/Prospectus.
This summary is qualified in its entirety by, and should be read in conjunction
with, the more detailed information appearing elsewhere or incorporated by
reference in this Joint Proxy Statement/Prospectus, and the Appendices hereto
and in documents incorporated herein by reference.
The Companies
SBB
SBB is a California corporation headquartered in Santa Barbara,
California, and a bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"). SBB was incorporated on December 7,
1981. Santa Barbara Bank & Trust ("SBB&T"), SBB's wholly owned banking
subsidiary, is a California banking corporation and member bank of the Federal
Reserve System. SBB&T is a full service commercial bank serving the California
communities of Buellton, Camarillo, Carpinteria, Fillmore, Goleta, Lompoc, Los
Olivos, Montecito, Oxnard, Santa Barbara, Santa Maria, Santa Paula, Solvang,
Vandenberg Village, Ventura and surrounding communities in Santa Barbara and
Ventura counties from 27 locations. SBB also owns Sanbarco Mortgage Company
which engages in the business of mortgage brokering services and the servicing
of brokered loans. Other than the ownership of SBB&T and Sanbarco Mortgage
Company, SBB is not engaged in any significant business activities.
At June 30, 1998, SBB had consolidated assets of approximately $1.62
billion, deposits of approximately $1.43 billion and shareholders' equity of
approximately $127.84 million. SBB Common Stock is quoted on Nasdaq under the
symbol "SABB." SBB's principal executive offices are located at 1021 Anacapa
Street in Santa Barbara, California 93101-2036, and its telephone number at this
location is (805) 564-6298.
See "PARTIES -- SBB."
Pacific
Pacific is a California corporation headquartered in Salinas,
California, and a bank holding company registered under the BHC Act. Pacific was
incorporated on January 26, 1983. Pacific owns all of the capital stock of two
banking subsidiaries: First National Bank of Central California ("First National
Bank") and South Valley National Bank ("South Valley"). First National Bank and
South Valley are full service commercial banks serving the California
communities of Carmel, Gilroy, Hollister, Monterey, Morgan Hill, Salinas, San
Juan Bautista, Soledad, Watsonville, and surrounding communities in Monterey,
San Benito, Santa Clara and Santa Cruz Counties from ten (10) locations. Pacific
does not engage in any significant business activities other than the ownership
of First National Bank of Central California and South Valley National Bank and
the ownership of one other wholly owned subsidiary, Pacific Capital Services
Corporation. Pacific Capital Services Corporation has no active operations at
this time.
On August 4, 1998, First National Bank and South Valley filed an
application with the Office of the Comptroller of the Currency (the "OCC") to
merge South Valley with and into First National Bank under the charter of First
National Bank (the "Affiliate Merger"). Upon consummation of the Affiliate
Merger, which is expected to be completed during the fourth quarter of 1998, all
of the offices of South Valley will be operated as branches of First National
Bank under the name of South Valley National Bank. No assurance can be given as
to whether or when the Affiliate Merger will be completed. Completion of the
Affiliate Merger is not a condition to completion of the transaction described
in this Joint Proxy Statement/Prospectus.
At June 30, 1998, Pacific had consolidated assets of approximately
$815.56 million, deposits of approximately $730.33 million and shareholders'
equity of approximately $76.06 million. The Pacific Common Stock is quoted on
Nasdaq under the symbol "PABN." Pacific's principal executive offices are
located at 307 South Main Street in Salinas, California 93901, and its telephone
number at this location is (408) 757-4900.
See "PARTIES -- Pacific."
1
<PAGE>
The Special Meetings
Date, Time and Place of Special Meetings
SBB. The SBB Meeting is scheduled to be held at the Lobero Theater, 33
East Canon Perdido, Santa Barbara, California, at 2:00 p.m., local time, on
Tuesday, December 15, 1998.
SEE "THE SBB MEETING -- Date, Time and Place."
Pacific. The Pacific Meeting is scheduled to be held at the Corral de
Tierra Country Club, 81 Corral de Tierra Road, Salinas, California, at ______
p.m., local time, on __________, December ___, 1998.
See "THE PACIFIC MEETING -- Date, Time and Place."
Matters to be Considered
SBB. The purpose of the SBB Meeting is to: (a) consider and vote upon a
proposal to approve and adopt the Agreements and the Merger; (b) consider and
vote upon a proposal to approve an amendment to the Bylaws of SBB to increase
the range of the size of the Board of Directors from (i) a minimum of seven (7)
persons and a maximum of thirteen (13) persons to (ii) a minimum of nine (9)
persons and a maximum of seventeen (17) persons, with the exact number of
directors within the foregoing range to be determined by the SBB Board (the
"Bylaw Amendment"); and (c) consider and vote upon a proposal to approve an
amendment to the Articles of Incorporation of SBB to eliminate cumulative voting
with respect to the election of directors (the "Article Amendment").
See "THE SBB MEETING -- Matters to be Considered."
Pacific. The purpose of the Pacific Meeting is consider and vote upon
a proposal to approve and adopt the Agreements and the Merger.
See "THE PACIFIC MEETING -- Matters to be Considered."
Record Date; Stock Entitled to Vote
SBB. Only holders of record of SBB Common Stock at the close of
business on ___________, 1998 (the "SBB Record Date") will be entitled to
receive notice of, and to vote at, the SBB Meeting and any postponements or
adjournments thereof.
See "THE SBB MEETING -- Record Date."
Pacific. Only holders of record of Pacific Common Stock at the close of
business on ____________, 1998 (the "Pacific Record Date") will be entitled to
receive notice of, and to vote at, the Pacific Meeting and any postponements or
adjournments thereof.
See "THE PACIFIC MEETING -- Record Date."
Vote Required; Quorum
SBB. The affirmative vote of the holders of at least a majority of the
total number of outstanding shares of SBB Common Stock entitled to vote at the
SBB Meeting is required to approve (a) the Agreements and the Merger, (b) the
Bylaw Amendment, and (c) the Article Amendment. Each holder of shares of SBB
Common Stock outstanding on the SBB Record Date will be entitled to one vote for
each share held of record upon each matter properly submitted at the SBB Meeting
and any postponement or adjournment thereof. A majority of all shares of SBB
Common Stock entitled to vote, represented in person or by proxy, constitutes a
quorum. Abstentions and "broker non-votes" (shares as to which brokerage firms
have not received voting instructions from their clients and therefore do not
have the authority to vote the shares at the meeting) are each included in the
calculation of the number of shares present for determination of a quorum;
however, they are not counted as votes in favor of the matters to be considered
at the SBB Meeting.
2
<PAGE>
See "THE SBB MEETING -- Quorum, Voting and Revocation of Proxies", "--
Vote Required to Approve the Merger", "-- Vote Required to Approve the Bylaw
Amendment", and "-- Vote Required to Approve the Article Amendment."
Pacific. The affirmative vote of the holders of at least a majority of
the total number of outstanding shares of Pacific Common Stock entitled to vote
at the Pacific Meeting is required to approve the Agreements and the Merger.
Each holder of shares of Pacific Common Stock outstanding on the Pacific Record
Date will be entitled to one vote for each share held of record upon each matter
properly submitted at the Pacific Meeting and any postponement or adjournment
thereof. A majority of all shares of Pacific Common Stock entitled to vote,
represented in person or by proxy, constitutes a quorum. Abstentions and "broker
non-votes" (shares as to which brokerage firms have not received voting
instructions from their clients and therefore do not have the authority to vote
the shares at the meeting) are each included in the calculation of the number of
shares present for determination of a quorum; however, they are not counted as
votes in favor of the Agreements and the Merger.
See "THE PACIFIC MEETING -- Quorum, Voting and Revocation of Proxies"
and "-- Vote Required."
Revocation of Proxies
The presence of a shareholder of either SBB or Pacific at the
respective SBB Meeting or Pacific Meeting (or at any postponement or adjournment
thereof) will not automatically revoke such shareholder's proxy. However, a
shareholder may revoke a proxy at any time prior to its exercise by (a) delivery
to the Secretary of SBB or Pacific, as appropriate, of a written notice of
revocation prior to or at the relevant meeting (or, if such meeting is adjourned
or postponed, prior to or at the time the adjourned or postponed meeting is
actually held); (b) submission of a duly executed proxy bearing a later date; or
(c) attending the relevant meeting (or, if such meeting is adjourned or
postponed, by attending the adjourned or postponed meeting) and voting in person
thereat.
In the case of a shareholder of SBB, any written revocation of proxy or
other related communications should be addressed to Jay D. Smith, Corporate
Secretary, Santa Barbara Bancorp, 1021 Anacapa Street, Santa Barbara, California
93101. In the case of a shareholder of Pacific, any written revocation of proxy
or other related communications should be addressed to James L. Gattis,
Corporate Secretary, Pacific Capital Bancorp, 307 South Main Street, Salinas,
California 93901.
See "THE SBB MEETING -- Quorum, Voting and Revocation of Proxies" and
"THE PACIFIC MEETING --Quorum, Voting and Revocation of Proxies."
Security Ownership of Management
SBB. As of the SBB Record Date, the directors and executive officers of
SBB beneficially held, in the aggregate, the ability to direct the voting with
respect to _______ shares of SBB Common Stock, comprising approximately ____% of
the voting power of the SBB Common Stock outstanding. Such directors and
executive officers of SBB have informed SBB that they intend to vote their
shares of SBB Common Stock in favor of (i) approval and adoption of the
Agreements and the Merger, (ii) approval of the Bylaw Amendment, and (iii)
approval of the Article Amendment.
See "INFORMATION ABOUT THE PARTIES -- Security Ownership of Principal
Shareholders and Management of SBB."
Pacific. As of the Pacific Record Date, the directors and executive
officers of Pacific beneficially held, in the aggregate, the ability to direct
the voting with respect to _______ shares of Pacific Common Stock, comprising
approximately ____% of the voting power of the Pacific Common Stock outstanding.
Such directors and executive officers of Pacific have informed Pacific that they
intend to vote their shares of Pacific Common Stock in favor of approval and
adoption of the Agreements and the Merger.
See "INFORMATION ABOUT THE PARTIES -- Security Ownership of Management
of Pacific."
3
<PAGE>
Risk Factors
In deciding whether to vote for approval of the Agreements and the
Merger, holders of SBB Common Stock and Pacific Common Stock should carefully
consider certain risk factors associated with the Merger.
See "RISK FACTORS" beginning on page 17 of this Joint Proxy
Statement/Prospectus.
Merger
Effects of Merger
On the Effective Date (defined herein), Pacific will merge with and
into SBB. SBB will be the surviving corporation in the Merger and will continue
its corporate existence under California law with the resulting name "Pacific
Capital Bancorp." The Agreements provide that the Articles of Incorporation of
SBB shall be amended to change the name of SBB such that the Surviving
Corporation will operate under the name "Pacific Capital Bancorp." The separate
corporate existence of Pacific will cease at the Effective Time (as defined
herein) of the Merger.
Upon the Merger becoming effective, each share of Pacific Common Stock
issued and outstanding at the Effective Time (other than shares which have been
voted against approval of the Merger and with respect to which dissenters'
rights shall have been perfected in accordance with Chapter 13 of the California
General Corporation Law (the "GCL")) will be converted automatically into the
right to receive shares of SBB Common Stock as herein described.
Subject to the terms and conditions contained in the Agreements, as a
result of the Merger each share of Pacific Common Stock will be converted into
the right to receive 1.935 shares (defined herein as the "Exchange Ratio") of
SBB Common Stock. No fractional shares of SBB Common Stock will be issued and,
in lieu thereof, holders of fractional shares of Pacific Common Stock who would
otherwise be entitled to a fractional share interest in SBB Common Stock (after
taking into account all shares of Pacific Common Stock held by such holder) will
be paid an amount of cash equal to the product of such fractional share interest
and the average of the closing bid and asked price of a share of Pacific Common
Stock as reported on Nasdaq on the business day immediately preceding the
Effective Date. See "THE MERGER -- Structure of the Merger", "-- Merger
Consideration", "-- Exchange of Stock Certificates; Fractional Shares." In
addition, pursuant to the terms of the Agreements all outstanding and
unexercised options to purchase shares of Pacific Common Stock granted under
various stock option plans maintained by Pacific will be assumed by SBB and will
be converted automatically at the Effective Date into, and will become, stock
options to purchase shares of Common Stock of the Surviving Corporation. See
"THE MERGER -- Effect of Merger on Employee Benefit and Stock Option Plans --
Stock Option Plans."
For information on how shareholders of Pacific will be able to exchange
certificates representing shares of Pacific Common Stock for certificates
representing Surviving Corporation Common Stock, see "THE MERGER -- Exchange of
Stock Certificates; Fractional Shares."
Effective Date
The Merger will become effective on the date (the "Effective Date") and
at the time (the "Effective Time") that the Merger Agreement and related
documents are filed with the California Secretary of State. Subject to the
satisfaction of conditions specified in the Reorganization Agreement, the
parties expect the Merger to become effective on or about December 31, 1998,
although there can be no assurance as to whether or when the Merger will occur.
See "THE MERGER -- Effective Date" and "-- Certain Conditions to
Consummation of the Merger."
Value of Merger
As of November ___, 1998, based on the Exchange Ratio and the average
of the closing bid and asked price of SBB Common Stock as reported on Nasdaq for
that date, the Merger had a per share value of $______ to holders of Pacific
Common Stock, and the approximate total value of the Merger Consideration to the
shareholders of Pacific was $______ million. Because the Exchange Ratio is
fixed, the market value of the Merger Consideration as stated above may increase
or decrease during the pendency of the transaction depending on the market price
of SBB Common Stock.
4
<PAGE>
Based upon (i) the ____________ shares of SBB Common Stock outstanding
on the SBB Record Date, (ii) the _________ shares of SBB Common Stock reserved
for issuance upon the exercise of stock options to acquire SBB Common Stock
outstanding on the SBB Record Date, (iii) the ________ shares of Pacific Common
Stock outstanding on the Pacific Record Date (as defined herein), (iv) the
________ shares of Pacific Common Stock reserved for issuance upon the exercise
of stock options to acquire Pacific Common Stock outstanding on the Pacific
Record Date, and assuming (i) the exercise of all outstanding options to acquire
shares of SBB Common Stock and Pacific Common Stock, and (ii) no dissenters'
rights are perfected by any shareholder of either SBB and Pacific, shares held
by SBB and Pacific shareholders after consummation of the Merger are estimated
to represent approximately ______ percent and _____ percent, respectively, of
the Surviving Corporation. Without giving effect to the exercise of any stock
options to acquire shares of SBB Common Stock and Pacific Common Stock as
assumed above, shares held by SBB and Pacific shareholders after consummation of
the Merger are estimated to represent approximately _______ percent and _______
percent, respectively, of the Surviving Corporation. See "MERGER -- Effect of
Merger on Employee Benefit and Stock Option Plans."
Reasons for Merger and Recommendation of Boards of Directors
The SBB Board and the Pacific Board have each unanimously approved the
Agreements and the transactions contemplated thereby, including the Merger. The
Board of Directors of each of SBB and Pacific believe that the Merger and the
transactions contemplated by the Agreements are in the best interests of the
shareholders of each of SBB and Pacific and recommend a vote "FOR" approval and
adoption of the Agreements and the Merger. The conclusions of the Board of
Directors of SBB and Pacific with respect to the Merger are based upon a number
of factors more fully described herein, including the receipt of fairness
opinions from their respective financial advisors.
See "THE MERGER -- Background of the Merger", "-- Reasons for the
Merger; Recommendation of the SBB Board", "--Reasons for the Merger;
Recommendation of the Pacific Board" and "-- Opinion of Financial Advisors."
In addition, the SBB Board also recommends a vote "FOR" the Bylaw
Amendment and the Article Amendment.
Opinions of Financial Advisors
SBB. The Bank Advisory Group, Inc. ("Advisory"), SBB's financial
advisor, has rendered its written opinion, dated as of _____________, 1998, to
the SBB Board to the effect that, as of such date, the terms of the Merger are
fair to the shareholders of SBB from a financial point of view. The written
opinion of Advisory (the "Advisory Fairness Opinion") is attached to this Joint
Proxy Statement/Prospectus as Appendix F and should be read by the shareholders
of SBB in its entirety.
See "THE MERGER -- Opinion of Financial Advisors -- SBB", which also
contains a discussion of the fees to be paid to Advisory.
Pacific. Van Kasper & Company ("Van Kasper"), Pacific's financial
advisor, has rendered its written opinion, dated as of _____________, 1998, to
the Pacific Board to the effect that, as of such date, the terms of the Merger,
including the Exchange Ratio and the conversion of shares of Pacific Common
Stock into shares of SBB Common Stock, are fair to the shareholders of Pacific
from a financial point of view. The written opinion of Van Kasper (the "Van
Kasper Fairness Opinion") is attached to this Joint Proxy Statement/Prospectus
as Appendix E and should be read by the shareholders of Pacific in its entirety.
See "THE MERGER -- Opinion of Financial Advisors -- Pacific", which
also contains a discussion of the fees to be paid to Van Kasper.
Regulatory Approvals
The Merger is subject to prior approval by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") under Section 3 of the
BHC Act. SBB submitted an application seeking approval of the Merger to the
Federal Reserve Board on September ___, 1998, and such application is pending.
See "THE MERGER -- Regulatory Approvals" and "-- Certain Conditions to
Consummation of the Merger."
5
<PAGE>
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. The receipt of (i) an opinion from
KPMG Peat Marwick LLP, the independent public accountants of Pacific, to the
effect that Pacific qualifies as an entity that may be a party to a business
combination for which the "pooling of interests" method of accounting is
available, and (ii) an opinion from Arthur Andersen LLP, the independent public
accountants of SBB, confirming that the Merger will qualify for "pooling of
interests" accounting, is a condition to SBB's and Pacific's obligations to
consummate the Merger. If such condition is not met, the Merger will not be
consummated unless the condition is waived by SBB and Pacific. As of the date of
this Joint Proxy Statement/Prospectus, SBB and Pacific are not aware, after
consultation with their respective independent public accountants, of any
existing facts or circumstances which would preclude such opinions from being
issued by KPMG Peat Marwick LLP and Arthur Andersen LLP.
See "THE MERGER -- Accounting Treatment" and "-- Certain Conditions to
Consummation of the Merger."
Certain Federal Income Tax Considerations
The Merger is intended to be a tax-free reorganization so that no gain
or loss would be recognized by SBB or Pacific, and no gain or loss would be
recognized by shareholders of Pacific Common Stock, except with respect to cash
received for any fractional shares and except for any cash payments which might
be received by shareholders properly exercising dissenters' rights. Consummation
of the Merger is conditioned upon receipt by SBB and Pacific of an opinion of
Jenkens & Gilchrist, a Professional Corporation, to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no gain or loss
will be recognized for federal income tax purposes by holders of Pacific Common
Stock who receive shares of SBB Common Stock in the Merger (other than in
respect of any cash received in lieu of fractional share interests in SBB Common
Stock); (iii) the basis of shares of SBB Common Stock received by the
shareholders of Pacific will be the same as the basis of shares of Pacific
Common Stock exchanged therefor; and (iv) the holding period of the shares of
SBB Common Stock received by such shareholders will include the holding period
of the shares of Pacific Common Stock exchanged therefor, provided such shares
were held as capital assets as of the Effective Date.
Any holder of Pacific Common Stock who perfects his or her dissenters's
appraisal rights and receives cash will recognize taxable gain or loss.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF PACIFIC, WITHOUT REGARD
TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDERS' TAX SITUATION
AND STATUS. BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER, IT IS RECOMMENDED THAT
SHAREHOLDERS OF PACIFIC COMMON STOCK CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE FEDERAL (AND ANY STATE, LOCAL AND FOREIGN) TAX CONSEQUENCES OF THE MERGER IN
THEIR PARTICULAR CIRCUMSTANCES.
See "THE MERGER - Federal Income Tax Consequences" and "-- Certain
Conditions to Consummation of the Merger."
Interests of Certain Persons in the Merger
Certain members of management of each of SBB and Pacific and of their
respective Boards have certain interests in the transactions contemplated by the
Agreements that are in addition to their interests generally as shareholders of
SBB and Pacific, as the case may be. For example, certain executive officers and
directors of Pacific will become executive officers and directors of the
Surviving Corporation following consummation of the Merger. These interests also
include "change-in-control" payments to be made to certain executive officers of
Pacific upon consummation of the Merger pursuant to the terms of existing
Amended and Restated Executive Salary Continuation Benefits Agreements and
employment contracts. In addition, these interests include, among others,
provisions in the Reorganization Agreement relating to directors' and officers'
liability insurance, participation in benefit plans of the Surviving Corporation
following the Merger, and the conversion of options to acquire shares of Pacific
Common Stock into options to acquire shares of SBB Common Stock.
6
<PAGE>
The SBB Board and the Pacific Board were aware of these interests and
considered them, among other matters, in approving the Agreements and the
transactions contemplated thereby.
See "THE MERGER -- Interests of Certain Persons in the Merger", "--
Conduct of Business Pending the Merger and Certain Other Agreements" and "--
Management and Operations After the Merger."
Rights of Dissenting Shareholders
In connection with the Merger, the shareholders of SBB and Pacific may
be entitled to dissenters' rights under Chapter 13 of the GCL, the text of which
is attached to this Joint Proxy Statement/Prospectus as Appendix G. Because SBB
Common Stock and Pacific Common Stock are each listed on Nasdaq, such
dissenters' rights will be available to shareholders of each respective
corporation only if the holders of five percent (5%) or more of SBB Common Stock
or Pacific Common Stock, respectively, make written demand upon such respective
corporation for the purchase of dissenting shares in accordance with Chapter 13
of the GCL. If this condition is satisfied, in order to be entitled to exercise
dissenters' rights, a notice must be sent by the shareholder and received by SBB
or Pacific, as the case may be, on or before the date of the SBB Meeting or
Pacific Meeting, respectively, and any such shareholder must vote AGAINST the
approval of the Agreements and the Merger. Failure to send such notice and vote
against the Merger will result in a waiver of such shareholder's dissenters'
rights.
See "THE MERGER -- Rights of Dissenting Shareholders" and Appendix G.
The Reorganization Agreement
Conduct of Business Pending the Merger and Certain Other Agreements
The parties have agreed to use their respective best efforts to perform
and fulfill all of their respective conditions and obligations to be performed
or fulfilled pursuant to the terms of the Reorganization Agreement, including
obtaining all consents and approvals from third parties, and to cause the
consummation of the Merger in accordance with the terms of the Reorganization
Agreement at the earliest practicable time. In addition, each party has agreed
to, and will use its respective best efforts to cause its directors and officers
to, use all commercially reasonable efforts to consummate the Merger in a manner
that will qualify the Merger for "pooling of interests" accounting treatment.
See "THE MERGER -- Accounting Treatment." The parties have also agreed to use
their respective best efforts to have each of its directors vote, or caused to
be voted, all shares of SBB Common Stock or Pacific Common Stock, as the case
may be, beneficially owned by them in favor of the Merger.
In addition, during the pendency of the transactions described in this
Joint Proxy Statement/Prospectus, SBB and Pacific have each agreed to, and as
applicable to cause their respective subsidiaries to, among other things, (i)
operate only in the ordinary course of business and consistent with prudent
banking practices; (ii) use all reasonable efforts to preserve its business
organization intact and to retain present customers, depositors and employees
and to maintain its assets in good operating condition and repair (except as
required by prudent business practices); (iii) perform obligations under
contracts, leases and documents relating to or affecting its assets, properties
and business (except such obligations as may be reasonably disputed); (iv)
maintain insurance policies now in effect or renewals thereof; (v) file all
reports required to be filed with governmental authorities and observe and
conform to applicable laws, rules and regulations (except as may be contested in
good faith by appropriate proceedings); (v) timely file tax returns and pay
taxes and assessments that become due and payable (except as may be contested in
good faith by appropriate proceedings); (vi) withhold appropriate payroll taxes
and to pay the same to proper tax receiving officers; and (vii) account for all
transactions and prepare financial statements in accordance with generally
accepted accounting principles (unless otherwise subject to regulatory
accounting principles).
Each party has also agreed to refrain from taking certain actions
during the pendency of the Merger, without the prior consent of the other party,
including, among others, (i) taking any action that would reasonably be
anticipated to result in a Material Adverse Change (as defined below), (ii) take
any action that would cause or permit the representations and warranties made by
such party to be inaccurate at the time when the parties meet to exchange
closing documents and certificates and determine whether all of the conditions
to consummation of the Merger have been met (the "Closing"); (iii) change the
articles of incorporation or bylaws (except with respect to SBB) or authorized
capital stock, (iv) grant any new stock options or accelerate the vesting of any
existing stock options, except as provided in the Reorganization Agreement, (v)
accelerate the vesting of pension or other benefits in favor of any employees,
(vi) acquire any capital stock or other equity securities or acquire any equity
7
<PAGE>
or ownership interest in any bank, corporation, partnership or other entity,
(vii) mortgage, pledge or subject to lien or charge, or grant any security
interest or any other encumbrance or restriction on any of its property,
business or assets, except in the ordinary course of business and consistent
with prudent banking practices, (viii) sell, transfer, lease to others or
otherwise dispose of any of its assets or cancel or compromise any debt or
claim, or waive or release any right or claim of material value, except in the
ordinary course of business and consistent with past practices and safe and
sound banking practices, or (ix) make any change in any accounting methods,
principles or material practices, except as required by generally accepted
accounting principles.
As used in the Reorganization Agreement, the term "Material Adverse
Change" means any material adverse change (excluding the occurrence of expenses
in connection with the Merger) since December 31, 1997 in the business, results
of operations, condition (financial or otherwise), assets, properties,
liabilities (absolute, accrued, contingent or otherwise), reserves of Pacific or
SBB, as the case may be, and their respective subsidiaries taken as a whole, and
specifically includes, without limitation, with respect to Pacific, any change
that reduces the tangible shareholders' equity of Pacific below $70,000,000, or,
with respect to SBB, any change that reduces the tangible shareholders' equity
of SBB below $118,000,000.
Conditions to the Merger
Each party's obligation to effect the Merger is subject to the
fulfillment or waiver, if legally permissible, of certain conditions prior to or
at the Closing including, among others: (i) the accuracy in all material respect
of representations and warranties of each party to the Reorganization Agreement;
(ii) the performance or compliance in all material respect with all agreements,
terms, covenants and conditions required by the Reorganization Agreement; (iii)
approval of the Agreements and the Merger by the holders of at least a majority
of the SBB Common Stock and the Pacific Common Stock entitled to vote thereon,
and the approval of the Bylaw Amendment by the holders of at least a majority of
the SBB Common Stock entitled to vote thereon; (iv) the receipt of all approvals
or consents of the transactions contemplated by the Agreements from all
necessary governmental agencies, authorities and third parties, including the
Commission and the Federal Reserve Board, and the expiration of all statutory
waiting periods with respect to such approvals; (v) the absence of any action,
statute, rule, regulation or order, including the entry of a preliminary or
permanent injunction, that would make the Reorganization Agreement or the
agreements and transactions contemplated thereby illegal, invalid or
unenforceable or would otherwise impose material limits on the ability of either
party to consummate the Merger; (vi) the delivery by each party to the other of
the closing deliveries identified in the Reorganization Agreement; (vii) the
receipt by each party of an unqualified written opinion of its respective
investment advisor to the effect that the Merger is fair to the shareholders of
such party from a financial point of view; (viii) receipt of an accounting
opinion to the effect that the Merger qualifies for "pooling of interests"
accounting treatment; (ix) the Registration Statement, of which this Joint Proxy
Statement/Prospectus forms a part, shall have become effective under the
Securities Act, no stop order suspending the effectiveness of the Registration
Statement shall be in effect or proceeding for that purpose pending before or
threatened by the Commission, and all state securities permits or approvals
required by applicable state securities laws to consummate the Merger shall have
been received and remain in effect; (x) receipt of a legal opinion on certain
tax aspects of the Merger; (xi) the holders of not more than a certain
percentage (not to exceed 9.9%) of the issued and outstanding shares of Pacific
Common Stock shall have demanded or be entitled to demand payment of the fair
value of their shares as dissenting shareholders under applicable provisions of
the GCL, such that the receipt of cash pursuant to the exercise of their
appraisal rights, when combined with all other cash transactions required to be
considered under generally accepted accounting principles, would result in the
Merger not qualifying for "pooling of interests" accounting treatment; (xii) all
accounting and tax treatment, entries and adjustments in connection with the
transactions contemplated by the Reorganization Agreement shall be reasonably
satisfactory to each party, and neither party shall have received notification
from any proper regulatory authority that such party's accounting and tax
treatment, entries and adjustments used in connection with the Merger are
improper; and (xiii) the occurrence of no Material Adverse Changes in the
business of SBB or Pacific since December 31, 1997.
The obligation of Pacific to effect the Merger is further subject to
the condition that SBB shall have taken all actions necessary to effect the
Bylaw Amendment. See "THE SBB MEETING -- Matters to be Considered -- The Bylaw
Amendment."
The obligation of SBB to effect the Merger is further subject to the
condition that SBB shall have received from Pacific, at least 31 days prior to
the date on which the Closing takes place (such date being referred to herein as
the "Closing Date"), the signed letters from each "affiliate" of Pacific. See
"THE MERGER -- Resale of SBB Common Stock."
8
<PAGE>
See "THE MERGER -- Certain Conditions to Consummation of the Merger."
Termination of Reorganization Agreement
The Reorganization Agreement may be terminated, and the Merger
abandoned, prior to the Effective Date, either before or after approval by the
shareholders of SBB and Pacific, upon the occurrence of various events and under
certain circumstances, including (i) by the mutual consent of SBB and Pacific;
(ii) by either party in the event of the failure of the respective shareholders
to approve the Merger; (iii) by either party upon the failure to obtain any
approval, consent or waiver of a governmental authority required to permit
consummation of the transactions contemplated by the Reorganization Agreement;
and (iv) by Pacific in the event that shares of SBB Common Stock trade below
certain price levels prior to the Effective Date. In addition, under certain
circumstances, a fee of $7,650,000, plus certain costs and expenses not to
exceed $250,000, may be payable by SBB or Pacific to the other party upon
termination of the Reorganization Agreement.
See "THE MERGER -- Termination of the Reorganization Agreement."
Mutual Stock Option Agreements
As an inducement to SBB to enter into the Reorganization Agreement,
Pacific and SBB entered into the Pacific Stock Option Agreement, dated July 20,
1998, (the "Pacific Stock Option Agreement"), pursuant to which Pacific granted
SBB an irrevocable option to purchase from Pacific 878,269 shares of Pacific
Common Stock (subject to adjustment, but in no event to exceed 19.5% of the then
outstanding shares of Pacific Common Stock), at a price of $58.00 per share (the
"Pacific Option"). A copy of the Pacific Stock Option Agreement is included with
the Joint Proxy Statement/Prospectus as Appendix D and is incorporated herein by
reference. The exercise price was determined through negotiations, taking into
account the recently prevailing price range of Pacific Common Stock prior to
announcement of the Merger. SBB may exercise the Pacific Option only upon the
occurrence of certain limited and specifically defined events described therein
(none of which has occurred as of the date hereof). Such events include the
authorization of Pacific to effect a merger with any entity other than SBB. At
the request of the holder of the Pacific Option, under certain circumstances,
Pacific is obligated to repurchase, pursuant to a formula price set out in the
Pacific Stock Option Agreement, the Pacific Option and any shares of Pacific
Common Stock purchased upon the exercise of the Pacific Option and beneficially
owned by such holder at that time.
As an inducement to Pacific to enter into the Reorganization Agreement,
SBB and Pacific entered into the SBB Stock Option Agreement, dated July 20,
1998, (the "SBB Stock Option Agreement", and together with the Pacific Stock
Option Agreement, the "Stock Option Agreements"), pursuant to which SBB granted
Pacific an irrevocable option to purchase from SBB up to 3,002,505 shares of SBB
Common Stock (subject to adjustment, but in no event to exceed 19.5% of the then
outstanding shares of SBB Common Stock), at a price of $30.00 per share (the
"SBB Option"). A copy of the SBB Stock Option Agreement is included with the
Joint Proxy Statement/Prospectus as Appendix C and is incorporated herein by
reference. The exercise price was determined through negotiations, taking into
account the recently prevailing price range of SBB Common Stock prior to
announcement of the Merger. Pacific may exercise the SBB Option only upon the
occurrence of certain limited and specifically defined events described therein
(none of which has occurred as of the date hereof). At the request of the holder
of the SBB Option, under certain circumstances, SBB is obligated to repurchase,
pursuant to a formula price set out in the SBB Stock Option Agreement, the SBB
Option and any shares of SBB Common Stock purchased upon the exercise of the SBB
Option and beneficially owned by such holder at that time.
The purchase of any shares of Pacific Common Stock pursuant to the
Pacific Stock Option Agreement, or the purchase of any shares of SBB Common
Stock pursuant to the SBB Stock Option Agreement, is subject to compliance with
applicable law, including receipt of any necessary approvals under the BHC Act.
The Stock Option Agreements are intended to increase the likelihood
that the Merger will be consummated in accordance with the terms set forth in
the Agreements by discouraging persons who might now, or prior to the Effective
Date, be interested in acquiring all of or a significant interest in the capital
stock of Pacific or SBB from considering or proposing such an acquisition.
In the event that the shareholders of either Pacific or SBB fail to
approve the Merger, either SBB or Pacific may terminate the Agreements. See "THE
MERGER -- Termination of the Reorganization Agreement." If such termination
9
<PAGE>
occurs prior to the occurrence of a Purchase Event or a Preliminary Purchase
Event (as such terms are defined in the Stock Option Agreements), the Stock
Option Agreements will automatically terminate at such time.
See "THE MERGER -- Mutual Stock Option Agreements"
Management and Operations after Merger
As of the Effective Date, and assuming that the Bylaw Amendment has
been approved by the shareholders of SBB at the SBB Meeting, the Board of
Directors of the Surviving Corporation will consist of fifteen (15) directors;
eleven (11) of whom represent all of the current directors of SBB and four (4)
of whom are current members of the Pacific Board. Pursuant to the terms of the
Merger Agreement, the four representatives of Pacific to be appointed to the
Board of Directors of the Surviving Corporation will be: D. Vernon Horton; Roger
C. Knopf; Clayton C. Larson; and William H. Pope. Each of Messrs. Horton, Knopf,
Larson and Pope currently serves on the Pacific Board. Mr. Horton is also the
Chairman of Pacific, and Mr. Larson is the President of Pacific.
The executive officers of the Surviving Corporation will consist of the
current executive officers of SBB plus Messrs. Horton and Larson, who will each
be appointed to serve as a Vice Chairman of the Surviving Corporation. A
complete listing of the directors and officers of the Surviving Corporation is
included as Schedule One to the Merger Agreement, attached to this Joint Proxy
Statement/Prospectus as Appendix B.
It is anticipated that the management and operation of SBB and Pacific
will be integrated after the Merger, and, except as provided above, it is not
anticipated that the management of SBB will be affected as a result of the
Merger. Following the Merger, it is anticipated that each of SBB&T and First
National Bank (as the continuing bank in the Affiliate Merger) will continue to
operate as separate subsidiaries of the Surviving Corporation. Nevertheless, it
is anticipated that certain duplicative operations of these entities may be
consolidated.
The Merger is expected to generate certain cost savings and revenue
enhancements for the Surviving Corporation. The total after-tax impact of these
cost savings is estimated to be $2,670,000 for the first full year of combined
operations, or approximately $0.10 per diluted share, on a pro forma basis. In
addition to cost savings, it is anticipated that the Surviving Corporation will
experience certain revenue enhancements through the introduction of an expanded
array of products and services in the markets served by the combined
organization.
One-time charges associated with the Merger, including investment
banking fees, legal and other professional fees, change-in-control payments and
contract termination fees, are anticipated to be between $7.5 and $8 million and
will likely be taken in the fourth quarter of 1998, the same quarter that the
Merger is expected to close.
The Surviving Corporation will have its corporate headquarters in Santa
Barbara, California and will operate under the name "Pacific Capital Bancorp."
See "THE MERGER -- Management and Operations After the Merger", "--
Interests of Certain Persons in the Merger" and "PRO FORMA FINANCIAL DATA."
Comparison of Shareholder Rights
The rights of shareholders of Pacific Common Stock and SBB Common Stock
differ in certain respects. The rights of shareholders of Pacific Common Stock
currently are determined by reference to the GCL, Pacific's Articles of
Incorporation and Pacific's Bylaws. At the Effective Time, shareholders of
Pacific will become shareholders of the Surviving Corporation, and, accordingly,
the rights of such shareholders will thereafter be determined and governed by
reference to the Articles of Incorporation, Bylaws and other corporate documents
of SBB. The material differences between the rights of shareholders of Pacific
Common Stock and SBB Common Stock include (i) the procedures for taking
shareholder action by written consent and without a meeting; (ii) the procedures
for nominating a person for election as a director; (iii) the procedures for
shareholders to submit proposals, other than nominations for election as
directors, for action by the shareholders at any meeting of shareholders; and
(iv) the shareholder vote required for certain amendments to the articles of
incorporation.
See "DESCRIPTION OF SBB CAPITAL STOCK" and "COMPARISON OF SHAREHOLDER
RIGHTS."
10
<PAGE>
In addition, if the holders of SBB Common Stock approve the Article
Amendment, another difference between the rights of holders of Pacific Common
Stock and SBB Common Stock will be that holders of SBB Common Stock will not be
permitted to cumulate their votes in the election of directors. The GCL permits
a California corporation that is a listed corporation (i.e., one whose shares
are listed on Nasdaq (and have at least 800 shareholders) or the New York Stock
Exchange or the American Stock Exchange) to amend its articles of incorporation
to eliminate cumulative voting. Because SBB Common Stock is quoted on Nasdaq and
SBB has at least 800 shareholders of record, SBB qualifies as a "listed
corporation" under the GCL. Accordingly, with the approval of a majority of the
outstanding shares of SBB Common Stock, SBB's Articles of Incorporation may be
amended to eliminate the ability to cumulate votes in the election of directors.
If the Article Amendment is approved and the Merger is consummated, holders of
Pacific Common Stock who exchange their stock for SBB Common Stock as described
herein will no longer have the right to cumulate votes in the election of
directors. Holders of Pacific Common Stock currently have the right to cumulate
their votes in the election of directors.
See "THE SBB MEETING--Matters to be Considered--The Article Amendment."
Comparative Stock Prices
Shares of SBB Common Stock are traded in the over-the-counter market
and are listed on Nasdaq under the symbol "SABB." Shares of Pacific Common Stock
are also traded in the over-the-counter market and are listed on Nasdaq under
the symbol "PABN." The following table sets forth the high and low sale prices
of SBB Common Stock and Pacific Common Stock for the periods indicated, as
reported on Nasdaq. Per share prices have been restated, as applicable, to
reflect all stock splits and stock dividends during the periods presented.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SBB Common Stock Pacific Common Stock
----------------------------------------------------------------
High Low High Low
----------------------------------------------------------------
1996 First Quarter....................... $ 12.67 $ 9.88 $ 28.09 $ 24.05
Second Quarter...................... 13.50 11.69 27.63 25.47
Third Quarter....................... 13.94 12.63 26.67 24.77
Fourth Quarter...................... 14.07 12.63 27.63 25.38
1997 First Quarter....................... $ 16.00 $ 13.82 $ 27.62 $ 23.10
Second Quarter...................... 23.25 14.94 33.93 27.02
Third Quarter....................... 24.19 19.63 33.10 30.60
Fourth Quarter...................... 24.50 22.75 42.25 32.74
1998 First Quarter....................... $ 27.88 $ 22.13 $ 43.25 $ 40.00
Second Quarter...................... 34.00 25.50 48.75 42.00
Third Quarter....................... ------- ------- ------- -------
Fourth Quarter...................... ------- ------- ------- -------
(through November __, 1998)
</TABLE>
On July 17, 1998, the last trading day prior to public announcement of
the proposed Merger, the closing sale prices of SBB Common Stock and Pacific
Common Stock, as reported on Nasdaq, were $32.25 per share and $49.00 per share,
respectively. On November ____, 1998, the latest practicable trading day before
the printing of this Joint Proxy Statement/Prospectus, the closing sale prices
of SBB Common Stock and Pacific Common Stock, as reported on Nasdaq, were
$______ per share and $_______ per share, respectively.
11
<PAGE>
The following table sets forth the closing price of the Pacific Common
Stock and the equivalent per share price of SBB Common Stock giving effect to
the Merger on July 17, 1998 (the last trading day prior to the public
announcement of the proposed Merger) and November ___, 1998 (the latest
practicable trading day before the printing of this Joint Proxy
Statement/Prospectus):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Closing Sales Price
Pro Forma
SBB Pacific Equivalent
Common Stock Common Stock Per Share(1)
------------ ------------ ------------
Market value per share:
July 17, 1998................................... $ 32.25 $ 49.00 $ 62.40
November ____, 1998............................. $______ $______ $______
- -------------
<FN>
(1) Equivalent market value per share of Pacific Common Stock represents
the closing sales price of the SBB Common Stock on each specified date,
multiplied by the Exchange Ratio of 1.935.
</FN>
</TABLE>
Shareholders are advised to obtain current market quotations for the
SBB Common Stock and Pacific Common Stock. No assurance can be given as to the
market price of the Pacific Common Stock on the Effective Date, or of the SBB
Common Stock after the Effective Date. As of the SBB Record Date, there were
approximately _____ holders of record of SBB Common Stock, and as of the Pacific
Record Date, there were approximately _____ holders of record of Pacific Common
Stock. Upon consummation of the Merger, it is expected that there will be
approximately _____ holders of record of Common Stock of the Surviving
Corporation.
12
<PAGE>
SELECTED COMPARATIVE PER SHARE DATA
(unaudited)
The following summary presents comparative historical, pro forma and
pro forma equivalent unaudited per share data for both SBB and Pacific. The
unaudited information set forth in the following tables reflects certain
comparative per common share data related to income per share and book value per
share (i) on a historical basis for SBB and Pacific; (ii) on a pro forma
combined basis per share of SBB Common Stock assuming consummation of the
Merger; and (iii) on an equivalent pro forma basis per SBB Common Stock assuming
consummation of the Merger. Per share amounts have been restated, as applicable,
to reflect all stock splits and stock dividends during the periods presented.
SBB pro forma amounts represent the pro forma results of the combined companies,
and Pacific's equivalent pro forma amounts are computed by multiplying the pro
forma amounts by a factor of 1.935, to reflect the Exchange Ratio (which equals
1.935 shares of SBB Common Stock for each share of Pacific Common Stock).
The pro forma amounts assume the Merger had been effective during the
periods presented and has been accounted for under the "pooling of interests"
method of accounting. For a description of "pooling of interests" accounting
with respect to the Merger, see "MERGER -- Accounting Treatment."
The information shown below should be read in conjunction with the
consolidated historical financial statements of SBB and Pacific, including the
respective notes thereto, incorporated by reference in this Joint Proxy
Statement/Prospectus, and the unaudited financial statements included elsewhere
in this Joint Proxy Statement/Prospectus. See "INFORMATION INCORPORATED BY
REFERENCE" and "PRO FORMA FINANCIAL DATA." The pro forma financial information
below is presented for comparative purposes only and is not necessarily
indicative of the combined financial position or results of operations that
would have been realized had the Merger been consummated during the periods or
as of the dates for which such pro forma financial information is presented.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Six Months Ended
June 30, Year Ended December 31,
--------------------------- ----------------------------------------
1998 1997 1997 1996 1995
--------------------------------------------------------------------
Net Income per Common Share:
Historical
SBB............................................... $ 0.90 $ 0.72 $ 1.29 $ 1.00 $ 0.67
Pacific........................................... 1.26 1.11 2.28 1.36 1.50
Pro forma combined per SBB share..................... 0.81 0.67 1.25 0.90 0.71
Equivalent pro forma per Pacific share............... 1.57 1.29 2.42 1.73 1.37
Dividends per Common Share:
Historical
SBB............................................... $ 0.30 $ 0.23 $ 0.49 $ 0.36 $ 0.28
Pacific........................................... 0.40 0.33 0.66 0.60 0.53
Pro forma combined per SBB share(1).................. 0.30 0.23 0.49 0.36 0.28
Equivalent pro forma per Pacific share............... 0.58 0.45 0.95 0.70 0.54
Book Value per Common Share (period end):
Historical
SBB............................................... $ 8.31 $ 7.53 $ 7.75 $ 7.09 $ 6.58
Pacific........................................... 17.60 16.47 16.90 15.59 15.54
Pro forma combined per SBB share..................... 8.59 7.87 8.10 7.42 7.06
Equivalent pro forma per Pacific share............... 16.61 15.22 15.67 14.36 13.65
- -----------------
<FN>
(1) SBB's pro forma dividends per share represent historical dividends per share
paid by SBB.
</FN>
</TABLE>
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated historical financial
data for each of SBB and Pacific as of and for each of the periods indicated and
unaudited pro forma combined amounts reflecting the Merger. The pro forma
amounts assume the Merger had been effective during the periods presented. The
data presented are derived from the consolidated financial statements of SBB and
Pacific and should be read in conjunction with the more detailed information and
financial statements incorporated by reference in this Joint Proxy
Statement/Prospectus. Per share amounts have been restated, as applicable, to
reflect all stock splits and stock dividends during the periods presented. The
data should also be read in conjunction with the unaudited pro forma financial
statements included elsewhere in this Joint Proxy Statement Prospectus. See
"INFORMATION INCORPORATED BY REFERENCE" and "PRO FORMA FINANCIAL DATA."
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SANTA BARBARA BANCORP
SELECTED FINANCIAL DATA
(unaudited)
Six Months Ended
June 30, Year End December 31,
----------------------------- ------------------------------------------------------------------------
1998 1997 - 1997 1996 - 1995 - 1994 1993
------------------------------------------------------------------------------------------------------
(dollar amounts in thousands, except per share data)
SUMMARIZED INCOME
STATEMENT:
Net Interest Income...... $ 44,071 $ $38,037 $ 71,730 $ 54,529 $ 48,605 $ 49,933 $ 46,071
Provision for Loan Losses 6,243 6,406 6,980 4,264 9,924 6,257 6,150
Noninterest Income....... 18,106 12,919 25,144 18,942 17,688 13,084 14,102
Noninterest Expense...... 34,184 27,842 60,105 46,589 41,969 39,291 37,336
Income Tax Expense....... 7,693 5,572 9,653 6,953 3,985 4,518 4,377
Cumulative Effect of
Accounting Changes(1). -- -- -- -- -- -- 620
Net Income............... 14,057 11,136 20,136 15,665 10,415 12,951 12,930
PER COMMON SHARE
DATA:
Net Income............... $ 0.90 $ 0.72 $ 1.29 $ 1.00 $ 0.67 $ 0.83 $ 0.83
Dividends Declared
Per Share............. 0.30 0.23 0.49 0.36 0.28 0.26 0.24
Shareholders' Equity
(period end).......... 8.31 7.53 7.75 7.09 6.58 6.11 5.48
FINANCIAL POSITION AT
PERIOD END:
Loans, Net of Unearned
Income............... $ 938,299 $ 788,808 $ 881,548 $ 684,167 $ 558,801 $ 499,431 $ 464,230
Total Assets............. 1,618,935 1,428,014 1,592,386 1,301,320 1,212,361 1,067,616 979,143
Deposits................. 1,433,618 1,232,781 1,404,155 1,113,083 1,054,020 956,717 866,253
Long-Term Debt........... 33,000 43,000 38,000 38,000 -- -- --
Shareholders' Equity..... 127,844 114,676 118,166 107,593 100,997 93,960 85,991
SELECTED FINANCIAL
RATIOS:
Return on Average
Assets(2)................ 1.73% 1.60% 1.40% 1.32% 0.96% 1.27% 1.34%
Return on Average
Common Equity(2)...... 22.57% 19.83% 17.56% 14.92% 10.60% 14.33% 15.41%
Return on Average Total
Equity(2)............. 22.57% 19.83% 17.56% 14.92% 10.60% 14.33% 15.41%
Net Interest Margin...... 5.72% 5.71% 5.22% 4.83% 4.76% 5.20% 5.13%
Nonperforming Assets as
% of Total Loans and
Foreclosed Property... 1.01% 1.12% 1.12% 1.47% 1.99% 1.69% 1.60%
Nonperforming Loans as
% of Total Loans...... 0.99% 1.12% 1.12% 1.23% 1.68% 1.52% 0.86%
Loan Reserve as % of
Loans................. 2.49% 2.43% 2.40% 2.42% 2.21% 2.59% 2.17%
Net Charge-Offs as % of
Average Loans(2)...... 0.44% 0.48% 0.40% 0.01% 1.96% 0.71% 1.15%
Earnings to Fixed Charges
Excluding Interest
Expense on Deposits. 3.88% 3.24% 2.98% 10.22% 7.77% 10.70% 11.75%
Including Interest
Expense on Deposits. 1.75% 1.64% 1.55% 1.64% 1.42% 1.68% 1.72%
Equity to Assets......... 7.90% 8.03% 7.42% 8.27% 8.33% 8.80% 8.78%
Tangible Equity to
Tangible Assets....... 6.94% 7.40% 6.41% 8.26% 8.33% 8.80% 8.78%
Tier 1 Risk-Based Capital 10.22% 11.58% 10.00% 15.20% 16.42% 17.88% 16.59%
Total Risk-Based Capital. 11.48% 12.84% 11.30% 16.50% 17.67% 19.14% 17.84%
- ------------------
<FN>
(1) As of January 1, 1993, SBB recorded the cumulative effect of the change in accounting for income taxes to comply with
Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
(2) Ratios for interim periods have been annualized.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PACIFIC CAPITAL BANCORP
SELECTED FINANCIAL DATA
(unaudited)
Six Months Ended
June 30, Year End December 31,
----------------------------- ------------------------------------------------------------------------
1998 1997 - 1997 1996 - 1995 - 1994 1993
------------------------------------------------------------------------------------------------------
(dollar amounts in thousands, except per share data)
SUMMARIZED INCOME
STATEMENT:
Net Interest Income...... $ 19,273 $ $17,030 $ 35,830 $ 30,639 $ 27,707 $ 24,956 $ 21,583
Provision for Loan Losses... 690 570 1,520 685 527 479 1,278
Noninterest Income.......... 1,844 1,604 3,356 3,160 2,983 2,871 3,031
Noninterest Expense......... 10,998 9,924 20,884 22,727 19,352 17,345 16,445
Income Tax Expense.......... 3,774 3,217 6,635 4,348 4,200 3,778 2,426
Cumulative Effect of
Account Changes (1)...... -- -- -- -- -- -- 549
Net Income.................. 5,655 4,923 10,147 6,039 6,611 6,225 5,014
PER COMMON SHARE DATA:
Net Income per Diluted Share $1.26 $1.11 $2.28 $1.36 $1.50 $1.44 $1.15
Dividends Declared per Share 0.40 0.33 0.66 0.60 0.53 0.40 0.30
Shareholders' Equity (period
end).................... 17.60 16.47 16.90 15.59 15.54 14.60 13.83
FINANCIAL POSITION AT PERIOD
END:
Loans, Net of Unearned Income $438,602 $414,018 $419,293 $388,728 $300,895 $290,352 $265,903
Total Assets................ 815,560 680,011 764,719 619,439 530,852 487,749 436,958
Deposits.................... 730,325 607,594 683,398 547,182 465,508 427,870 382,475
Long-Term Debt.............. -- -- -- -- -- -- --
Shareholders' Equity........ 76,064 67,412 72,558 63,646 60,533 55,002 50,039
SELECTED FINANCIAL RATIOS:
Return on Average Assets(2). 1.46% 1.55% 1.50% 1.06% 1.33% 1.35% 1.16%
Return on Average Common
Equity(2)............... 15.04% 14.98% 14.84% 9.57% 11.36% 11.81% 10.40%
Return on Average Total
Equity(2)............... 15.04% 14.98% 14.84% 9.57% 11.36% 11.81% 10.40%
Net Interest Margin......... 5.50% 6.00% 5.80% 6.10% 6.30% 6.10% 5.59%
Nonperforming Assets as % of
Total Loans and
Foreclosed Property..... 0.49% 0.80% 0.81% 0.91% 1.97% 2.19% 2.05%
Nonperforming Loans as % of
Total Loans (net of
unearned income)......... 0.22% 0.44% 0.57% 0.48% 1.08% 1.43% 1.13%
Loan Reserve as % of
Loans.................... 1.04% 0.98% 1.02% 0.94% 1.23% 1.30% 1.41%
Net Charge-Offs as % of
Average Loans(2)......... 0.19% 0.05% 0.23% 0.22% 0.20% 0.17% 0.39%
Earnings to Fixed Charges
Excluding Interest Expense
on Deposits.............. 21.68% 19.54% 20.11% 14.05% 16.53% 12.81% 9.73%
Including Interest Expense
on Deposits........... 1.89% 1.97% 2.47% 1.74% 1.93% 2.13% 1.82%
Equity to Assets............ 9.33% 9.91% 9.49% 10.27% 11.40% 11.28% 11.45%
Tangible Equity to Tangible
Assets................... 9.08% 9.87% 9.21% 10.23% 11.34% 11.28% 11.45%
Tier 1 Risk-Based Capital... 13.35% 13.89% 13.58% 13.91% 16.63% 16.40% 16.52%
Total Risk-Based Capital.... 14.18% 14.73% 14.43% 14.71% 17.66% 17.52% 17.74%
- ----------------
<FN>
(1) As of January 1, 1993, Pacific recorded the cumulative effect of the
change in accounting for income taxes to comply with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
(2) Ratios for interim periods have been annualized.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SANTA BARBARA BANCORP AND PACIFIC CAPITAL BANCORP
PRO FORMA COMBINED SELECTED FINANCIAL DATA
(unaudited)
Six Months Ended
June 30, Year End December 31,
----------------------------- ------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------------------------------------------------------------------------------------------------
(dollar amounts in thousands, except per share data)
SUMMARIZED INCOME
STATEMENT:
Net Interest Income...... $ 63,344 $ 55,067 $ 107,560 $ 85,168 $ 76,312 $ 74,889 $ 67,654
Provision for Loan Losses 6,933 6,976 8,500 4,949 10,451 6,736 7,428
Noninterest Income....... 19,950 14,523 28,500 22,102 20,671 15,955 17,133
Noninterest Expense...... 45,182 37,766 80,989 69,316 61,321 56,636 53,781
Income Tax Expense....... 11,467 8,789 16,288 11,301 8,185 8,296 6,803
Cumulative Effect of
Accounting Changes(1). -- -- -- -- -- -- 1,169
Net Income............... 19,712 16,059 30,283 21,704 17,026 19,176 17,944
PER COMMON SHARE DATA:
Net Income per Diluted
Share................. $0.81 $0.67 $1.25 $0.90 $0.71 $0.82 $0.74
Dividends Declared(2).... 0.30 0.23 0.49 0.36 0.28 0.26 0.24
Shareholders' Equity
(period end)......... 8.59 7.87 8.10 7.42 7.06 6.57 6.13
FINANCIAL POSITION AT
PERIOD END:
Loans, Net of Unearned
Income............... $ 1,376,901 $ 1,202,826 $ 1,300,841 $ 1,072,895 $ 859,696 $ 789,783 $ 730,133
Total Assets............. 2,434,495 2,108,025 2,357,105 1,920,759 1,743,213 1,555,365 1,416,101
Deposits................. 2,163,943 1,840,375 2,087,553 1,660,265 1,519,528 1,385,587 1,248,728
Long-Term Debt........... 33,000 43,000 38,000 38,000 -- -- --
Shareholders' Equity..... 203,908 182,088 190,724 171,239 161,530 148,962 136,030
SELECTED FINANCIAL RATIOS:
Return on Average Assets(3) 1.64% 1.59% 1.43% 1.23% 1.08% 1.30% 1.29%
Return on Average Common
Equity(3)............. 19.74% 18.04% 16.55% 12.91% 10.88% 13.40% 13.59%
Return on Average Total
Equity(3)............. 19.74% 18.04% 16.55% 12.91% 10.88% 13.40% 13.59%
Net Interest Margin...... 5.63% 5.78% 5.41% 5.21% 5.23% 5.45% 5.27%
Nonperforming Assets as %
of Total Loans and
Foreclosed Property... 0.84% 1.01% 1.02% 1.27% 1.98% 1.88% 1.76%
Nonperforming Loans as %
of Total Loans........ 0.74% 0.89% 0.93% 0.96% 1.46% 1.49% 0.96%
Loan Reserve as % of
Loans................. 2.02% 1.93% 1.95% 1.89% 1.87% 2.11% 1.89%
Net Charge-Offs as % of
Loans(3).............. 0.66% 0.66% 0.34% 0.08% 1.34% 0.51% 0.88%
Earnings to Fixed Charges
Excluding Interest
Expense on Deposits 4.89% 4.15% 3.92% 11.16% 9.93% 11.37% 11.07%
Including Interest Expense
on Deposits........ 1.79% 1.72% 1.64% 1.67% 1.55% 1.79% 1.75%
Equity to Assets......... 8.38% 8.64% 8.09% 8.92% 9.27% 9.58% 9.61%
Tangible Equity to Tangible
Assets................ 7.66% 8.20% 7.32% 8.89% 9.25% 9.58% 9.61%
Tier 1 Risk-Based Capital 11.27% 12.38% 11.23% 14.70% 16.49% 17.31% 16.56%
Total Risk-Based Capital. 12.39% 13.50% 12.35% 15.78% 17.67% 18.52% 17.80%
- ----------------
<FN>
(1) Includes cumulative effect of FAS No. 109 adoption in 1993.
(2) Pro forma dividends per share represent historical dividends per share paid
by SBB.
(3) Ratios for interim periods have been annualized.
</FN>
</TABLE>
16
<PAGE>
RISK FACTORS
This Joint Proxy Statement/Prospectus contains forward-looking
statements that involve risks and uncertainties. The Surviving Corporation's
actual results could differ from those articulated in such forward-looking
statements as a result of a variety of factors, including those set forth in the
following risk factors and elsewhere in this Joint Proxy Statement/Prospectus.
The following discussion of certain risk factors or investment considerations
should be carefully considered in evaluating the Merger, in addition to the
risks and other information described elsewhere or incorporated by reference in
this Joint Proxy Statement/Prospectus.
Prospects of the Surviving Corporation After the Merger
Ability to Integrate the Operations of SBB and Pacific
The earnings, financial condition and prospects of the Surviving
Corporation after the Merger will depend in part on a number of factors,
including, without limitation, management's ability to successfully integrate
the operations and management of SBB and Pacific and to continue to implement
the community banking philosophy shared by each organization. There can be no
assurance the management of the Surviving Corporation will be able to
effectively and profitably integrate the operations and management of SBB and
Pacific. In addition, there can be no assurance that the Surviving Corporation
will be able to realize fully the potential revenue enhancement expected as a
result of the Merger. Further, there can be no assurance that the Surviving
Corporation will be able to fully realize any of the potential cost savings
expected as a result of SBB and Pacific and their respective banking
subsidiaries being able to share administrative and other resources. See "PRO
FORMA FINANCIAL DATA." Finally, there can be no assurance that any cost savings
which may be realized will not be offset by losses in revenues or other charges
to earnings.
Because the markets in which SBB and Pacific operate are highly
competitive and because of the inherent uncertainties associated with merging
two companies, there can be no assurance that the Surviving Corporation will be
able to realize fully the operating efficiencies currently expected as a result
of the Merger and the consolidating of the administrative operations of the two
companies or that such operating efficiencies will be realized in the time frame
currently anticipated.
Performance of Combined Loan Portfolios
The performance and prospects of the Surviving Corporation after the
Merger also will be dependent to a significant extent on the performance of the
loan portfolios of SBB and Pacific and ultimately on the financial condition of
SBB's and Pacific's borrowers and other customers. The existing loan portfolios
of SBB and Pacific differ to some extent in the types of borrowers, industries
and credits represented. In addition, there are differences in the
documentation, classifications, credit ratings and management of the portfolios.
As a result, the Surviving Corporation's overall loan portfolio will have a
different risk profile than the loan portfolio of either SBB or Pacific before
the Merger. The performance of the combined loan portfolio may be adversely
affected if any one of these factors is different than currently anticipated. In
addition, to the extent that present customers are not retained by the combined
company or additional expenses are incurred in retaining them, there could be
adverse effects on future results of operations of the Surviving Corporation
following the Merger.
Market Trading and Liquidity; Possible Volatility of Prices
SBB Common Stock and Pacific Common Stock are each designated for
quotation on Nasdaq (as will the shares of Common Stock to be issued in the
Merger) and there is a trading market for such shares. There can be no
assurance, however, that an active trading market for shares of common stock of
the Surviving Corporation will continue after the Merger, or that shareholders
of the Surviving Corporation will be able to resell their securities or
otherwise liquidate their investment without delay, if at all, or impact on the
sales price.
There can be no assurance as to the market value of the shares of
common stock of the Surviving Corporation after the Merger, which value may be
affected by such factors as quarter-to-quarter variations in the Surviving
Corporation's results of operations, news announcements or changes in general
market or industry conditions. In addition, the Surviving Corporation may pursue
acquisitions of other financial institutions from time to time when such
acquisitions are believed by the Surviving Corporation to enhance shareholder
value or satisfy other strategic objectives. Such acquisitions, if any, could
17
<PAGE>
be accomplished by the issuance of additional shares of common stock of the
Surviving Corporation or other securities convertible into or exercisable for
such shares, which may have a dilutive effect.
Credit Risk
A significant source of risk for financial institutions such as SBB and
Pacific arises from the possibility that losses will be sustained because
borrowers, guarantors and related parties may fail to perform in accordance with
the terms of their loans. SBB and Pacific have adopted underwriting and credit
monitoring procedures and credit policies, including the establishment and
review of the allowance for credit losses, that each company's respective
management believes are appropriate to minimize this risk by assessing the
likelihood of nonperformance, tracking loan performance and diversifying the
respective credit portfolios. There can be no assurance that actual losses
incurred will not exceed the amount of the allowance or require substantial
additional provisions to the allowance. Such policies and procedures, however,
may not prevent unexpected losses that could materially adversely affect the
respective companies' results of operations.
Interest Rate Risk
It is expected that the Surviving Corporation, through its
subsidiaries, will continue to realize income primarily from the differential or
"spread" between the interest earned on loans, securities and other
interest-earning assets, and interest paid on deposits, borrowings and other
interest-bearing liabilities. Net interest spreads are affected by the
difference between the maturities and repricing characteristics of
interest-earning assets and interest-bearing liabilities. In addition, loan
volume and yields are affected by market interest rates on loans, and rising
interest rates generally are associated with a lower volume of loan
originations. There can be no assurance that the Surviving Corporation's
interest rate risk will be minimized or eliminated. In addition, an increase in
the general level of interest rates may adversely affect the ability of certain
borrowers to pay the interest on, and principal of, their obligations.
Accordingly, changes in levels of market interest rates could materially
adversely affect the Surviving Corporation's net interest spread, asset quality,
loan origination volume and overall results of operation.
Impact of Year 2000
The "Year 2000" issue refers to the phenomenon whereby computer
programs, having been written using two digits rather than four to define the
applicable year, may erroneously recognize a date using "00" as the year 1900
rather than the year 2000. This error could potentially result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
As part of its Year 2000 compliance program, SBB has reviewed and,
where appropriate, updated its mission critical systems to mitigate the
possibility of system interruption or failure as a result of the Year 2000
issue. To a degree, SBB relies on outside software vendors and suppliers for the
operation of its computer systems. SBB has initiated formal communications with
these parties to determine the extent to which SBB's systems are vulnerable to
those third parties' failure to remedy their own Year 2000 issues. While SBB has
taken action to identify and correct known deficiencies in its computer
operating systems, if necessary modifications and conversions are not made, or
are not completed timely, the Year 2000 issue could have a material impact on
the operations of SBB.
Competition
The banking and financial services business in California generally,
and in SBB's and Pacific's market areas specifically, is highly competitive with
respect to both loans and deposits. The increasingly competitive environment is
a result primarily of changes in regulation, changes in technology and product
delivery systems and the accelerating pace of consolidation among financial
services providers. SBB and Pacific presently compete for loans, deposits and
customers for financial services with other commercial banks, savings and loan
associations, securities and brokerage companies, mortgage companies, insurance
companies, finance companies, money market funds, credit unions and other
non-bank financial service providers. Many of these competitors are much larger
in total assets and capitalization, have greater access to capital markets and
offer a broader array of financial services than SBB or Pacific. There can be no
assurance that the Surviving Corporation will be able to compete effectively in
the market currently served by SBB and Pacific, and the results of operations of
the Surviving Corporation could be adversely affected if circumstances affecting
the nature or level of competition change.
18
<PAGE>
Government Regulation and Monetary Policy
The banking industry is subject to extensive federal and state
supervision and regulation. Such regulation limits the manner in which SBB,
Pacific and their respective banking subsidiaries conduct their businesses,
undertake new investments and activities and obtain financing. This regulation
is designed primarily for the protection of the deposit insurance funds and
consumers, and not for benefit the holders of SBB's or Pacific's securities.
Financial institution regulation has been the subject of significant legislation
in recent years, and may be the subject of further significant legislation in
the future, none of which is in the control of SBB or Pacific. Significant new
laws or changes in, or repeals of, existing laws may cause SBB's or Pacific's
results to differ materially. Further, federal monetary policy, particularly as
implemented through the Federal Reserve System, significantly affects credit
conditions for financial institutions, primarily through open market operations
in United States government securities, the discount rate for bank borrowings
and bank reserve requirements. Any material change in these conditions would be
likely to have a material impact on SBB's and Pacific's respective results of
operations.
Common Stock Dividends
Each of SBB and Pacific currently declare and pay regular quarterly
dividends with respect to the SBB Common Stock and Pacific Common Stock,
respectively. Declarations or payments of dividends by the Board of Directors of
the Surviving Corporation in the future will depend upon a number of factors,
including capital requirements, regulatory limitations, the Surviving
Corporation's financial condition and results of operations and general economic
conditions. No assurance can be given that any dividends will be declared or, if
declared, what the amount of dividends will be or whether such dividends, once
declared, will continue.
Economic Conditions and Geographic Concentration
The operations of SBB and Pacific are located in Central California and
concentrated primarily in Monterey, Santa Barbara, Santa Clara, San Benito and
Ventura Counties. As a result of this geographic concentration, SBB's and
Pacific's results depend largely upon economic conditions in these areas. Any
deterioration in economic conditions in these market areas could have a material
adverse impact on the quality of the Surviving Corporation's loan portfolio and
the demand for its products and services and, accordingly, its results of
operations. See "INFORMATION ABOUT THE PARTIES -- SBB", and "-- Pacific."
THE SBB MEETING
Date, Time and Place
This Joint Proxy Statement/Prospectus is being furnished to
shareholders of SBB in connection with the solicitation of proxies by the SBB
Board for use at the SBB Meeting, and at any adjournment or postponement
thereof. The SBB Meeting will be held at the Lobero Theater, 33 East Canon
Perdido, Santa Barbara, California, at 2:00 p.m., local time, on Tuesday,
December 15, 1998.
The date on which this Joint Proxy Statement/Prospectus is first being
sent to shareholders of SBB is November ___, 1998.
Matters to be Considered
The SBB Meeting will be held for the purpose of considering and voting
upon a proposal to approve and adopt the Reorganization Agreement and the Merger
Agreement and the consummation of the transactions contemplated thereby,
including the Merger and amending the Articles of Incorporation of SBB to change
the name of the Surviving Corporation to "Pacific Capital Bancorp" upon
consummation of the Merger (the "Name Change"). See "THE MERGER."
Shareholders of SBB will also be asked to consider and vote upon two
additional proposals: (a) to consider and vote upon a proposal to approve an
amendment to the Bylaws of SBB to increase the range of the number of persons
who may serve as directors of SBB from a maximum of thirteen (13) persons to a
maximum of seventeen (17) persons (defined herein as the "Bylaw Amendment"); and
(b) to consider and vote upon a proposal to approve an amendment to the Articles
of Incorporation of SBB to eliminate cumulative voting with respect to the
election of directors (defined herein as the "Article Amendment"). Additional
19
<PAGE>
information with respect to each of the Bylaw Amendment and the Article
Amendment is provided below.
Management of SBB knows of no matters to be brought before the SBB
Meeting other than those referred to above. If any other business should
properly come before the SBB Meeting, the persons named in the proxy will vote
in accordance with their best judgment.
The Bylaw Amendment
At the SBB Meeting, holders of SBB Common Stock will be asked to
consider and act upon a proposal to amend SBB's Bylaws to increase the range of
the size of the SBB Board from a minimum of seven (7) and a maximum of thirteen
(13) to a minimum of nine (9) and a maximum of seventeen (17), with the exact
number of directors within the foregoing range to be determined by the SBB
Board. Following the adoption of the Bylaw Amendment, the exact number of
Directors will be established at fifteen (15). See "THE MERGER--Management and
Operations After the Merger." As is the practice under current provisions of the
Bylaws of SBB, the SBB Board will continue to have the ability to vary the exact
number of Directors within the foregoing range without additional shareholder
approval.
Reason for the Bylaw Amendment. The Bylaw Amendment will permit the SBB
Board to increase the size of the SBB Board (currently comprised of 11 persons)
to accommodate the four (4) director representatives of Pacific who will be
appointed to the Board of Directors upon consummation of the Merger. Currently,
the Bylaws of SBB provide that the maximum number of directors who may sit on
the SBB Board is thirteen (13) persons. Thus, under the current provisions of
the SBB Bylaws, the eleven-person SBB Board may be increased by only two (2)
additional persons before the maximum range is achieved. Accordingly, it is
necessary to increase the range of the size of the SBB Board to accommodate the
appointment of at least four additional directors upon consummation of the
Merger.
It is important to note that it is a condition to consummation of the
Merger that the Bylaw Amendment be approved by the shareholders of SBB at the
SBB Meeting in order that the four (4) director representatives of Pacific may
be appointed to the Board of Directors of the Surviving Corporation upon
consummation of the Merger. Accordingly, if the Bylaw Amendment is not approved,
Pacific would not be obligated to consummate the Merger under the terms of the
Reorganization Agreement.
Text of the Proposed Bylaw Amendment. The Bylaws of SBB are proposed to
be amended by restating Section 3.2.1 thereof to read as follows:
"Authorized Number. The number of directors who may be authorized to
serve on the Board of Directors of the Corporation shall be no less than nine
(9) nor more than seventeen (17). Until a different number within the foregoing
limits is specified in an amendment to this Section 3.2.1 duly adopted by the
Board of Directors or the shareholders, the exact number of authorized directors
shall be fifteen (15)."
The Article Amendment
At the SBB Meeting, holders of SBB Common Stock will be asked to
consider and vote upon a proposal to amend the Articles of Incorporation of SBB
to eliminate the ability of shareholders to cumulate votes in elections for
directors. Shareholders of SBB are presently entitled to cumulate their votes in
elections for directors. With cumulative voting, each shareholder is entitled to
cast a number of votes equal to the number of directors to be elected multiplied
by the number of shares held in the shareholder's name on the record date. This
total number of votes may be cast for one nominee or may be distributed among as
many candidates as the shareholder desires. The candidates (up to the number of
directors to be elected) receiving the highest number of votes are elected.
The GCL permits a California corporation that is a "listed corporation"
(i.e., one whose shares are listed on Nasdaq (and have at least 800
shareholders) or the New York Stock Exchange or the American Stock Exchange) to
amend its articles of incorporation and bylaws to eliminate cumulative voting
for the election of directors. The legislation containing this provision was
sponsored by the Business Law Section of the State Bar of California and became
effective on January 1, 1990. Prior to the legislation, cumulative voting in
electing directors was mandatory for California corporations upon proper notice
by any shareholder. By permitting shareholders of California corporations with
widely traded securities to eliminate cumulative voting and provide for
20
<PAGE>
conventional voting in electing directors, the GCL substantially conforms
California corporate law with the corporate laws of a majority of other states
(including Delaware, Illinois, Michigan, Missouri, New Jersey, New York, Ohio,
Pennsylvania and Texas), which either provide that cumulative voting is optional
or make no provisions for cumulative voting at all. Only a small minority of
states still require that shareholders be permitted to invoke cumulative voting.
Because SBB Common Stock is quoted on Nasdaq and because SBB has at
least 800 shareholders of record, SBB qualifies as a "listed corporation."
Accordingly, with the approval of the shareholders of SBB, the Articles of
Incorporation of SBB may be amended to eliminate the ability to cumulate votes
in the election of directors.
For the reasons discussed below, the SBB Board believes that cumulative
voting is not an appropriate method of corporate governance for SBB.
Accordingly, the SBB Board has adopted and is submitting for shareholder
approval an amendment to SBB's Articles of Incorporation (defined herein as the
"Article Amendment"), which, if approved by the shareholders, would eliminate
cumulative voting upon filing with the California Secretary of State an
amendment to the Articles of Incorporation of SBB to include the text of the
Article Amendment as set forth herein. If the Article Amendment is approved by
shareholders of SBB at the SBB Meeting, the directors of SBB will be elected by
conventional voting commencing with the next Annual Meeting of Shareholders of
SBB.
A description of cumulative and conventional voting together with a
summary of the reasons for the Board's recommendation of the proposed Article
Amendment and certain other considerations concerning the proposed Article
Amendment are set forth below. In addition, the text of the proposed Article
Amendment is set forth below.
Cumulative Voting and Conventional Voting. Cumulative voting in the
election of directors may currently be invoked by any shareholder of SBB
complying with statutory notice requirements. Under cumulative voting, holders
of shares of SBB Common Stock are entitled to a number of votes per share equal
to the number of directors to be elected and all directors are voted upon
simultaneously. Holders of shares may cast all of their votes for a single
director candidate or distribute them among two or more director candidates.
As a consequence of cumulative voting, shareholders representing a
relatively small number of the voting shares may have the power to nominate and
elect one or more directors. For example, if fifteen (15) directors (the number
of directors who will comprise the SBB Board assuming consummation of the
Merger) are to be elected at an annual meeting of shareholders, a shareholder or
group of shareholders holding less than 7% of the voting shares could nominate
and elect one director by cumulating and casting their fifteen votes per share
only for their single candidate. This is so even if shareholders holding over
93% of the voting shares are opposed to the election of that candidate and cast
their vote to elect fifteen other director candidates.
With conventional voting, however, a director nominee cannot be elected
without relatively wide shareholder support, as shareholders are entitled to
cast only one vote per share for any director candidate. Consequently, with
conventional voting, the only director candidates who could be elected are those
who receive support from shareholders holding the greatest number of voting
shares and shareholders holding a majority of the voting shares would be able to
elect all of the directors.
Reasons for the Proposed Article Amendment. The SBB Board believes that
approval of the proposed Article Amendment is in the best interests of SBB and
its shareholders. It believes that conventional voting in electing directors is
desirable because it assures that the only persons who will be elected as
directors of SBB are those who are supported by shareholders holding the
greatest number of voting shares. The SBB Board believes that every director of
a publicly-held corporation should represent the interests of all shareholders
rather than any specific shareholder or group of shareholders. It believes that
directors elected by a minority shareholder or group of shareholders through
cumulative voting are likely to be partisans of the particular interest group
who elected them rather than representatives of a majority of shareholders. Such
partisanship could disrupt the management of SBB and prevent it from operating
in the most effective manner. Further, the election of directors who view
themselves as representing or answerable to a particular minority constituency
could introduce an element of discord on the board of directors, impair the
ability of the directors to work effectively and discourage qualified
independent individuals from serving as directors. By providing for conventional
voting in electing directors, approval of the proposed Article Amendment will
help ensure that each director acts in the best interests of all shareholders.
Approval of the proposed amendment should also discourage election contests by
individuals who are likely to receive support only from the holders of a
relatively small number of voting shares and, as a result, reduce the attendant
costs of annual meetings.
21
<PAGE>
Other Effects. The SBB Board believes the proposed Article Amendment is
in the best interests of shareholders and should be approved. Shareholders
should, however, carefully consider certain effects of the proposal in deciding
whether or not to approve the proposed Article Amendment.
Approval of the Article Amendment may render more difficult any attempt
by a holder or group of holders of a significant number of voting shares, but
less than a majority, to change or influence the management or policies of SBB.
In addition, under certain circumstances, the proposed Article Amendment, along
with other measures that may be viewed as having anti-takeover effects, may
discourage an unfriendly acquisition or business combination involving SBB that
a shareholder might consider to be in such shareholder's best interest,
including an unfriendly acquisition or business combination that might result in
a premium over the market price for the shares held by the shareholder. For
example, the proposed Article Amendment may discourage the accumulation of large
minority shareholdings (as a prelude to an unfriendly acquisition or business
combination proposal or otherwise) by persons who would not effect that
acquisition without being assured of representation on the board of directors.
Nevertheless, the SBB Board believes that the proposed Article
Amendment and subsequent election of directors by at least a majority of votes
cast non-cumulatively by shareholders will best enable the SBB Board to act for
the benefit of SBB and all of its shareholders.
It is important to note that the proposed Article Amendment is not in
response to any attempt to acquire control of SBB, nor is SBB aware of any such
attempt. In addition, it is important to note that, unlike with respect to the
Bylaw Amendment, approval of the Article Amendment is not a condition to
consummation of the Merger.
Text of Proposed Article Amendment. The Articles of Incorporation of
SBB are proposed to be amended by adding thereto a new Article Seventh, which
shall read as set forth below:
"SEVENTH. ELIMINATION OF CUMULATIVE VOTING.
No holder of any class of stock of the Corporation shall be
entitled to cumulate votes at any election of directors of the
Corporation."
Record Date
The SBB Board has fixed the close of business on ____________, 1998 as
the SBB Record Date. Only the holders of record of the outstanding shares of SBB
Common Stock on the SBB Record Date will be entitled to notice of, and to vote
at the SBB Meeting. On the SBB Record Date there were ___________ shares of SBB
Common Stock issued and outstanding and entitled to vote at the SBB Meeting. No
shares of SBB Common Stock can be voted at the SBB Meeting unless the record
holder is present in person or represented by proxy at the SBB Meeting.
Quorum, Voting and Revocation of Proxies
Proxies for use at the SBB Meeting accompany this Joint Proxy
Statement/Prospectus. A shareholder may use his or her proxy if he or she is
unable to attend the SBB Meeting in person or wishes to have his or her share
voted by proxy even if he or she does attend the SBB Meeting. Shares of SBB
Common Stock represented by a proxy properly signed and returned to SBB at, or
prior to, the SBB Meeting, unless subsequently revoked, will be voted at the SBB
Meeting in accordance with the instructions thereon. If a proxy is properly
signed and returned and the manner of voting is not indicated on the proxy, any
shares of SBB Common Stock represented by such proxy will be voted FOR the
matters to be considered at the SBB Meeting. The grant of a proxy will also
confer discretionary authority on the persons named in the proxy to vote on
matters incident to the conduct of the SBB Meeting, including any adjournment or
postponement thereof; provided, however, that no proxy which is voted "against"
the proposal to approve and adopt the Merger will be voted in favor of any such
adjournment or postponement.
The presence, in person or by proxy, of a majority of the issued and
outstanding shares of SBB Common Stock entitled to vote on the SBB Record Date
is necessary to constitute a quorum at the SBB Meeting. SBB intends to count
shares of SBB Common Stock present in person at the SBB Meeting but not voting,
and shares of SBB Common Stock for which it has received proxies but with
respect to which holders of shares have abstained or which constitute "broker
non-votes" (shares as to which brokerage firms have not received voting
instructions from their clients and therefore do not have the authority to vote
22
<PAGE>
the shares at the meeting), as present at the SBB Meeting for purposes of
determining the presence or absence of a quorum for the transaction of business.
Each share of SBB Common Stock is entitled to one vote on each matter
to be voted upon at the SBB Meeting. Since the affirmative vote of the holders
of a majority of the outstanding shares of SBB Common Stock is required to
approve the matters to be considered at the SBB Meeting, non-voting shares and
abstentions will have the effect of a vote "against" such matters. In addition,
brokers who hold shares of SBB Common Stock in street name for customers who are
the beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers with respect to the matters to be considered and
voted upon at the SBB Meeting without specific instructions from such customers
(so-called "broker non-votes"). The failure of such customers to provide
specific instructions with respect to their shares of SBB Common Stock to their
broker will have the effect of a vote "against" such matters.
If a quorum is not obtained at the SBB Meeting, or fewer shares of SBB
Common Stock are voted in favor of the Agreements and the Merger than the number
required for approval of the Agreements and the Merger, it is expected that the
SBB Meeting will be postponed or adjourned for the purpose of allowing
additional time for obtaining additional proxies or votes, and at any subsequent
reconvening of the SBB Meeting, all proxies will be voted in the same manner as
such proxies would have been voted at the original convening of the SBB Meeting
(except for any proxies which have theretofore effectively been revoked or
withdrawn).
Any proxy given pursuant to this solicitation may be revoked by the
grantor at any time prior to the voting thereof on the matters to be considered
at the SBB Meeting by filing with the Secretary of SBB a written revocation or a
duly executed proxy bearing a later date. All written notices of revocation and
other communications with respect to revocation of SBB proxies should be
addressed to Santa Barbara Bancorp, 1021 Anacapa Street, Santa Barbara,
California 93101, Attention: Corporate Secretary. A holder of SBB Common Stock
who previously signed and returned a proxy and who elects to attend the SBB
Meeting and vote in person may withdraw his or her proxy at any time before it
is exercised by giving notice of such revocation to the Secretary of SBB at the
SBB Meeting and voting in person by ballot at the SBB Meeting; however,
attendance at the SBB Meeting will not in and of itself constitute a revocation
of the proxy. In addition, shareholders whose shares of SBB Common Stock are not
registered in their own name will need additional documentation from the record
holder of such shares to vote personally at the SBB Meeting.
Vote Required to Approve the Merger
The affirmative vote of the holders of a majority of the shares of SBB
Common Stock outstanding and entitled to vote at the SBB Meeting is necessary to
approve and adopt the Reorganization Agreement and the Merger Agreement and the
transactions contemplated thereby, including the Merger and the Name Change.
Approval of the Reorganization Agreement by holders of SBB Common Stock is a
condition to consummation of the Merger.
THE SBB BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENTS AND THE MERGER
AND RECOMMENDS THAT SHAREHOLDERS OF SBB VOTE "FOR" APPROVAL AND ADOPTION OF THE
AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Vote Required to Approve the Bylaw Amendment
In accordance with the Bylaws of SBB, the affirmative vote of the
holders of a majority of the shares of SBB Common Stock outstanding and entitled
to vote at the SBB Meeting is necessary to approve the Bylaw Amendment. Approval
of the Bylaw Amendment by holders of SBB Common Stock is a condition to
consummation of the Merger.
THE SBB BOARD HAS UNANIMOUSLY APPROVED THE BYLAW AMENDMENT AND
RECOMMENDS THAT SHAREHOLDERS OF SBB VOTE "FOR" APPROVAL AND ADOPTION OF THE
BYLAW AMENDMENT.
Vote Required to Approve the Article Amendment
The affirmative vote of the holders of a majority of the shares of SBB
Common Stock outstanding and entitled to vote at the SBB Meeting is necessary to
approve the Article Amendment. Approval of the Article Amendment by holders of
SBB Common Stock is not a condition to consummation of the Merger.
23
<PAGE>
THE SBB BOARD HAS APPROVED THE ARTICLE AMENDMENT AND RECOMMENDS THAT
SHAREHOLDERS OF SBB VOTE "FOR" APPROVAL AND ADOPTION OF THE ARTICLE AMENDMENT.
THE PACIFIC MEETING
Date, Time and Place
This Joint Proxy Statement/Prospectus is being furnished to
shareholders of Pacific in connection with the solicitation of proxies by the
Pacific Board for use at the Pacific Meeting, and at any adjournment or
postponement thereof. The Pacific Meeting will be held at Corral de Tierra
Country Club, 81 Corral de Tierra Road, Salinas, California, at ________ p.m.,
local time, on _____________, December ___, 1998.
The date on which this Joint Proxy Statement/Prospectus is first being
sent to shareholders of Pacific is November ___, 1998.
Matters to be Considered
The Pacific Meeting will be held for the purpose of considering and
voting upon a proposal to approve and adopt the Reorganization Agreement and the
Merger Agreement and the consummation of the transactions contemplated thereby,
including the Merger.
Management of Pacific knows of no matters to be brought before the
Pacific Meeting other than those referred to herein. If any other business
should properly come before the Pacific Meeting, the persons named in the proxy
will vote in accordance with their best judgment.
Record Date
The Pacific Board has fixed the close of business on ____________, 1998
as the Pacific Record Date. Only the holders of record of the outstanding shares
of Pacific Common Stock on the Pacific Record Date will be entitled to notice
of, and to vote at the Pacific Meeting. On the Pacific Record Date there were
___________ shares of Pacific Common Stock issued and outstanding and entitled
to vote at the Pacific Meeting. No shares of Pacific Common Stock can be voted
at the Pacific Meeting unless the record holder is present in person or
represented by proxy at the Pacific Meeting.
Quorum, Voting and Revocation of Proxies
Proxies for use at the Pacific Meeting accompany this Joint Proxy
Statement/Prospectus. A shareholder may use his or her proxy if he or she is
unable to attend the Pacific Meeting in person or wishes to have his or her
shares voted by proxy even if he or she does attend the Pacific Meeting. Shares
of Pacific Common Stock represented by a proxy properly signed and returned to
Pacific at, or prior to, the Pacific Meeting, unless subsequently revoked, will
be voted at the Pacific Meeting in accordance with the instructions thereon. If
a proxy is properly signed and returned and the manner of voting is not
indicated on the proxy, any shares of Pacific Common Stock represented by such
proxy will be voted FOR the approval and adoption of the Agreements and the
transactions contemplated thereby. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy to vote on matters
incident to the conduct of the SBB Meeting, including any adjournment or
postponement thereof; provided, however, that no proxy which is voted "against"
the proposal to approve and adopt the Merger will be voted in favor of any such
adjournment or postponement.
The presence, in person or by proxy, of a majority of the issued and
outstanding shares of Pacific Common Stock entitled to vote on the Pacific
Record Date is necessary to constitute a quorum at the Pacific Meeting. Pacific
intends to count shares of Pacific Common Stock present in person at the Pacific
Meeting but not voting, and shares of Pacific Common Stock for which it has
received proxies but with respect to which holders of shares have abstained or
which constitute "broker non-votes" (shares as to which brokerage firms have not
received voting instructions from their clients and therefore do not have the
authority to vote the shares at the meeting), as present at the Pacific Meeting
for purposes of determining the presence or absence of a quorum for the
transaction of business.
24
<PAGE>
Each share of Pacific Common Stock is entitled to one vote on each
matter to be voted upon at the Pacific Meeting. Since the affirmative vote of a
majority of the outstanding shares of Pacific Common Stock is required to
approve the Merger, non-voting shares and abstentions will have the effect of a
vote "against" such matters. In addition, brokers who hold shares of Pacific
Common Stock in street name for customers who are the beneficial owners of such
shares are prohibited from giving a proxy to vote shares held for such customers
with respect to the matters to be considered and voted upon at the Pacific
Meeting without specific instructions from such customers (so called "broker
non-votes"). The failure of such customers to provide specific instruction with
respect to their shares of Pacific Common Stock to their broker will have the
effect of a vote "against" such matters.
If a quorum is not obtained at the Pacific Meeting, or fewer shares of
Pacific Common Stock are voted in favor of the Agreements and the Merger than
the number required for approval of the Agreements and the Merger, it is
expected that the Pacific Meeting will be postponed or adjourned for the purpose
of allowing additional time for obtaining additional proxies or votes, and at
any subsequent reconvening of the Pacific Meeting, all proxies will be voted in
the same manner as such proxies would have been voted at the original convening
of the Pacific Meeting (except for any proxies which have theretofore
effectively been revoked or withdrawn).
Any proxy given pursuant to this solicitation may be revoked by the
grantor at any time prior to the voting thereof on the matters to be considered
at the Pacific Meeting by filing with the Secretary of Pacific a written
revocation or a duly executed proxy bearing a later date. All written notices of
revocation and other communications with respect to revocation of Pacific
proxies should be addressed to Pacific Capital Bancorp, 307 South Main Street,
Salinas, California 93901, Attention: Corporate Secretary. A holder of Pacific
Common Stock who previously signed and returned a proxy and who elects to attend
the Pacific Meeting and vote in person may withdraw his or her proxy at any time
before it is exercised by giving notice of such revocation to the Secretary of
Pacific at the Pacific Meeting and voting in person by ballot at the Pacific
Meeting; however, attendance at the Pacific Meeting will not in and of itself
constitute a revocation of the proxy. In addition, shareholders whose shares of
Pacific Common Stock are not registered in their own name will need additional
documentation from the record holder of such shares to vote personally at the
Pacific Meeting.
Vote Required
The affirmative vote of the holders of a majority of the shares of
Pacific Common Stock outstanding and entitled to vote at the Pacific Meeting is
necessary to approve and adopt the Reorganization Agreement and the Merger
Agreement and the transactions contemplated thereby, including the Merger. The
approval of the Reorganization Agreement by holders of Pacific Common Stock is a
condition to consummation of the Merger.
THE PACIFIC BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENTS AND THE
MERGER AND RECOMMENDS THAT SHAREHOLDERS OF PACIFIC VOTE "FOR" APPROVAL AND
ADOPTION OF THE AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY.
INFORMATION ABOUT THE PARTIES
SBB
SBB is a California corporation incorporated in 1981 and a bank holding
company registered under the BHC Act. SBB is the holding company and sole
shareholder of SBB&T and Sanbarco Mortgage Corporation. SBB&T was originally
chartered in 1960 as Santa Barbara National Bank. In 1979, the bank converted to
a California state bank charter and changed its name to "Santa Barbara Bank &
Trust". In 1995, SBB&T became a member of the Federal Reserve System and is
presently subject to examination and regulation by the Federal Reserve Board and
the Commissioner of Financial Institutions of the State of California. The
deposits of SBB&T are insured by the FDIC to the fullest extent authorized by
law. Sanbarco Mortgage Company (formerly known as SBBT Service Corporation), a
California corporation, was formed in 1988 and is primarily involved in mortgage
brokering services and the servicing of brokered loans.
SBB&T offers a full range of commercial banking services to households,
professionals, and small- to medium-sized businesses. These include various
commercial, real estate and consumer loan, leasing and deposit products. The
bank offers other services including electronic fund transfers and safe deposit
boxes to both individuals and businesses. In addition, services such as lockbox
payment servicing, foreign exchange, letters of credit, and cash management are
25
<PAGE>
offered to business customers. SBB&T also offers trust and investment services
to individuals and businesses. These include acting as trustee or agent for
living and testamentary trusts, employee benefit trusts, and profit sharing
plans. Investment management and advisory services are also provided.
SBB&T operates from 27 locations serving the California communities of
Buellton, Camarillo, Carpinteria, Fillmore, Goleta, Lompoc, Los Olivos,
Montecito, Oxnard, Santa Barbara, Santa Maria, Santa Paula, Solvang, Vandenberg
Village, Ventura and surrounding communities in Santa Barbara and Ventura
counties.
SBB does not engage in any significant business activities other than
the ownership of SBB&T and Sanbarco Mortgage Corporation. As a registered bank
holding company, SBB is subject to supervision and regulation by the Federal
Reserve Board.
At June 30, 1998, SBB had consolidated assets of approximately $1.62
billion, deposits of approximately $1.43 billion and shareholders's equity of
$127.84 million. As of June 30, 1998, SBB and its subsidiaries employed 704
full-time equivalent employees. The principal executive offices of SBB are
located at 1021 Anacapa Street, Santa Barbara, California 93101, and its
telephone number is (805) 564-6298.
Additional information regarding SBB and its subsidiaries is included
in the SBB documents incorporated by reference herein. See "INFORMATION
INCORPORATED BY REFERENCE."
Security Ownership of Principal Shareholders and Management of SBB
As of the SBB Record Date, _____ shares of SBB Common Stock were issued
and outstanding and entitled to vote at the SBB Meeting. As of such date, the
directors and executive officers of SBB beneficially owned, in the aggregate,
_____ shares of SBB Common Stock, comprising approximately _____% of the voting
power of the SBB Common Stock outstanding.
The following table sets forth information as of July 31, 1998
pertaining to the beneficial ownership of the SBB Common Stock by persons known
to SBB to own five percent (5%) or more of such stock, current directors and
executive officers of SBB, and all directors and executive officers of SBB as a
group. The information contained herein has been obtained from SBB's records and
from information furnished directly by the individual or entity to SBB. Unless
otherwise indicated, each director and executive officer listed below possesses
sole voting power and sole investment power. All of the shares shown in the
following table are owned both of record and beneficially, except as indicated
in the notes to the table. All addresses of directors and executive officers are
in care of SBB at 1021 Anacapa Street, Santa Barbara, California, 93101.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and Nature
of Beneficial Percent of
Beneficial Owner Office Ownership (1) Class (2)
- ------------------------------------------------------------------------------------------------------
Santa Barbara Bank and Trust, 1,418,103 9.21%
Trustee of the Santa Barbara
Bank and Trust Employee Stock
Ownership Trust
1021 Anacapa Street
Santa Barbara, CA 93101
David Abts EVP 81,559(3) *
Donald M. Anderson Chairman 525,674(4) 3.41%
Frank H. Barranco, M.D. Director 38,720(5) *
Donald Barry EVP 34,790(6) *
Edward E. Birch Director 39,405(7) *
Terrill F. Cox Director 5,000(8) *
Richard M. Davis Director 44,350(9) *
Anthony Guntermann Director 71,917(10) *
Dale E. Hanst Director 108,985(11) *
Donald Lafler Sr. VP and 40,858(12) *
CFO
26
<PAGE>
Amount and Nature
of Beneficial Percent of
Beneficial Owner Office Ownership (1) Class (2)
- ------------------------------------------------------------------------------------------------------
John J. McGrath Sr. VP and 107,086(13) *
CCO
Harry B. Powell Director 38,576(14) *
Jay D. Smith Sr. VP, General 206,355(15) 1.34%
Counsel and
Corporate
Secretary
David W. Spainhour President, CEO 461,328(16) 2.99%
and Director
Cathy Steinke Sr. VP 21,066(17) *
William S. Thomas, Jr. Vice Chairman, 95,714(18) *
COO and
Director
Susan Trescher Director 13,108(19) *
Kent M. Vining Sr. VP 55,648(20) *
1,990,139(21) 12.67%
All directors and executive officers
as a group (18 persons)
<FN>
- ---------------
* Owns less than 1%.
(1) Includes all shares beneficially owned, whether directly or indirectly,
together with known associates. Also includes any shares owned, whether
jointly or as community property, with a spouse and shares allocated to
executive officers under the Santa Barbara Bank and Trust Employee Stock
Ownership Plan. Also includes any stock acquirable by exercise of stock
options exercisable within 60 days following July 31, 1998. All share data
are stated as of July 31, 1998.
(2) Percentages are stated to include exercisable stock options accounted for
in the column listing "Amount and Nature of Beneficial Ownership." See
Footnote (1) above.
(3) Includes 25,225 shares which may be acquired upon the exercise of
exercisable stock options and 7,760 shares in Individual Retirement
Account.
(4) Includes 12,778 shares which may be acquired upon the exercise of
exercisable stock options.
(5) Includes 2,600 shares which may be acquired upon the exercise of
exercisable stock options.
(6) Includes 4,000 shares which may be acquired upon the exercise of
exercisable stock options.
(7) Includes 24,083 shares which may be acquired upon the exercise of
exercisable stock options.
(8) Includes 4,000 shares which may be acquired upon the exercise of
exercisable stock options.
(9) Includes 2,600 shares which may be acquired upon the exercise of
exercisable stock options and 17,150, shares in Individual Retirement
Account.
(10) Includes 24,083 shares which may be acquired upon the exercise of
exercisable stock options.
(11) Includes 35,695 shares which may be acquired upon the exercise of
exercisable stock options.
(12) Includes 15,251 shares which may be acquired upon the exercise of
exercisable stock options.
(13) Includes 3,000 shares which may be acquired upon the exercise of
exercisable stock options and 1,088 shares in Individual Retirement
Account.
(14) Includes 11,172 shares which may be acquired upon the exercise of
exercisable stock options.
(15) Includes 14,130 shares which may be acquired upon the exercise of
exercisable stock options.
(16) Includes 6,001 shares which may be acquired upon the exercise of
exercisable stock options.
(17) Includes 49,969 shares which may be acquired upon the exercise of
exercisable stock options.
(18) Includes 85,600 shares which may be acquired upon the exercise of
exercisable stock options.
(19) Includes 1,322 shares in Individual Retirement Account.
(20) Includes 12,000 shares which may be acquired upon the exercise of
exercisable stock options.
(21) Includes 310,704 shares which may be acquired upon the exercise of
exercisable stock options. Actual share ownership as of July 31, 1998, by
the directors and executive officers was 1,679,435.
</FN>
</TABLE>
It is currently expected that each such director and executive officer
of SBB will vote the shares of SBB Common Stock beneficially owned by him or her
in favor of the matters to be considered at the SBB Meeting. In addition, as of
the SBB Record Date, Pacific's directors and executive officers beneficially
owned _______ shares, or less than ____%, of the outstanding shares of SBB
Common Stock, all of which they intend to vote in favor of the matters to be
considered at the SBB Meeting.
27
<PAGE>
Pacific
Pacific is a California corporation incorporated in 1983 and a bank
holding company registered under the BHC Act. Pacific's headquarters are located
in Salinas, California. Pacific's principal wholly owned subsidiaries are First
National Bank of Central California (formerly known as First National Bank of
Monterey County) ("First National"), which commenced operations on April 2,
1984, and South Valley National Bank ("South Valley"), which commenced
operations on April 21, 1982. On November 20, 1996, Pacific acquired South
Valley Bancorporation and its banking subsidiary, South Valley, headquartered in
Morgan Hill, California, in a merger transaction accounted for as a "pooling of
interests." The primary federal regulator for each of First National and South
Valley is the OCC. The deposits of First National and South Valley are insured
by the FDIC to the extent permitted by law.
Each of First National and South Valley is a commercial bank providing
a wide range of commercial banking services to individuals, professionals, and
small- and medium-sized businesses. These services include those typically
offered by commercial banks, such as: checking, interest checking and savings
accounts, travelers checks, safe deposit boxes, collection services, night
depository facilities and wire and telephone transfers. In addition to these
deposit services, First National and South Valley also provide a full array of
loan products including commercial, real estate and consumer loans as well as a
variety of government assisted loan programs such as SBA or Rural Economic
Community Development Service guaranteed loans. Professional firms, individuals
and businesses form the core of these banks' customer and deposit bases. Neither
First National nor South Valley offer trust services.
First National operates from six locations serving Monterey, Salinas,
Carmel, Watsonville, and surrounding areas in Monterey and Santa Cruz Counties
in California. South Valley operates from four locations and serves Morgan Hill,
Gilroy, Hollister, San Juan Bautista, and surrounding areas in Santa Clara and
San Benito Counties in California.
On August 4, 1998, First National Bank and South Valley filed an
application with the OCC to merge South Valley with and into First National Bank
under the charter of First National Bank (defined herein as the "Affiliate
Merger"). Upon consummation of the Affiliate Merger, which is expected to be
completed during the fourth quarter of 1998, all of the offices of South Valley
will be operated as branches of First National Bank under the name of South
Valley National Bank. No assurance can be given as to whether or when the
Affiliate Merger will be completed. Completion of the Affiliate Merger is not a
condition to completion of the transaction described in this Joint Proxy
Statement/Prospectus.
Pacific does not engage in any business activities other than the
ownership of First National and South Valley and the ownership of one other
wholly owned subsidiary, Pacific Capital Services Corporation, a California
corporation.
Pacific Capital Services Corporation was incorporated on April 22, 1985, to
arrange and broker residential, commercial and construction loans and other
extensions of credit and is currently an inactive corporation. As a registered
bank holding company, Pacific is subject to supervision and regulation by the
Federal Reserve Board.
At June 30, 1998, Pacific had consolidated assets of approximately
$815.56 million, deposits of approximately $730.33 million and shareholders's
equity of $76.064 million. As of June 30, 1998, Pacific and its subsidiaries
employed 288 full-time equivalent employees. The principal executive offices of
Pacific are located at 307 South Main Street, Salinas, California 93901, and its
telephone number is (408) 757-4900.
Additional information regarding Pacific and its subsidiaries is
included in the Pacific documents incorporated by reference herein. See
"INFORMATION INCORPORATED BY REFERENCE."
Security Ownership of Management of Pacific
As of the Pacific Record Date, _____ shares of Pacific Common Stock
were issued and outstanding and entitled to vote at the Pacific Meeting. As of
such date, the directors and executive officers of Pacific beneficially owned,
in the aggregate, _____ shares of Pacific Common Stock, comprising approximately
_____% of the voting power of the Pacific Common Stock outstanding.
The following table sets forth information as of July 31, 1998
pertaining to the beneficial ownership of the Pacific Common Stock by current
directors and executive officers of Pacific, and all directors and executive
officers of Pacific as a group. As of July 31, 1998, no person known to Pacific
owned more than five percent (5%) of the outstanding shares. The information
contained herein has been obtained from Pacific's records and from information
furnished directly by the individual or entity to Pacific. Unless otherwise
28
<PAGE>
indicated, each director and executive officer listed below possesses sole
voting power and sole investment power. All of the shares shown in the following
table are owned both of record and beneficially, except as indicated in the
notes to the table. All addresses of directors and executive officers are in
care of Pacific at 307 South Main Street, Salinas, California, 93901.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and Nature
of Beneficial Percent of
Beneficial Owner Office Ownership (1) Class (2)
- ------------------------------------------------------------------------------------------------------
Charles E. Bancroft Director 37,688(3) *
Dennis A. DeCius EVP and CFO 26,814(4) *
Gene DiCicco Director 39,775(3) (5) *
Dale R. Diederick EVP & Loan 7,911(6) *
Administrator
Lewis L. Fenton Director 45,256(3) (7) 1.00%
Gerald T. Fry Director 35,670(3) (8) *
James L. Gattis Director, Secretary 43,719(3) *
Eugene R. Guglielmo Director 55,873(9) 1.24%
Stanley R. Haynes Director 39,879(3) (10) *
D. Vernon Horton Director, Chairman 83,077(11) 1.84%
Hubert W. Hudson Director 52,347(12) 1.16%
William J. Keller Director 45,135(13) 1.00%
Roger C. Knopf Director 130,618(14) 2.90%
Clayton C. Larson Director, President 93,031(15) 2.07%
William S. McAfee Director 66,385(3) (16) 1.47%
William H. Pope Director 49,963(3) (17) 1.11%
Mary Lou Rawitser Director 17,337(18) *
William K. Sambrailo Director 56,797(19) 1.26%
Robert B. Sheppard Director 51,608(3) (20) 1.15%
978,883 21.73%
All directors and executive
officers as a group
(19 persons)
<FN>
- ---------------
* Owns less than 1%.
(1) All shares are calculated on the basis of the number of current shares held
plus shares subject to options that are currently exercisable or will
become exercisable within sixty (60) days following July 31, 1998.
(2) All percentages are calculated on the basis of the number of shares
outstanding as of July 31, 1998 plus shares subject to options that are
currently exercisable or will become exercisable within sixty (60) days
after July 31, 1998.
(3) Includes 7,031 shares subject to presently exercisable options granted
under Pacific's 1992 Directors' Stock Option Plan and 22,654 shares
issuable upon exercise of options granted under Pacific's 1994 Stock Option
Plan.
(4) Includes 5,024 shares allocated as of December 31, 1997, to Mr. DeCius'
account pursuant to Pacific's Employee Stock Ownership Plan, and 2,169
shares held in the 1991 Pacific Capital Bancorp Irrevocable Nonqualified
Deferred Compensation Trust, FBO Dennis A. DeCius and 717 shares acquired
under Pacific's 401(k) Profit Sharing Plan. Also includes 16,834 held in
the name of the 1994 DeCius Revocable Trust, 1,057 shares held by Smith
Barney in an IRA for the benefit of Mr. DeCius and 1,013 shares held in an
IRA by Smith Barney for the benefit of his wife.
(5) Includes 2,786 shares held by DiCicco Centers, a partnership of which Mr.
DiCicco is a general partner.
(6) Includes 3,023 shares allocated as of December 31, 1997 to Mr. Diederick's
account pursuant to Pacific's Employee Stock Ownership Plan.
(7) Includes 26,279 shares held in the name of the Lewis L. Fenton Living Trust
and 18,977 shares held in an IRA by Wells Fargo Bank for the benefit of Mr.
Fenton.
(8) Includes 2,980 shares held by Dean Witter in an IRA for the benefit of Mr.
Fry.
(9) Includes 10,500 shares subject to presently exercisable options granted
under Pacific's 1994 Stock Option Plan. Also includes 27,840 shares held in
the name of Emilio Guglielmo Winery Inc., of which Mr. Guglielmo is a
shareholder, director and executive officer, 3,616 shares owned by
Guglielmo Winery, Inc. Profit Sharing Plan and 250 shares held in the name
of Mr. Guglielmo's children and grandchild.
(10) Includes 35,754 shares held in the name of Stanley Haynes Living Trust and
1,185 shares owned by Cinderella Showcase, Inc., a corporation controlled
by Mr. Haynes. Also includes 2,459 shares held by Dean Witter in an IRA for
the benefit of Mr. Haynes and 481 shares owned by Mr. Haynes and his
daughter as joint tenants.
(11) Includes 7,208 shares allocated as of December 31, 1997 to Mr. Horton's
account pursuant to Pacific's Employee Stock Ownership Plan and 674 shares
held in the 1991 Pacific Capital Bancorp Irrevocable Nonqualified Deferred
29
<PAGE>
Compensation Trust, FBO D. Vernon Horton. Includes 2,127 shares held by
Smith Barney in an IRA for the benefit of Mr. Horton and 72,598 shares held
in the name of D. Vernon Horton and Joyce Marie Horton Revocable Trust.
Also includes 470 shares held in the Jeffrey L. Meeks and Debra Burk Meeks
Irrevocable Trust FBO Mallory Mae Meeks of which Mr. Horton is Trustee.
(12) Includes 52,347 shares held in the name of Hubert W. Hudson & Patricia A.
Hudson Revocable Trust.
(13) Includes 10,500 shares subject to presently exercisable options granted
under Pacific's 1994 Stock Option Plan. Also includes 7,907 held by Charles
Schwab & Co., Inc. in an IRA for the benefit of Dr. Keller and 14,574 held
in the name of William James Keller & Clara Downs Keller Trust.
(14) Includes 10,500 shares subject to presently exercisable options granted
under Pacific's 1994 Stock Option Plan. Also includes 26,658 held by the
Knopf Construction Co. Retirement Plan and 2,782 held in the name of Mr.
Knopf's children.
(15) Includes 7,082 shares allocated as of December 31, 1997 to Mr. Larson's
account pursuant to Pacific's Employee Stock Ownership Plan and 6,851
shares held in the 1991 Pacific Capital Bancorp Irrevocable Nonqualified
Deferred Compensation Trust, FBO of Clayton C. Larson. Also includes 70,604
held in the name of the Clayton C. Larson and Sharon Joy Larson Family
Trust, 7,663 shares held by First Trust & Co. in an IRA for the benefit of
Mr. Larson, 636 shares held in an IRA by First Trust & Co. for the benefit
of his wife and 195 shares held in the name of Mr. Larson's children with
Mrs. Larson as custodian.
(16) Includes 31,691 held by Paine Webber in an IRA for the benefit of Dr.
McAfee.
(17) Includes 14,135 shares held by W.H. Pope, Inc., as to which Mr. Pope
exercises sole voting and investment control, 2,930 shares held by the
William H. Pope Family Trust and 1,088 held in an IRA by Charles Schwab &
Co., Inc. for the benefit of Mr. Pope. Also includes 2,125 shares FBO
Jennifer Gudrun Church of which Mr. Pope is Trustee.
(18) Includes 2,500 shares subject to presently exercisable options granted
under Pacific's 1994 Stock Option Plan.
(19) Includes 22,277 shares held in the name of William K. Sambrailo Trust,
10,824 shares held in name of the Charles Sambrailo Paper Co. Profit
Sharing Trust over when Mr. Sambrailo exercises voting and investment
control, 21,499 shares held in the name of the William K. Sambrailo
Community Property Trust, 141 shares held by Mr. Sambrailo and Clarence J.
Ferrari, Jr., Co-Trustees of the Charles P. Sambrailo, Jr., QTIP Trust and
2,056 shares held by Paul E. Crabb, Trustee, The William K. Sambrailo
Grandchildren's Trust I, II and III.
(20) Includes 21,923 shares held by The Bank of California in an IRA for the
benefit of Mr. Sheppard.
</FN>
</TABLE>
It is currently expected that each such director and executive officer
of Pacific will vote the shares of Pacific Common Stock beneficially owned by
him or her in favor of the matters to be considered at the Pacific Meeting. As
of the Pacific Record Date, subsidiaries of Pacific did not beneficially own any
outstanding shares of Pacific Common Stock. As of the Pacific Record Date,
directors and executive officers of SBB beneficially owned 2,713 shares, or less
than 1.0%, of the outstanding shares of Pacific Common Stock, all of which they
intend to vote in favor of the matters to be considered at the Pacific Meeting.
THE MERGER
The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Reorganization Agreement and the Merger Agreement, copies of
which are attached to this Joint Proxy Statement/Prospectus as Appendix A and
Appendix B, respectively, and are incorporated herein by reference. Shareholders
of SBB and Pacific are urged to read the Agreements carefully.
General
The SBB Board and the Pacific Board have each approved the
Reorganization Agreement and the Merger Agreement, which provide for the Merger
of SBB and Pacific, with SBB as the surviving corporation in the Merger, and an
amendment to the Articles of Incorporation of SBB to provide that the Surviving
Corporation will operate under the resulting name "Pacific Capital Bancorp"
(defined herein as the "Name Change"). At the Effective Time, each share of
Pacific Common Stock (excluding shares held by Pacific, SBB, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted, and excluding all shares held by
shareholders who perfect their dissenters' rights) issued and outstanding at the
Effective Date will be converted into 1.935 shares of SBB Common Stock. Each
share of SBB Common Stock issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding after the Merger as Common
Stock of the Surviving Corporation. See "THE MERGER -- Merger Consideration."
The SBB Board and the Pacific Board each believe that the terms of the
Reorganization Agreement and the Merger Agreement are in the best interest of
the parties and their respective shareholders and recommends that the
shareholders of each of SBB and Pacific vote to approve and adopt the
Reorganization Agreement and the Merger Agreement and the consummation of the
30
<PAGE>
transactions contemplated thereby, including the Merger and the Name Change. The
conclusions of the Board of Directors of SBB and Pacific with respect to the
Merger are based upon a number of factors more fully described herein, including
the receipt of fairness opinions from their respective financial advisors.
Structure of the Merger
The Reorganization Agreement provides that, subject to the satisfaction
or waiver (where permissible) of the conditions set forth therein (see "THE
MERGER -- Certain Conditions to Consummation of the Merger") and in accordance
with the GCL, at the Effective Time, Pacific will merge with and into SBB. SBB
will be the surviving corporation in the Merger and will continue its corporate
existence under the name "Pacific Capital Bancorp". At the Effective Time, the
separate corporate existence of Pacific will terminate. The Articles of
Incorporation of SBB, as amended pursuant to the Merger Agreement and as
otherwise in effect at the Effective Date, will be the Articles of Incorporation
of the Surviving Corporation, and the Bylaws of SBB, as amended to reflect the
Bylaw Amendment and as otherwise in effect at the Effective Date, will be the
Bylaws of the combined company.
Merger Consideration
At the Effective Time of the Merger, each share of Pacific Common Stock
outstanding, other than shares held by SBB or Pacific or any wholly owned
subsidiary thereof (except, in both cases, for shares held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary, custodial or similar capacity that are beneficially owned by third
parties ("Trust Account Shares") or in respect of a debt previously contracted
("DPC Shares")), will be converted into the right to receive 1.935 shares
(defined herein as the "Exchange Ratio") of SBB Common Stock. Because the
Exchange Ratio is fixed and because the market price of SBB Common Stock is
subject to fluctuation, the value of the shares of SBB Common Stock that holders
of Pacific Common Stock will receive in the Merger may increase or decrease
prior to and following the Merger. Pacific's obligation to consummate the Merger
is, however, subject to, among other things, the average of the average closing
bid and asked price of a share of SBB Common Stock as reported on Nasdaq for the
twenty (20) business day period immediately preceding the fifth (5th) business
day prior to the Closing Date (the "SBB Average Price") being not less than
$22.95. If the SBB Average Price shall be less than $22.95 and the parties are
unable in good faith to renegotiate the Exchange Ratio within three (3) business
days after determination of the SBB Average Price, then Pacific may terminate
the Reorganization Agreement. The market prices of SBB Common Stock and Pacific
Common Stock as of a recent date are set forth on the cover page of this Joint
Proxy Statement/Prospectus. Shareholders of Pacific are advised to obtain recent
market quotations for SBB Common Stock and Pacific Common Stock. No assurance
can be given as to the market price of SBB Common Stock or Pacific Common Stock
immediately prior to the Effective Date, or as to the market price of SBB Common
Stock on or after the Effective Date.
Each outstanding share of Pacific Common Stock owned by SBB or its
wholly owned subsidiaries or Pacific or its wholly owned subsidiaries (except
for Trust Account Shares and DPC Shares) will be canceled at the Effective Time
and will cease to exist, and no SBB Common Stock or other consideration will be
delivered in exchange therefor. Shares of SBB Common Stock issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding immediately after the Merger.
The merger consideration, including the Exchange Ratio, was determined
through negotiations between management of SBB and Pacific, taking into account
the relative value of SBB Common Stock and Pacific Common Stock. Each of SBB and
Pacific were advised with respect to such negotiations by their financial
advisors, The Bank Advisory Group, Inc. (defined herein as "Advisory") and Van
Kasper & Company (defined herein as Van Kasper), respectively.
Immediately following the Merger, shareholders of SBB and Pacific will
own approximately ____% and _____%, respectively, of the then outstanding shares
of Common Stock of the Surviving Corporation (without giving effect to the
exercise of the Pacific Stock Options).
Background of the Merger
The SBB Board has focused on the Central Coast of California as the
geographic area for expansion and creation of a strong community bank franchise.
In 1995, SBB&T, the principal subsidiary of SBB, expanded from Southern Santa
Barbara County to West Ventura County by opening three de novo offices. During
1997, SBB&T acquired two community banks in cash transactions: First Valley
31
<PAGE>
Bank, located in North Santa Barbara County, and Citizens State Bank of Santa
Paula, located in Ventura County, thereby expanding the bank's geographic
coverage on the Central Coast.
The SBB Board has recognized that growth through acquisition can be an
effective means of leveraging capital and offering the bank's products and
services over a larger geographic market that has similar characteristics to the
communities currently served. In addition, the SBB Board believes that an
expansion strategy within the Central Coast increases long-term value for SBB's
shareholders by building a more geographically diversified organization with a
growing customer base and business volume. The growing base provides the
opportunity to enhance revenue by cross- selling products while at the same time
pursuing and implementing the rapidly evolving technological advances in the
financial services industry on a more cost competitive basis as expenses are
spread over a larger organization. The SBB Board has discussed in annual
planning retreats the possibility of a strategic combination with a compatible
bank or bank holding company serving the Central Coast as a means by which to
effect this expansion strategy.
Mr. Donald Anderson, Chairman of the Board of SBB, Mr. David Spainhour,
President of SBB, Mr. Vernon Horton, Chairman of the Board of Pacific, and Mr.
Clayton Larson, President of Pacific, are well acquainted with each other
through their association at banking industry meetings for many years.
In April 1998, Mr. Spainhour contacted Mr. Larson to inquire as to
Pacific's interest in initiating discussions that might lead to a business
combination involving SBB and Pacific. Mr. Larson expressed interest in pursuing
the subject and a meeting was arranged for April 30, 1998, at which Messrs.
Larson, Spainhour, Horton, Anderson and Mr. William S. Thomas, Jr., President &
Chief Executive Officer of SBB&T, were to attend. It was agreed at that meeting
to assign key officers of both organizations the task of identifying potential
cost savings to be achieved in a business combination involving the two
organizations. Information was developed and exchanged during the month of May,
and both organizations consulted with outside legal and financial advisors.
At a special meeting of the SBB Board held on June 9, 1998, Mr.
Spainhour and other members of the senior management team of SBB presented the
proposed terms for a possible business combination with Pacific. This
presentation included information about Pacific and its financial condition,
performance, markets and management, reasons for the proposed merger and its
benefits to SBB, plans for on-site due diligence and the proposed addition of
four Pacific directors to the SBB Board upon completion of the transaction.
Following this presentation, the SBB Board adopted a resolution authorizing
representatives of SBB to negotiate with representatives of Pacific regarding
the principal terms of a proposed business combination. These discussions were
initially concluded by June 10, 1998 so that representatives of Pacific could
discuss the proposed terms with the Executive Committee of the Pacific Board and
prepare for a presentation before a special meeting of the Pacific Board during
the week of June 15, 1998.
In addition to the discussions with SBB, Pacific had received a written
expression of interest from one institution and an oral expression of interest
from another. The Pacific Board met on June 18, 1998 to evaluate in detail SBB's
and the other two institutions' proposals to acquire Pacific. In addition to
price, the Pacific Board was concerned that the stock of one of the two
institutions (other than SBB) was trading at very high multiples of book value
and earnings and that the institution was at that time proceeding with the
acquisition of another bank of significant size. The Pacific Board was concerned
regarding the ability of the institution to effectively integrate and digest the
new acquisition. With the other institution, the Pacific Board considered the
price compared to that offered by SBB, cultural differences between the two
organizations and the impact on customers and employees of Pacific. Thus, after
reviewing SBB's proposal along with two other proposals in consultation with
their outside advisors, the Pacific Board agreed to accept SBB's terms for a
business combination, subject to development of a definitive agreement and
satisfactory completion of mutual due diligence. The Pacific Board authorized
management to proceed to negotiate a definitive agreement with SBB.
Following the Pacific Board meeting, legal counsel for SBB was
instructed to begin work on preparation of a definitive agreement and to work
with Pacific's legal counsel to resolve any legal issues. It was also agreed by
the parties to begin due diligence prior to signing any definitive agreement.
On June 19, 1998, an annual planning retreat of the SBB Board was held
and SBB's financial advisors reviewed the financial analysis of the proposed
transaction with Pacific. The SBB Board discussed the financial and strategic
implication of this acquisition in relation to the company's long range
strategic plan. The SBB Board was also provided with updated information on
32
<PAGE>
developments in the banking industry and discussed various recent acquisitions
and trends in the banking industry.
At a regular meeting of the SBB Board held on June 23, 1998, the SBB
Board passed a resolution authorizing certain officers of SBB to execute an
Agreement and Plan of Reorganization by and between SBB and Pacific,
substantially providing for, among other things, the merger of Pacific with and
into SBB.
On June 24, 1998, Messrs. Spainhour and Thomas, on behalf of SBB, and
Messrs. Horton and Larson, on behalf of Pacific, met with key staff members from
their respective organizations to begin integration planning.
On July 14, 1998, the Pacific Board received an unsolicited second
letter from one of the two prior prospective acquirors to propose again that
Pacific consider a combination with it. Upon receipt of the letter, a meeting of
the Pacific Executive Committee was convened telephonically on July 16, 1998 to
discuss the second letter. The Executive Committee discussed and re-affirmed the
Pacific Board's concern regarding a proposed combination with this institution,
including among other things, the price compared to that offered by SBB,
compatibility of management of the two organizations, cultural differences
between the two organizations and the probable impact on customers and employees
of Pacific. The Executive Committee decided to decline the institutions's offer
and to proceed to negotiate a definitive agreement with SBB.
During the remainder of June and first week of July, preliminary due
diligence and drafting of the definitive agreement was completed. The Pacific
Board met on July 20, 1998 to discuss the finalized draft of the Reorganization
Agreement and the proposed Stock Option Agreements. Van Kasper orally rendered
to the Pacific Board a fairness opinion to the effect that the financial terms
of the Merger as set forth in the Reorganization Agreement was fair from a
financial point of view to the shareholders of Pacific. The Reorganization
Agreement was signed on July 20, 1998, and the parties immediately issued press
releases announcing the proposed merger.
Reasons for the Merger; Recommendation of the SBB Board
In reaching its conclusion to approve the Agreements and the Merger,
the SBB Board considered numerous factors, including the following: (i) the
creation of additional value for shareholders of SBB, which is likely to result
from the acquisition of operations from Pacific, and the resulting cost savings
and revenue enhancements of the combined companies which SBB could not achieve
over the existing asset base and geographic markets it currently serves; (ii)
the similarity of the Pacific markets to those markets already served by SBB,
which will allow for the extension of existing market communication and branding
strategies without significant revisions; (iii) the similar cultures of the two
banking organizations which will facilitate not only the post-merger integration
of the two companies, but will also create an atmosphere of partnership among
the sister banks in the multi-community bank holding company structure; (iv) the
fairness opinion of SBB's financial advisor that the exchange ratio is fair from
a financial point of view to the shareholders of SBB; in this regard, the SBB
Board considered the percentage ownership offered to Pacific shareholders and
the relationship of that percentage to the future growth of earnings and equity
over and above the anticipated growth of earnings and equity of SBB on a
stand-alone basis; (v) the SBB Board's review of the provisions of the
Agreements and related documents; and (vi) the impact of this Merger on the
existing operations of SBB and its impact on SBB's ability to continue to
fulfill the promise of its corporate mission, vision and values.
When considering these factors, the SBB Board did not assign any
relative or specific weights to the factors considered. However, the SBB Board
discussed and considered these factors in determining whether or not to approve
the proposed Merger. The SBB Board viewed all of these factors as a whole
without weighing individual factors in reaching its conclusion to approve the
Agreements and the Merger.
FOR THE REASONS SET FORTH ABOVE, THE SBB BOARD HAS UNANIMOUSLY APPROVED
THE AGREEMENTS AND THE MERGER AND RECOMMENDS THAT SHAREHOLDERS OF SBB VOTE "FOR"
APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
Reasons for the Merger; Recommendation of the Pacific Board
In reaching its conclusion to approve the Agreements and the Merger,
the Pacific Board considered numerous factors, including the following: (i) the
creation of additional value for shareholders of Pacific which additional value
33
<PAGE>
results from certain cost savings and potential revenue enhancements of the
combined companies and which cannot be achieved if Pacific were to remain
independent; (ii) the similar, but not overlapping, markets of each of Pacific
and SBB and the fact that each company is familiar with the other's market such
that a combined entity would be a stronger competitor in their respective
markets; (iii) the similar cultures of the two banking organizations which will
facilitate, among other things, the post-Merger integration of the two
companies; (iv) the Van Kasper Fairness Opinion that the Exchange Ratio is fair
from a financial point of view to the shareholders of Pacific; in this regard,
the Pacific Board considered the premium represented by the consideration
offered to shareholders of Pacific in relation to the book value per share of
Pacific Common Stock; (v) the Pacific Board's review of the provisions of the
Agreements and related documents with Van Kasper and Pacific's legal advisors;
(vi) the fact that the Merger will be tax-deferred for federal income tax
purposes to the holders of Pacific Common Stock (other than in respect to cash
paid in lieu of fractional shares and for dissenter's rights); (vii) the market
liquidity and dividend history of SBB Common Stock; (viii) the historical
financial performance and future prospects of SBB, the current and prospective
economic and regulatory environment, burdens and constraints affecting banking
for banking services; and (ix) the probable impact of the Merger on customers
and employees and the communities served by Pacific.
When considering these factors, the Pacific Board did not assign any
relative or specific weights to the factors considered. However, the Pacific
Board discussed and considered these factors in determining whether or not to
approve the proposed Merger. The Pacific Board viewed all of these factors as a
whole without weighing individual factors in reaching its conclusion to approve
the Agreements and the Merger.
FOR THE REASONS SET FORTH ABOVE, THE PACIFIC BOARD HAS UNANIMOUSLY
APPROVED THE AGREEMENTS AND THE MERGER AND RECOMMENDS THAT SHAREHOLDERS OF
PACIFIC VOTE "FOR" APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
Opinion of Financial Advisors
SBB
The Bank Advisory Group, Inc. (defined herein as "Advisory") is a
recognized investment banking firm regularly engaged in the valuation of
financial institutions and their securities in connection with mergers and
acquisitions, and in valuations for estate, corporate and other business
purposes. Since August 1990, and prior to its retention for this specific
assignment, Advisory has served as a financial advisor to SBB under the terms of
a retainer agreement (the "Retainer Agreement"). Services routinely provided to
SBB by Advisory under the Retainer Agreement include, but are not limited to:
(i) meeting with the SBB Board, on an as needed basis, for the purpose of
discussing current trends in the bank merger and acquisition arena together with
SBB's ongoing bank acquisition efforts; reviewing state and national peer group
data as it relates to SBB's most recent financial performance, and
reviewing/discussing other relevant issues as needed; and, (ii) providing merger
and acquisition support services, generally analytical and financial in nature,
together with limited negotiating support services in connection with
preliminarily reviewing target bank opportunities, as they are identified by
SBB. From time-to-time, SBB has required merger & acquisition advisory services
above and beyond the scope of the services routinely provided under the Retainer
Agreement. Therefore, on occasion, Advisory has provided SBB with specific
financial advisory services, as required by SBB, including more specific
negotiating support services and more detailed financial analyses.
Pursuant to an engagement letter dated August 7, 1998, signed and
executed by SBB on August 12, 1998, SBB engaged Advisory to act as an
independent financial advisor to the SBB Board in connection with the Merger
and, subject to Advisory's final due diligence investigation, to issue a
fairness opinion letter, for disclosure to shareholders of SBB. Specifically,
based on Advisory's reputation and qualifications in evaluating financial
institutions, the SBB Board requested that Advisory render advice and analysis
in connection with the Merger, and to provide an opinion with regard to the
fairness --from the perspective of the shareholders of SBB Common Stock -- of
the financial terms of the Merger.
Based on all factors that Advisory deemed relevant and assuming the
accuracy and completeness of the information and data provided, Advisory has
rendered a written opinion, dated ___________, 1998 (the "Advisory Fairness
Opinion"), to the effect that the terms of the Merger, including, without
limitation, the Exchange Ratio and the consequential pro forma ownership in the
Surviving Company of the shareholders of SBB Common Stock, are fair, from a
financial point of view, to the shareholders of SBB Common Stock.
34
<PAGE>
No limitations were imposed by the SBB Board of Directors upon Advisory
with respect to the investigations made or procedures followed in rendering the
Advisory Fairness Opinion. Advisory does not, and its officers, directors and
shareholders do not, own any shares of SBB Common Stock or Pacific Common Stock;
nor does Advisory make a market in the stock of SBB, Pacific, or any other
publicly-traded security, financial or otherwise.
The full text of the Advisory Fairness Opinion, which sets forth
certain assumptions made, matters considered, and limits on the review
undertaken by Advisory, is attached hereto as Appendix F. SBB shareholders are
urged to read the Advisory Fairness Opinion in its entirety. The Advisory
Fairness Opinion, addressed to the SBB Board of Directors, covers only the
fairness of the financial terms of the Merger, from a financial point of view,
to the shareholders of SBB Common Stock. The financial terms include, but are
not limited to, the Exchange Ratio and the consequential pro forma ownership in
the Surviving Company of the shareholders of SBB Common Stock. The Advisory
Fairness Opinion does not constitute an endorsement of the Merger, and it does
not represent a recommendation to any SBB shareholder as to how such shareholder
should vote regarding the Merger. Advisory was not asked to consider, and the
Advisory Fairness Opinion does not address, the relative merits of the proposed
Merger as compared to alternative business strategies that might exist for SBB
or the effect of any other transaction(s) in which SBB might engage. In
furnishing the Advisory Fairness Opinion, Advisory does not purport to be an
expert with respect to the Registration Statement of which this Joint Proxy
Statement/Prospectus is part within the meaning of the term "experts" as used in
the Securities Act and the rules and regulations promulgated thereunder, nor
does Advisory purport that its opinion constitutes a report or valuation within
the meaning of Section 11 of the Securities Act. The summary of the procedures
and analysis performed and assumptions used by Advisory set forth in the Joint
Proxy Statement/Prospectus is qualified in its entirety by reference to the text
of the Advisory Fairness Opinion.
Summary of Preliminary Analyses. As it relates to Pacific, and in
conjunction with the Retainer Agreement, SBB contacted Advisory during April
1998 with the request that Advisory prepare a preliminary merger analysis
reflecting Pacific merging with and into SBB assuming an unspecified range of
exchange ratios (the "April 1998 Analysis"). Specifically, Advisory developed
stand-alone financial projections for both SBB and Pacific, then analyzed the
changes in the amount of earnings, book value and indicated dividends
attributable to one share of SBB Common Stock before the proposed merger to
those attributable to SBB Common Stock as a result of the proposed merger at the
then assumed exchange ratios ("Pro Forma Impact Analysis"). Advisory provided
the April 1998 Analysis to SBB shortly after SBB's initial request. In early May
1998, SBB offered comments and input with regard to the April 1998 Analysis, and
requested that Advisory analyze certain effects of the potential merger of SBB
and Pacific, assuming exchange ratios, among others, ranging between 1.80:1 and
2.10:1 (the "Early-May 1998 Analysis"). The Early-May 1998 Analysis, for the
purpose of computing the Pro Forma Impact Analysis, assumed one-time
merger-related transactions costs together with ongoing merger-related operating
costs savings ("Merger Costs/Savings") estimated, with consultation from
Advisory, by the management of SBB.
In late May 1998, as a result of SBB's conversations with the
management and staff of Pacific, SBB provided Advisory with revised data
regarding more specific anticipated Merger Costs/Savings that might result from
SBB's potential merger with Pacific. In turn, Advisory prepared a preliminary
merger analysis reflecting Pacific merging with and into SBB assuming a new
range of exchange ratios (the "Late-May 1998 Analysis"). In its Late-May 1998
Analysis, Advisory prepared Pro Forma Impact Analyses assuming exchange ratios,
among others, ranging between 1.75:1 and 2.05:1, and assuming the revised and
more detailed Merger Costs/Savings. The Pro Forma Impact Analyses were updated a
number of times throughout the month of June 1998, giving consideration to
alternative exchange ratios and evaluating the potential merger of SBB and
Pacific on a fully-diluted perspective by basing the assumed number of common
shares outstanding for both SBB and Pacific under the presumption that stock
option holders at SBB and Pacific had exercised, prior to the Effective Date of
the Merger, 100% of all stock options outstanding.
Finally, on July 16, 1998, Advisory prepared a Pro Forma Impact
Analysis reflecting both the 1.935 Exchange Ratio and the then current revised
projections regarding anticipated Merger Costs/Savings that might result from
SBB's proposed merger with Pacific (the "July 1998 Analysis"). The July 1998
Analysis and the corresponding Pro Forma Impact Analysis suggested that for
1998, the projected year of closing, SBB's earnings per share would be impacted
downward by 22.59%, primarily reflective of the one-time transaction costs
associated with consummating the Merger; thereafter, however, SBB's earnings per
share reflected annual appreciation ranging between 3.33% and 8.37% during the
period 1999-2009. Furthermore, the July 1998 Analysis suggested that SBB's book
value per share would reflect appreciation ranging between 0.45% and 5.85%
during the period 1999-2009. The July 1998 Analysis further assumed no change in
SBB's dividends per share on a post-Merger basis.
35
<PAGE>
Summary of Procedures & Analysis Related to Advisory Fairness Opinion.
Regarding SBB, the Advisory Fairness Opinion is based upon, among other things,
a review of: (i) audited consolidated financial statements, on form 10-K, for
the year's ended December 31, 1997, 1996, and 1995; (ii) quarterly financial
statements, on Form 10-Q, for the 1997 and 1996 calendar quarters, and for the
first two calendar quarters of 1998; (iii) consolidated financial statements, on
form F.R. Y-9C, for the years ended December 31, 1997, 1996, and 1995, and for
the six-month period ended June 30, 1998, as filed with the Federal Reserve
System; (iv) internally-generated financial statements for the eight-month
period ending August 31, 1998; (v) selected equity research reports regarding
SBB prepared by various analysts who cover the financial institutions sector for
market makers of SBB Common Stock; (vi) certain internal financial analyses and
forecasts for SBB prepared by the management of SBB, including projections of
future performance; (vii) certain other summary materials and analyses with
respect to SBB's loan portfolio, securities portfolio, deposit base, fixed
assets, and operations including, but not limited to: (a) schedules of loans and
other assets identified by management as deserving special attention or
monitoring given the characteristics of the loan/asset and the local economy,
(b) analyses concerning the adequacy of the loan loss reserve, (c) schedules of
"other real estate owned," including current carrying values and recent
appraisals, and (d) schedules of securities, detailing book values, market
values, and lengths to maturity; (viii) certain publicly-available information
concerning the trading of, and the trading market for, SBB Common Stock; (ix)
the condition of the commercial banking industry, as indicated in financial
reports filed with various Federal bank regulatory authorities by all federally
insured commercial banks; and, (x) such other information -- including financial
studies, analyses, investigations, and economic and market criteria -- that
Advisory deemed relevant.
Regarding Pacific, the Advisory Fairness Opinion is based upon, among
other things, a review of: (i) audited consolidated financial statements, on
Form 10-K, for the years ended December 31, 1997, 1996, and 1995; (ii) quarterly
financial statements, on Form 10-Q, for the 1997 and 1996 calendar quarters, and
for the first two calendar quarters of 1998; (iii) consolidated financial
statements, on form F.R. Y-9C, for the years ended December 31, 1997, 1996, and
1995, and for the six-month period ended June 30, 1998, as filed with the
Federal Reserve System; (iv) internally-generated financial statements for the
eight-month period ending August 31, 1998; (v) selected equity research reports
regarding Pacific prepared by various analysts who cover the financial
institutions sector for market makers of Pacific Common Stock; (vi) certain
internal financial analyses and forecasts for Pacific prepared individually and
collectively by the management of SBB and Pacific, including projections of
future performance; (vii) certain other summary materials and analyses with
respect to Pacific's loan portfolio, securities portfolio, deposit base, fixed
assets, and operations including, but not limited to: (a) schedules of loans and
other assets identified by management as deserving special attention or
monitoring given the characteristics of the loan/asset and the local economy,
(b) analyses concerning the adequacy of the loan loss reserve, (c) schedules of
"other real estate owned," including current carrying values and recent
appraisals, and (d) schedules of securities, detailing book values, market
values, and lengths to maturity; (viii) certain publicly-available information
concerning the trading of, and the trading market for, Pacific Common Stock;
(ix) the condition of the commercial banking industry, as indicated in financial
reports filed with various Federal bank regulatory authorities by all
federally-insured commercial banks; and, (x) such other information -- including
financial studies, analyses, investigations, and economic and market criteria --
that Advisory deemed relevant.
Additionally, the Advisory Fairness Opinion is based upon, among other
things, a review of: (i) the Reorganization Agreement, and any amendments
thereto, that sets forth, among other items, the terms, conditions to closing,
pending litigation against both SBB and Pacific, and representations and
warranties of SBB and Pacific with respect to the proposed Merger; (ii) the
Joint Proxy Statement/Prospectus, in draft form; (iii) the financial terms and
price levels, to the extent publicly-available, of selected recent business
combinations of companies in the banking industry that Advisory deemed
comparable, either in whole or in part, to the Merger -- together with the
financial performance and condition of such banking organizations; (iv) the
price-to-equity multiples, price-to-earnings multiples and trading volumes of
banking organizations based in the United States -- and specifically in
California -- that have publicly-traded common stocks, together with the
financial performance and condition of such banking organizations, compared with
the price-to- equity multiples, price-to-earnings multiples and trading volumes
for both SBB Common Stock and Pacific Common Stock; and, (v) such other
information -- including financial studies, analyses, investigations, and
economic and market criteria -- that Advisory deemed relevant.
In connection with its review, Advisory has relied upon the information
provided by the management of both SBB and Pacific, or otherwise
publicly-available and reviewed by Advisory, as being complete and accurate in
all material respects. Advisory met with the management of both SBB and Pacific
for the purpose of discussing the relevant information that has been provided to
Advisory.
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<PAGE>
Advisory has not verified, through independent inspection or direct
examination, the specific assets or liabilities of SBB, Pacific or their
subsidiary banks. Advisory has assumed that there has been no material changes
in the assets, financial condition, results of operations, or business prospects
of SBB and Pacific since the date of the last financial statements made
available to Advisory. Advisory is not an expert in the evaluation of loan
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto, and Advisory assumed, with SBB's consent, that such
allowances for each of SBB and Pacific are in the aggregate adequate to cover
such losses. In addition, Advisory did not assume responsibility for reviewing
any individual credit files, or for making an independent evaluation, appraisal
or physical inspection of any of the assets or liabilities (contingent or
otherwise) of SBB or Pacific, nor was Advisory furnished with any such
appraisals. Finally, Advisory's opinion was based on economic, monetary and
market and other conditions in effect as of the date of the Advisory Fairness
Opinion. Accordingly, although subsequent developments may affect Advisory's
opinion, Advisory has not assumed any obligation to update, revise or reaffirm
such opinion.
Advisory relied on the advice of legal counsel to SBB as to all legal
matters with respect to SBB, Pacific, the Merger and the Reorganization
Agreement. Advisory did not discuss with the independent accountants for either
SBB or Pacific any financial reporting matters with respect to SBB, Pacific, the
Merger or the Reorganization Agreement. SBB informed Advisory, and Advisory
assumed, that the Merger would be recorded as a "pooling of interests" under
generally accepted accounting principles. Advisory assumed that the Merger would
be consummated in a manner that complies in all respects with the applicable
provisions of the Securities Act, the Exchange Act and all other applicable
federal and state statutes, rules and regulations.
With respect to the financial forecasts for SBB provided to Advisory by
SBB's management, the financial forecasts for Pacific derived by SBB, with
consultation from Advisory and management of Pacific, and the forecasts
regarding the impact of cost savings on the Surviving Corporation, Advisory
assumed for purposes of its opinion, and with SBB's consent, that the forecasts
were reasonably prepared on bases reflecting the best available estimates at the
time of preparation as to the future financial performance of SBB, Pacific and
the Surviving Corporation, and that they provided a reasonable basis upon which
Advisory could form its opinion.
Set forth below is a brief summary of the analyses used by Advisory in
drawings conclusions in connection with the Advisory Fairness Opinion.
Analysis of Selected Merger Transactions. Advisory maintains a sizable
database of information pertaining to the prices paid for U.S. banks. The
database includes transactions involving banking organizations throughout the
United States, and provides comparable pricing and financial performance data
for banking organizations acquired in the United States since 1989. Advisory has
the capability of sorting the records by year or combinations of years to yield
transactions involving similar banks. Similarities might include banks within a
specific asset size range, banks within a specific state or geographic region,
banks that generate a return on average assets ("ROA") within a specified range,
banks that have an equity-assets ratio within a certain range, or banks that
sold for a specific form of consideration (cash or stock). The ability to
produce specific groups of comparable banks facilitates making a valid
comparative purchase price analysis.
In deriving the comparable pricing analyses, as described below, it
should be recognized that no other single company or transaction is identical to
Pacific or the Merger. Accordingly, an examination of the results of the
following comparative analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies as well as other factors that could affect the
public trading value and the announced acquisition prices of the companies to
which Pacific and the Merger are being compared.
Price Multiples and Price Indices. Advisory considered the transaction
values for profitable banking organizations with total assets between $500
million and $1 billion acquired in the United States during 1997 and thus far in
1998, with 100% common stock as the form of consideration, and for which both
price data and related financial information are publicly available (the
"National Bank Mergers"). Advisory compared the average of those transaction
values, and the corresponding average of the financial characteristics for the
National Bank Mergers, in relation to the transaction value attributable to
Pacific in connection with the Merger. The comparative analysis revealed that
the merger of Pacific with SBB yields a transaction value for Pacific that
results in a price-equity index [(purchase price / equity) x (equity / total
assets)] of 32.84, an index 25.6% higher than the 26.15 average for the National
Bank Mergers. Likewise, the price-earnings index [(purchase price / earnings) x
(earnings / average assets)] for Pacific equals 35.83, an index 29.1% higher
than the 27.75 average for the National Bank Mergers.
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<PAGE>
The equity ratio for Pacific (as measured by the equity-to-assets
ratio) as of June 30, 1998 equals 9.31%, a ratio 53 basis points and 6.0%
greater than the average equity ratio of 8.78% for the National Bank Mergers.
Furthermore, the 12-month trailing ROA for Pacific equals 1.46%, a ratio that is
29 basis points and 24.8% greater than the average ROA of 1.17% for the National
Bank Mergers; and, the 12-month trailing return on average equity ("ROE") for
Pacific equals 15.19%, a ratio that is 193 basis points and 14.56% greater than
the average ROE of 13.26% for the National Bank Mergers. When giving
consideration to the superior financial condition and performance of Pacific in
relation the National Bank Mergers, the analysis suggests that the transaction
value for Pacific, as measured by the price indices described above, is
reasonable and defensible when compared with the price indices for the National
Bank Mergers. The table set forth below summarizes this comparative analysis,
and highlights the Pacific transaction.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price Multiples Price Indices
------------------------------------------
# of Assets Equity-to-
Banks $(MM) Assets ROA ROE Total Price Equity Earnings Equity Earnings
----- ------ ---------- --- --- ----------- ------ -------- ------ --------
Pacific* 1 $816 9.31% 1.46% 15.19% $268.0 3.53x 24.53x 32.84 35.83
National Bank Mergers 28 $649 8.78% 1.17% 13.26% $169.6 2.98x 23.76x 26.15 27.75
- --------------
<FN>
* Total price for Pacific based on the issuance of 8,309,670 shares of
SBB Common Stock, and a $32.25 closing price per share as of July 17,
1998. Financial data for Pacific is as of June 30, 1998, with earnings
based on 12-month trailing earnings.
</FN>
</TABLE>
Common Stock Indexed Price Multiples. Advisory also considered the
transaction values for profitable banking organizations with total assets
between $500 million and $2 billion acquired in the United States since 1994,
with 100% common stock as the form of consideration, and for which both price
data and related financial information are publicly available (the "National
Peer Group"); however, for the National Peer Group, Advisory compared the price
multiples calculated for each transaction value at the date of announcement
relative to the market price multiples for the common stock of the relevant
acquiror at the month-end prior to announcement date ("Indexed Price
Multiples"). Advisory then compared the average of the Indexed Price Multiples
for the National Peer Group, segmented by year of announcement, in relation to
the Indexed Price Multiples computed for the transaction value attributable to
Pacific, using the market price multiple for SBB Common Stock, in connection
with the Merger. This comparative analysis reveals that the merger of Pacific
with SBB yields a transaction value for Pacific that results in a
price-to-equity multiple of 3.53x, versus a 2.93x average for the National Peer
Group thus far in 1998 (excluding the Merger) and a 2.82x average for the
National Peer Group in 1997. However, when the 3.53x price-to-equity transaction
multiple for the Merger is compared relative to the 3.88x price-to-equity
multiple for SBB Common Stock, the transaction value equates to an Indexed Price
Multiple of 90.98, versus a 99.32 average for the National Peer Group thus far
in 1998 (excluding the Merger) and a 107.18 average for the National Peer Group
in 1997. The comparative analysis also reveals that the merger of Pacific with
SBB yields a transaction value for Pacific that results in a price-to-earnings
multiple of 24.53x, versus a 26.13x average for the National Peer Group thus far
in 1998 (excluding the Merger) and a 21.79x average for the National Peer Group
in 1997. However, when the 24.53x price-to-earnings transaction multiple for the
Merger is compared relative to the 21.94x price- to-equity multiple for SBB
Common Stock, the transaction value equates to an Indexed Price Multiple of
111.80, compared with an average of 111.86 for the National Peer Group thus far
in 1998 (excluding the Merger) and an average of 116.63 for the National Peer
Group in 1997.
When giving consideration to the superior financial condition and
performance of Pacific in relation the National Peer Group and when viewed in
terms of the Indexed Price Multiples described above, the analysis suggests that
the transaction value for Pacific is reasonable and defensible. The table set
forth below summarizes the Indexed Price Multiples, and highlights the Pacific
transaction.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction Price Acquiror Stock Indexed Price
Multiples - Multiples Multiples**
-----------------------------------------------------------------
# of Assets Equity-to-
---- ------ ----------
Banks $(MM) Assets ROA Equity Earnings Equity Earnings Equity Earnings
----- ----- ------ --- ------ -------- ------ -------- ------ --------
Pacific* 1 $816 9.31% 1.46% 3.53x 24.53x 3.88x 21.94x 90.98 111.80
National Peer Group - 1998 14 $837 9.38% 1.09% 2.93x 26.13x 2.95x 23.36x 99.32 111.86
National Peer Group - 1997 17 $800 8.85% 1.22% 2.82x 21.79x 2.63x 18.68x 107.18 116.63
National Peer Group - 1996 12 $934 9.12% 1.33% 2.31x 16.84x 1.93x 13.00x 119.84 129.55
National Peer Group - 1995 10 $1,157 8.99% 1.22% 1.90x 14.61x 1.66x 11.36x 114.52 128.55
National Peer Group - 1994 11 $883 8.52% 0.98% 2.03x 18.70x 1.64x 10.67x 123.53 175.23
<FN>
- --------------
* Total price for Pacific based on the issuance of 8,309,670 shares of
SBB Common Stock, and a $32.25 closing price per share as of July 17,
1998. Financial data for Pacific is as of June 30, 1998, with earnings
based on 12-month trailing earnings.
** Transaction Price Multiples as % of Acquiror Stock Multiples.
</FN>
</TABLE>
Contribution Analysis. Advisory analyzed the contribution of each of
SBB and Pacific to, among other things, total tangible common equity, assets,
latest 12 months' net income, gross loans and core deposits of the pro forma
combined companies at or for the period ended June 30, 1998. This analysis
showed, among other things, that based on pro forma combined balance sheets for
SBB and Pacific at June 30, 1998, Pacific would have contributed 39.88% of
tangible common equity, 33.50% of assets, 31.85% of total loans and 33.75% of
total deposits. Pro forma income statements for the latest 12 months ended June
30, 1998 indicated that Pacific would have contributed 32.06% of the net income
of the pro forma Surviving Corporation (before the inclusion of any Merger
Costs/Savings). Based upon the 1.935 Exchange Ratio and the resulting issuance
of 8,364,399 additional shares of SBB Common Stock, current holders of Pacific
Common Stock would own approximately 35.22% of SBB on a post-Merger basis
(without giving effect to the exercise of the Pacific Stock Options or options
to acquire shares of SBB Common Stock).
Pro Forma Impact Analysis. Advisory prepared a Pro Forma Impact
Analysis reflecting the 1.935 Exchange Ratio and the current estimate of Merger
Costs/Savings, as provided by SBB, that are projected to result from the Merger.
This Pro Forma Impact Analysis suggests that for 1998, the projected year of
closing, SBB's earnings per share will be impacted downward by _____%,
reflective of the one-time transaction costs associated with consummating the
Merger; thereafter, however, SBB's earnings per share reflect annual
appreciation ranging between _____% and _____% during the period 1999-2009.
Furthermore, the Pro Forma Impact Analysis suggests that SBB's book value per
share will reflect appreciation ranging between _____% and _____% during the
period 1999-2009. The Pro Forma Impact Analysis assumes no change in SBB's
dividends per share on a post-Merger basis.
The summary set forth above does not purport to be a complete
description of the analyses performed by Advisory. Advisory believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting a portion of its analyses and factors, without considering all
analyses and factors, would create an incomplete view of the process underlying
the analyses used by Advisory. In addition, Advisory may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting from any particular analysis described above should not be
taken to be Advisory's view of the actual value of Pacific or of the Surviving
Corporation. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Advisory made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of both SBB and Pacific. The
analyses performed by Advisory are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared in connection with
Advisory's determination of the fairness of the financial terms of the Merger,
from a financial point of view, to the shareholders of SBB Common Stock. The
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<PAGE>
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or any time in the future. The forecasts utilized by
Advisory in certain of its analyses are based on numerous variables and
assumptions which are inherently unpredictable and, therefore, not certain to
become reality. Accordingly, actual results could vary significantly from those
contemplated in such forecasts. Advisory is of the belief that its review of,
among other things, the aforementioned items, provides a reasonable basis for
the issuance of the Advisory Fairness Opinion, recognizing that Advisory is
issuing an informed professional opinion -- not a certification of value.
Pacific
Pacific Capital retained Van Kasper & Company (defined herein as "Van
Kasper") to render financial advisory and investment banking services in
connection with the proposed merger of Pacific with SBB. Van Kasper has rendered
a written opinion (the "Van Kasper Fairness Opinion") to the Pacific Board to
the effect that the financial terms of the Merger as set forth in the
Reorganization Agreement, including the Exchange Ratio, are fair to the holders
of Pacific Common Stock from a financial point of view. No limitations were
imposed by the Pacific Board upon Van Kasper with respect to the investigations
made or procedures followed in rendering the Van Kasper Fairness Opinion.
The text of the Van Kasper Fairness Opinion, dated as of __________,
1998, which set forth certain assumptions made, matters considered and limits on
the review undertaken by Van Kasper, is attached hereto as Appendix E. Pacific
shareholders are urged to read the Fairness Opinion in its entirety. In
furnishing such Fairness Opinion, Van Kasper does not admit that it is an expert
with respect to the Registration Statement of which this Joint Proxy
Statement/Prospectus is part within the meaning of the term "experts" as used in
the Securities Act and the rules and regulations promulgated thereunder nor does
it admit that its opinion constitutes a report or valuation within the meaning
of section 11 of the Securities Act. The summary of the procedures and analysis
performed, and assumptions used by Van Kasper set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the text of
such Van Kasper Fairness Opinion. The Van Kasper Fairness Opinion is directed to
the Pacific Board and is directed only to the consideration to be received by
holders of Pacific Common Stock in the Merger and does not constitute a
recommendation to any Pacific shareholder as to how such shareholder should vote
at the Pacific Meeting.
In arriving at its opinion, Van Kasper has reviewed and analyzed, among
other things, the following: (i) the Agreements; (ii) certain publicly available
financial and other data with respect to SBB and Pacific, including consolidated
financial statements for recent years and interim periods to June 30, 1998;
(iii) certain other publicly available financial and other information
concerning Pacific and SBB and the trading markets for the publicly traded
securities of Pacific and SBB; (iv) publicly available information concerning
other banks and holding companies, the trading markets for their securities and
the nature and terms of certain other merger transactions Van Kasper believed
relevant to its inquiry; and (v) evaluations and analyses prepared and presented
to the Pacific Board or a committee thereof in connection with the Merger. Van
Kasper has held discussions with senior management of Pacific and of SBB
concerning their past and current operations, financial condition and prospects.
Van Kasper reviewed with the senior management of Pacific earnings
projections for Pacific as a stand-alone entity, assuming the Merger does not
occur. Van Kasper also reviewed earnings projections for SBB as a stand alone
entity, assuming the Merger does not occur as well as securities industry
consensus estimates of projected earnings per share from published sources for
SBB as a stand-alone entity. Van Kasper also reviewed with the senior management
of Pacific the projected operating cost savings expected by the combined
companies to be achieved in each year resulting from the Merger. Certain
financial projections for the combined companies and for Pacific and SBB as
stand-alone entities were derived by Van Kasper based partially upon the
projections described above, as well as Van Kasper's own assessment of general
economic, market and financial conditions.
Van Kasper took into account its assessment of general economic, market
and financial conditions and its experience in other transactions, as well as
its experience in securities valuation and its knowledge of the banking industry
generally. Van Kasper considered such financial and other factors as it deemed
appropriate under the circumstances. The Van Kasper Fairness Opinion was
necessarily based upon conditions as they existed and could only be evaluated on
the date thereof and the information made available to Van Kasper through the
date thereof.
In conducting its review and in arriving at the Van Kasper Fairness
Opinion, Van Kasper relied upon and assumed the accuracy and completeness of the
financial and other information provided to it or publicly available and did not
40
<PAGE>
attempt independently to verify the same. Van Kasper relied on advice of counsel
and independent accountants as to all legal and financial reporting matters with
respect to SBB, Pacific, the Merger and the Agreements. Van Kasper relied upon
the management of Pacific and SBB as to the reasonableness of the financial and
operating forecasts, projections and projected operating cost savings. Van
Kasper also assumed, without independent verification, that the aggregate
allowances for loan losses for Pacific and SBB were adequate to cover such
losses. Van Kasper did not make or obtain any evaluations or appraisals of the
property of Pacific or SBB, nor did Van Kasper examine any individual loan
credit files. The Van Kasper Fairness Opinion is limited to the fairness, from a
financial point of view, to the shareholders of Pacific of the consideration to
be received by the holders of Pacific Common Stock in the Merger which was
determined by arms length negotiations and does not address Pacific's underlying
decision to proceed with the Merger.
In connection with rendering the Van Kasper Fairness Opinion to the
Pacific Board, Van Kasper performed certain financial analyses, which are
summarized below. The summary set forth below does not purport to be a complete
description of the presentation by Van Kasper to the Pacific Board or of the
analyses performed by Van Kasper. Van Kasper believes that its analysis must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analysis and the processes underlying the Van
Kasper Fairness Opinion. The preparation of a fairness opinion is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. In its analysis, Van Kasper made
numerous assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of Pacific
and SBB. Any estimates contained in Van Kasper's analyses are not necessarily
indicative of future results or values, which may be significantly more or less
favorable than such estimates. Estimates of values of companies do not purport
to be appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. None of the financial analyses performed by Van
Kasper was assigned a greater significance by Van Kasper than any other.
Neither Pacific nor SBB publicly discloses internal management
financial forecasts and projections of the type provided to Van Kasper in
connection with its review of the proposed Merger. Such forecasts and
projections were not prepared with a view towards public disclosure. The
forecasts, projections, and projected operating cost savings prepared by Van
Kasper were based on numerous variables and assumptions that are inherently
uncertain, including, without limitation, factors related to general economic
and market conditions. Accordingly, actual results could vary significantly from
those set forth in such forecasts and projections.
Set forth below is a brief summary of the analysis performed by Van
Kasper in reaching the Van Kasper Fairness Opinion. Van Kasper assumed for
purposes of its opinion that the Merger will be accounted for as a pooling of
interests transaction under generally accepted accounting principles. Van Kasper
used an Exchange Ratio of 1.935 shares of SBB Common Stock at time of closing or
$62.40 per share, based upon the July 17, 1998 closing price of $32.25 per share
of SBB Common Stock. The analysis also focuses on core financial and operating
projections and statistics that are not specifically adjusted for non-recurring
charges, unless otherwise stated.
Pro Forma Merger and Contribution Analysis. Van Kasper analyzed the
changes in the amount of earnings, book value and indicated dividends
attributable to one share of Pacific Common Stock before the Merger to those
attributable to one share of Pacific Common Stock as a result of the proposed
Merger. The following assumptions regarding earnings and dividends underlie the
pro forma results. The analysis assumes a dividend pay-out ratio consistent with
SBB's recent historical dividend pay-out ratio. The analysis further assumes,
unless otherwise stated, Merger-related operating cost savings to be fully
realized during 1999 and assumes the Merger is completed during the fourth
quarter of 1998. These projected operating cost savings represent approximately
6% of the combined companies' projected non-interest expense on a pre-tax basis.
This level of projected operating cost savings, expressed as a percent of the
combined companies' projected non-interest expense, is within a range of the
level of operating cost savings, expressed as a percentage of the combined
companies' non-interest expense, achieved in similar transactions reviewed by
Van Kasper. Van Kasper performed pro forma merger analyses assuming the stated
earnings projections and the Merger-related projected operating cost savings. In
addition, Van Kasper analyzed certain pro forma merger scenarios in order to
assess the impact on Pacific of some levels of volatility in SBB's and Pacific's
projected earnings as well as volatility of the levels of Merger-related
projected operating cost savings. The impact on Pacific of volatility in SBB's
earnings was shown by calculating pro forma results assuming SBB's earnings as
projected, as well as 75% and 125% of SBB's projected earnings. In order to
measure the impact on Pacific of volatility of Pacific's earnings to the pro
forma results, Van Kasper also examined the earnings impact on Pacific resulting
at those levels of SBB earnings if Pacific achieved 75% and 125% of its
projected earnings. The impact on Pacific of volatility in the level of
Merger-related projected operating cost savings was shown by calculating pro
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forma results assuming cost savings as projected, as well as 125% and 75% of
projected cost savings. Van Kasper analyzed the changes in earnings and book
value for the years 1999, 2000 and 2001 resulting from various combinations of
the stand-alone and pro forma projected earnings and cost savings volatility
assumptions described above. The analyses showed that for the year 1999 the
change in earnings per share ranged from 15.77% to 29.05% and the change in book
value per share ranged from -9.91% to -10.93%. For the year 2000 the increase in
earnings per share ranged from 15.25% to 37.60% and the change in book value per
share ranged from -6.23% to -8.89%. For the year 2001 the change in earnings per
share ranged from 14.74% to 46.71% and the change in book value per share ranged
from -1.66% to -6.60%.
Analysis of Other Merger Transactions. Van Kasper analyzed other 1998
bank merger and acquisition transactions where the announced deal value was
greater than $100 million and less than $500 million. The transactions analyzed
were: First American Corporation and Pioneer Bancshares, a private investor
group and East-West Bank, Mercantile Bancorp and First Financial Bancorp,
BancFirst Corp. and AmQuest Financial Corp., Old Kent Financial and First
Evergreen Corp, Western Bancorp and Bank of Los Angeles, Mercantile Bancorp and
Financial Services Corporation of the Mid-West, Union Planters Corp. and AMBANC
Corp., St Paul Bancorp and Beverly Bancorp, Union Planters Corp and Transflorida
Bank, First Security Corp and California State Bank, SouthTrust Corp. and
American Banks of Florida, Cullen/Frost Bankers, Inc. and Overton Bancshares,
Premier Bancshares and Button Gwinnett Financial, Union Planters Corp and
Merchants Bancshares, First Midwest Bancorp and Heritage Financial Services,
Regions Financial and Etowah Bank, Mercantile Bancorp and CBT Corp.
This analysis showed that the Exchange Ratio represented a multiple of:
(i) 3.65x Pacific's tangible book value compared to a high multiple of 5.59x, a
median multiple of 2.94x and a low multiple of 1.86x for the comparable
transactions; (ii) 25.68x Pacific's latest twelve months' earnings per share,
compared to a high multiple of 31.25x, a median multiple of 24.15x, and a low
multiple of 16.63x for the comparable transactions. Van Kasper noted that no
transaction reviewed was identical to the Merger and that, accordingly any
analysis of comparable transactions necessarily involves complex considerations
and judgements concerning differences in financial and operating characteristics
of the parties to the transactions being compared.
Discounted Cash Flow Analysis. Van Kasper examined the results of a
discounted cash flow analysis designed to compare the present value, under
certain assumptions, that would be attained if Pacific remained independent
through 2002 or was acquired in 2002 by a larger financial institution, with the
present value of the combined institutions at the Exchange Ratio as described in
the Reorganization Agreement. The results produced in the analysis did not
purport to be indicative of actual values or expected values of Pacific or the
shares of Pacific Common Stock. All cases were analyzed assuming realization of
the operating cost savings, in the amounts and time periods previously
indicated, unless otherwise stated (see Pro Forma Merger and Contribution
Analysis).
In calculating the present values through the discounted cash flow
analysis, Van Kasper analyzed the effect of possible earnings volatility and
potential Merger-related operating cost savings volatility, among other items,
by assuming varying levels of projected earnings for Pacific and SBB. The three
cases examined were: Pacific earnings as projected and SBB earnings as
projected; Pacific earnings 75% of projected earnings and SBB earnings 125% of
projected earnings; and Pacific earnings 125% of projected earnings and SBB
earnings 75% of projected earnings. Pro forma combined cash flows were
calculated assuming the combinations of the cash flows in each of these cases,
and were compared to the cash flows of Pacific on a stand-alone basis as well as
to the cash flows of Pacific acquired in 2002 by a larger financial institution.
The discount rates used ranged from 8.0% to 12.0%. For the Pacific
stand-alone analyses, the terminal price multiples applied to 2002 estimated
earnings per share ranged from 16.00x to 23.00x. The lower levels of the
price-to-earnings per share multiples range reflected an estimated future
trading range of Pacific, while the higher levels of the price-to-earnings per
share multiples were more indicative of a future sale of Pacific's stock to a
larger financial institution. For the pro forma combined analyses, the terminal
price-to-earnings per share multiples also ranged from 16.00x to 23.00x.
For the Pacific stand-alone analyses, the cash flows were comprised of
the projected stand alone dividends per share in years 1998 through 2002 plus
the terminal value of Pacific's Common Stock at year-end 2002 (calculated by
applying each one of the assumed terminal price-to-earnings per share multiples
as stated above to 2002 projected Pacific earnings per share). For the pro forma
combined analyses, the cash flows were comprised of the projected pro forma
combined dividends per share in years 1998 through 2002 plus the terminal value
of the pro forma combined entity's stock at year-end 2002 (calculated by
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applying each one of the assumed terminal price-to-earnings per share multiples
as stated above to 2002 projected pro forma combined earnings per share). Van
Kasper also calculated the present values that would be attained in each case if
75% or 125% of projected operating cost savings were realized.
These analyses showed a range of stand-alone present values per share
for Pacific from $32.33 to $63.06, as compared to a range of pro forma combined
present values per share of $44.68 to $85.14. These analyses do not purport to
be indicative of actual values or expected values of the shares of Pacific
Common Stock. Discounted present value analysis is a widely used valuation
methodology that relies on numerous assumptions, including asset and earnings
growth rates, dividend pay-out rates, terminal values and discount rates. The
analysis showed that use of a higher (lower) level of projected SBB earnings
raised (lowered) the resulting present value for a given level of Pacific
earnings, on a pro forma combined basis. The analysis also showed that use of a
lower (higher) discount rate or a higher (lower) terminal price-to-earnings per
share multiple raised (lowered) the calculated present values.
Comparative Analysis. Using publicly available information, Van Kasper
compared certain financial and stock market information for Pacific and SBB to a
group of 35 public Western banks (the "comparison group"). Van Kasper also
analyzed certain credit and operating statistics for Pacific and SBB, comparing
these statistics to data for the comparison group. The comparisons made are as
of or for the period ending June 30, 1998 and are summarized in the following
table:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Santa Barbara Pacific Capital Comparison
Bancorp Bancorp Group Average
---------------------------------------------------------------
Market Capitalization $442,300 $190,200 $126,200
Price to Tangible equity per share 3.97x 2.58x 2.84x
Price to Earnings 18.43x 17.19x 18.67x
Total Equity to Total Assets 7.90% 9.33% 9.37%
Loans to deposits 65.45% 60.06% 70.50%
Nonperforming assets to total assets 0.54% 0.26% 0.75%
Loan loss reserve to nonperforming loans 274.38% 483.40% 295.71%
Net Interest Margin 5.47% 5.44% 5.83%
Noninterest income to average assets 1.81% 0.47% 1.57%
Efficiency Ratio 59.39% 50.58% 60.89%
Return on assets 1.52% 1.46% 1.43%
Return on equity 19.39% 15.09% 15.20%
</TABLE>
The analysis necessarily involved complex considerations and judgements
concerning differences in financial and operating characteristics of the
comparable companies.
Van Kasper is an investment banking firm continually engaged in the
valuation of businesses and securities, including financial institutions and
their securities, in connection with mergers and acquisitions, negotiated
underwritings, competitive private offerings of securities, secondary
distributions of listed and unlisted securities and valuations for estate,
corporate and other purposes. In the ordinary course of its business, Van Kasper
may trade equity securities of SBB and Pacific for its own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. Van Kasper has previously provided investment
banking services to Pacific. Van Kasper has not previously provided investment
banking services to SBB.
Financial Advisory Fees
SBB. SBB's Retainer Agreement with Advisory is renewed annually on
August 1 for the consecutive 12-month period. The current Retainer Agreement was
renewed on August 1, 1998, and expires July 31, 1999. Professional fees paid to
Advisory by SBB under the Retainer Agreement, together with supplemental
billings for specific financial advisory services provided by Advisory to SBB
that exceeded the scope of the Retainer Agreement ("Supplemental Billings"),
totaled $38,250 for the period August 1, 1997 through July 31, 1998, and
approximated $74,700 for the period August 1, 1996 through July 31, 1997. SBB
also reimbursed Advisory for miscellaneous out-of-pocket expenses. The
professional fees received by Advisory from SBB under the Retainer Agreement and
from Supplemental Billings were insignificant as compared to Advisory's annual
revenues.
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For Advisory's services as an independent financial analyst and advisor
to SBB in connection with the Merger, SBB has agreed to pay Advisory a
professional fee totaling $295,000. Additionally, SBB also has agreed to
reimburse Advisory for reasonable out-of-pocket expenses. Furthermore, in
connection with the Merger, SBB has agreed to indemnify Advisory, the officers,
directors, employees, and shareholders of Advisory and assigns, heirs,
beneficiaries and legal representatives of each indemnified entity and person.
No portion of Advisory's fee is contingent upon the conclusion reached in the
Advisory Fairness Opinion.
Advisory has not previously provided any services to Pacific and, thus,
has never received any professional fees from Pacific.
Pacific. In consideration for the rendering of financial advice and for
the preparation and rendering of the Van Kasper Fairness Opinion, Pacific has
agreed to pay Van Kasper a fee equal to 1.25% to 1.35% of the aggregate
consideration paid to the shareholders of Pacific. A portion of this fee is
payable upon signing of the Reorganization Agreement. Pacific has also agreed to
reimburse Van Kasper for all reasonable out-of-pocket expenses which may be
incurred in connection with the rendering of the Van Kasper Fairness Opinion. No
portion of the fee is contingent upon the conclusions reached in the Van Kasper
Fairness Opinion.
Exchange of Stock Certificates; Fractional Shares
Pacific
As soon as practicable after the Effective Date, and in no event later
than three (3) business days thereafter, a form of transmittal letter will be
mailed by the Exchange Agent for SBB to the holders of Pacific Common Stock. The
form of transmittal letter will contain instructions with respect to the
surrender of certificates formerly representing shares of Pacific Common Stock
(the "Pacific Certificates") and will specify that delivery shall be effected,
and risk of loss and title to such Pacific Certificates shall pass, only upon
delivery of such Pacific Certificates to the Exchange Agent.
CERTIFICATES REPRESENTING SHARES OF PACIFIC COMMON STOCK SHOULD NOT BE
RETURNED WITH THE ENCLOSED PROXY AND SHOULD NOT BE FORWARDED TO THE EXCHANGE
AGENT UNLESS AND UNTIL THE PACIFIC SHAREHOLDER RECEIVES A LETTER OF TRANSMITTAL
FOLLOWING THE EFFECTIVE DATE OF THE MERGER.
Upon proper surrender of a Pacific Certificate for exchange and
cancellation to the Exchange Agent, together with a properly completed letter of
transmittal, the holder of such Pacific Certificate shall be entitled to receive
a certificate representing that whole number of shares of SBB Common Stock to
which such holder is entitled pursuant to the Reorganization Agreement and a
check representing the amount of any fractional share interest as described
herein. In the event that a letter of transmittal contains an error, is
incomplete or is not accompanied by all appropriate Pacific Certificates, then
the Exchange Agent will promptly notify the holder of the need for further
information.
Until surrendered, Pacific Certificates will be deemed (except with
respect to dissenters' rights) to represent the right to receive the Merger
Consideration. No dividends or other distributions of any kind which are
declared payable to the shareholders of record of the Surviving Corporation
after the Effective Date shall be paid to persons entitled to receive SBB Common
Stock in the Merger until such persons surrender their Pacific Certificates.
Upon surrender of such Pacific Certificates, the holder thereof shall be paid,
without interest, any dividends or other distributions with respect to the SBB
Common Stock as to which the record date and payment date occurred on or after
the Effective Date and before the date of surrender. Notwithstanding any such
failure to surrender Pacific Certificates, for a period of ninety (90) days
after the Closing Date, holders of such Pacific Certificates shall be entitled
to vote as shareholders of SBB Common Stock.
Neither the Exchange Agent, Pacific nor SBB will be liable to any
former holder of Pacific Common Stock for any amount delivered in good faith to
a public official pursuant to any applicable abandoned property, escheat or
similar laws.
If a Pacific Certificate has been lost, stolen or destroyed, the
Exchange Agent will issue the consideration properly payable in accordance with
the Reorganization Agreement upon receipt of appropriate evidence as to such
loss, theft or destruction, appropriate evidence as to the ownership of such
certificate by the claimant, and appropriate and customary indemnification.
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For a description of the SBB Common Stock, which shall be the Common
Stock of the Surviving Corporation, see "DESCRIPTION OF SBB CAPITAL STOCK". For
a description of the differences between the rights of the holders of SBB Common
Stock and Pacific Common Stock, see "COMPARISON OF SHAREHOLDER RIGHTS".
Fractional Shares
No fractional shares of SBB Common Stock will be issued to any holder
of Pacific Common Stock upon consummation of the Merger. For each fractional
share that would otherwise be issued (after taking into account all shares of
Pacific Common Stock held by such holder), the Surviving Corporation will pay
cash in an amount equal to such fraction multiplied by the average of the
closing bid and asked price of a share of SBB Common Stock as quoted on Nasdaq
on the business day immediately preceding the Effective Date. No interest will
be paid on any cash in lieu of fractional shares.
SBB
Shares of SBB Common Stock issued and outstanding immediately prior to
the Effective Time will remain issued and outstanding and be unaffected by the
Merger. Holders of such shares will not be required to exchange the certificates
representing such shares or take any other action by reason of the consummation
of the Merger.
Share Adjustments
If, prior to the Effective Date, the outstanding shares of SBB Common
Stock or Pacific Common Stock are changed into a different number of shares or a
different class of shares by reason of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
similar change in capitalization (a "Share Adjustment"), then the number of
shares of SBB Common Stock into which a share of Pacific Common Stock will be
converted pursuant to the Reorganization Agreement and the Merger Agreement will
be appropriately and proportionately adjusted so that each shareholder of
Pacific will be entitled to receive such number of shares of SBB Common Stock as
such shareholder would have received pursuant to such Share Adjustment had the
record date therefor been immediately following the Effective Date of the
Merger.
Effective Date
The Agreements provide that the Merger will be effective on the date of
filing with the California Secretary of State of a duly executed Merger
Agreement and officers' certificates prescribed by Section 1103 of the GCL (the
"Effective Date"). The time at which such materials are accepted for filing on
the Effective Date is referred to herein as the "Effective Time." Although the
parties have not adopted any formal timetable, it is presently anticipated that
the Effective Date of the Merger will be December 31, 1998, assuming all the
conditions set forth in the Reorganization Agreement are theretofore satisfied
or waived. There can be no assurance, however, that this timetable will be met,
and it is possible that the Effective Date may extend beyond such date.
Regulatory Approvals
The Merger is subject to approval by the Federal Reserve Board pursuant
to Section 3 of the BHC Act. SBB agreed in the Reorganization Agreement to use
its best efforts to obtain such regulatory approval at the earliest practicable
date. On September ___, 1998, SBB filed the required application with the
Federal Reserve Board for approval of the Merger. The application is currently
pending. Assuming Federal Reserve Board approval, the Merger may not be
consummated until 30 days after such approval, during which time the Department
of Justice may challenge the Merger on antitrust grounds and seek the
divestiture of certain assets and liabilities. With the approval of the Federal
Reserve Board and the Department of Justice, the waiting period may be reduced
to no less than 15 days.
The Federal Reserve Board is prohibited from approving any transaction
under the BHC Act which:
(i) would result in a monopoly or which would be in
furtherance of any combination or conspiracy to monopolize or to
attempt to monopolize the business of banking in any part of the United
States; or
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(ii) may have the effect in any section of the United States
of substantially lessening competition, or tending to create a
monopoly, or resulting in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of the
transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs
of the communities to be served.
In addition, in reviewing a transaction under the applicable statutes,
the Federal Reserve Board will consider the financial and managerial resources
of the companies and their subsidiary banks and the convenience and needs of the
communities to be served. As part of, or in addition to, consideration of the
above factors, it is anticipated that the Federal Reserve Board will consider
the regulatory status of SBB and Pacific, current and projected economic
conditions in Central California and the overall capital and safety and
soundness standards established by the Federal Deposit Insurance Corporation
Improvement Act of 1991 and the regulations promulgated thereunder.
In addition, under the Community Reinvestment Act of 1977, as amended
(the "CRA"), the Federal Reserve Board must take into account the record of
performance of each of SBB and Pacific in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, served by each
company. As of the date of this Joint Proxy Statement/Prospectus, SBB's sole
banking subsidiary, SBB&T, has a "Satisfactory" CRA rating with the Federal
Reserve Bank of San Francisco, and each of Pacific's banking subsidiaries has a
"Satisfactory" CRA rating with the OCC. None of SBB's or Pacific's banking
subsidiaries received any negative comments from its respective Federal
regulator in its last CRA examination relating to such ratings which were
material and remain unresolved.
The Federal Reserve Board will furnish notice and a copy of the
application for approval of the Merger to the OCC, the Federal Deposit Insurance
Corporation and the appropriate state regulatory authority. These agencies have
30 days to submit their views and recommendations to the Federal Reserve Board.
The Federal Reserve Board is required to hold a public hearing in the event it
receives a written recommendation of disapproval of the application from any of
these agencies within such 30-day period. Furthermore, the BHC Act and Federal
Reserve Board regulations require publication of notice of, and the opportunity
for public comment on, the application submitted by SBB for approval of the
Merger and authorize the Federal Reserve Board to hold a public hearing in
connection therewith if the Federal Reserve Board determines that such a hearing
would be appropriate. Any such hearing or comments provided by third parties
could prolong the period during which the application is subject to review by
the Federal Reserve Board.
As noted above, the Merger may not be consummated until 30 days after
Federal Reserve Board approval, during which time the Department of Justice may
challenge the Merger on antitrust grounds and seek the divestiture of certain
assets and liabilities. With the approval of the Federal Reserve Board and the
Department of Justice, the waiting period may be reduced to no less than 15
days. The commencement of an antitrust action by the Department of Justice would
stay the effectiveness of the Federal Reserve Board approval of the Merger
unless a court specifically orders otherwise. In reviewing the Merger, the
Department of Justice could analyze the Merger's effect on competition
differently than the Federal Reserve Board, and thus it is possible that the
Department of Justice could reach a different conclusion than the Federal
Reserve Board regarding the Merger's competitive effects. Failure of the
Department of Justice to object to the Merger may not prevent the filing of
antitrust actions by private persons or state attorneys general.
In general, the Federal Reserve Board and the Department of Justice
will examine the impact of the Merger on competition in various product and
geographic markets, including competition for deposits and loans, especially
loans to small- and middle-market businesses.
SBB's and Pacific's rights to exercise their respective options under
the Stock Option Agreements are also subject to the prior approval of the
Federal Reserve Board, to the extent that the exercise of their respective
options under the Stock Option Agreements would result in SBB or Pacific, as the
case may be, owning more than 5% of the outstanding shares of the Pacific Common
Stock or the SBB Common Stock, respectively. In considering whether to approve
SBB's or Pacific's right to exercise its respective option, including its
respective right to purchase more than 5% of the outstanding shares of Pacific
Common Stock or SBB Common Stock, as the case may be, the Federal Reserve Board
would generally apply the same statutory criteria it would apply to its
consideration of approval of the Merger.
The Merger cannot proceed in the absence of approval from the Federal
Reserve Board. There can be no assurance that approval of the Merger by the
Federal Reserve Board will be obtained, and, if obtained, there can be no
assurance as to the date of any such approvals or the absence of any litigation
challenging such approval. There can likewise be no assurance that the
Department of Justice will not attempt to challenge the Merger on antitrust
grounds or, if such a challenge is made, as to the result thereof.
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SBB and Pacific are not aware of any other material governmental
approvals or actions that are required prior to the parties' consummation of the
Merger other than those described above. It is presently contemplated that if
any such additional governmental approvals or actions are required, such
approvals or actions will be sought. There can be no assurance, however, that
any such additional approvals or actions will be obtained.
Representations and Warranties
The Reorganization Agreement contains various representations and
warranties of SBB and Pacific. These include representations and warranties as
to, among other things, (i) the corporate organization and existence of each
party and its respective subsidiaries; (ii) the corporate power and authority of
each party to enter into the Agreements; (iii) the capitalization of each party
and its respective subsidiaries; (iv) each party's compliance with applicable
law; (v) each party's financial statements; (vi) the absence of undisclosed
liabilities; (vii) the absence of material legal proceedings; (viii)
governmental and third-party consents and approvals; (ix) title to and condition
of assets; (x) the absence of material defaults under certain contracts; (xi)
the absence of certain changes in each party's business since December 31, 1997;
(xii) leases, contracts and agreements; (xiii) the filing and accuracy of each
party's tax returns; (xiv) adequacy of insurance; (xv) ownership of patents,
trademarks and copyrights; (xvi) environmental compliance; (xvii) the timely
filing of regulatory reports and regulatory compliance; (xviii) timeliness,
accuracy and completeness of filings made by each party with the Commission;
(xix) accuracy of information provided by the parties for inclusion in this
Joint Proxy Statement/Prospectus; (xx) "pooling of interests" accounting
treatment; (xxi) maintenance of corporate books and records; (xxii) employee
relationships; (xxiii) each parties employee benefit plans and related matters;
(xxiv) interest rate risk management instruments; and (xxv) compliance with
regulatory interagency guidances regarding the year 2000 computer issue.
Conduct of Business Pending the Merger and Certain Other Agreements
Best Efforts and Business in Ordinary Course
The parties have agreed to use their respective best efforts to perform
and fulfill all of their respective conditions and obligations to be performed
or fulfilled pursuant to the terms of the Reorganization Agreement, including
obtaining all consents and approvals from third parties, and to cause the
consummation of the Merger in accordance with the terms of the Reorganization
Agreement at the earliest practicable time. In addition, each party has agreed
to, and will use its respective best efforts to cause its directors and officers
to, use all commercially reasonable efforts to consummate the Merger in a manner
that will qualify the Merger for "pooling of interests" accounting treatment.
See "THE MERGER -- Accounting Treatment." The parties have also agreed to use
their respective best efforts to have each of its directors vote, or caused to
be voted, all shares of SBB Common Stock or Pacific Common Stock, as the case
may be, beneficially owned by them in favor of the Merger.
In addition, during the pendency of the transactions described in this
Joint Proxy Statement/Prospectus, SBB and Pacific have each agreed to, and as
applicable to cause their respective subsidiaries to, among other things, (i)
operate only in the ordinary course of business and consistent with prudent
banking practices; (ii) use all reasonable efforts to preserve its business
organization intact and to retain present customers, depositors and employees
and to maintain its assets in good operating condition and repair (except as
required by prudent business practices); (iii) perform obligations under
contracts, leases and documents relating to or affecting its assets, properties
and business (except such obligations as may be reasonably disputed); (iv)
maintain insurance policies now in effect or renewals thereof; (v) file all
reports required to be filed with governmental authorities and observe and
conform to applicable laws, rules and regulations (except as may be contested in
good faith by appropriate proceedings); (v) timely file tax returns and pay
taxes and assessments that become due and payable (except as may be contested in
good faith by appropriate proceedings); (vi) withhold appropriate payroll taxes
and to pay the same to proper tax receiving officers; and (vii) account for all
transactions and prepare financial statements in accordance with generally
accepted accounting principles (unless otherwise subject to regulatory
accounting principles).
Each party has also agreed to refrain from taking certain actions
during the pendency of the Merger, without the prior consent of the other party,
including, among others, (i) taking any action that would reasonably be
anticipated to result in a Material Adverse Change, (ii) take any action that
would cause or permit the representations and warranties made by such party to
be inaccurate at the time of Closing; (iii) change the articles of incorporation
or bylaws (except with respect to SBB) or authorized capital stock, (iv) grant
any new stock options or accelerate the vesting of any existing stock options,
except as provided in the Reorganization Agreement, (v) accelerate the vesting
of pension or other benefits in favor of any employees, (vi) acquire any capital
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stock or other equity securities or acquire any equity or ownership interest in
any bank, corporation, partnership or other entity, (vii) mortgage, pledge or
subject to lien or charge, or grant any security interest or any other
encumbrance or restriction on any of its property, business or assets, except in
the ordinary course of business and consistent with prudent banking practices,
(viii) sell, transfer, lease to others or otherwise dispose of any of its assets
or cancel or compromise any debt or claim, or waive or release any right or
claim of material value, except in the ordinary course of business and
consistent with past practices and safe and sound banking practices, or (ix)
make any change in any accounting methods, principles or material practices,
except as required by generally accepted accounting principles.
During the pendency of the transactions contemplated by the
Reorganization Agreement, each party is to promptly notify the other upon the
occurrence of certain events including (i) the filing or threat of litigation
that questions the validity of the Agreements or seeks to enjoin or otherwise
restrain the transactions contemplated thereby or that would, in the event of an
unfavorable outcome, result in a Material Adverse Change; (ii) any change or
development in the business, financial condition, operations or prospects of
such party that results in, or may lead to a, Material Adverse Change or that
would adversely affect, prevent or delay the obtaining of any regulatory
approval necessary to consummate the transactions contemplated by the
Reorganization Agreement; or (iii) awareness of any fact or condition that makes
untrue in any material respect any representation or warranty in the
Reorganization Agreement or that results in such party's failure to comply with
any covenant, condition or agreement contained in the Reorganization Agreement.
Environmental Inspections
SBB and Pacific have each agreed to permit the other party, including
such other party's consultants, agents and representatives, to perform asbestos
surveys and environmental inspections and testing with respect to all real
property currently owned or leased by SBB or Pacific, as the case may be,
including foreclosed properties and properties used as banking premises,
including all improvements and fixtures thereon (the "Environmental
Inspections"). Such Environmental Inspections were conducted by September 3,
1998. If further investigation of certain property was warranted by such
Environmental Inspections, each party agreed to notify the other of its intent
to perform secondary investigations with respect to such property, which
secondary investigations were to have commenced on or before September 18, 1998.
Neither party notified the other of its intent to perform any secondary
investigations with respect to such property and, accordingly, no secondary
investigations will be performed.
Upon the occurrence of certain events relative to the Environmental
Inspections, each party may have the right to terminate the Reorganization
Agreement. See "THE MERGER -- Termination of the Reorganization Agreement." As
of the date of this Joint Proxy Statement/Prospectus, neither party is aware of
any environmental condition that would warrant termination of the Reorganization
Agreement.
Director and Committee Meetings
SBB and Pacific have each agreed to permit two representative of the
other party (which designees shall be consented to by the inviting party) to
attend all regular and special meetings of the SBB Board and Pacific Board,
respectively, and to permit such persons to attend all regular and special
meetings of any board or senior management committee thereof. Notwithstanding
this invitation, each of SBB and Pacific has reserved the right to exclude such
invitees from attending any portion of any such meeting at any time. In
addition, SBB and Pacific have agreed to provide to the other copies of the
minutes of all regular and special meetings of the SBB Board and Pacific Board,
as applicable, and minutes of all regular and special meetings of any board or
senior management committee thereof (except for those portions of such minutes
which are devoted to the discussion of the Agreements or the Merger or which,
upon the advise of counsel, are otherwise privileged).
No Solicitation
The Reorganization Agreement provides that, until the Effective Date or
the earlier termination of the Reorganization Agreement, neither SBB nor Pacific
will encourage, solicit or initiate discussions or negotiations with, or (except
upon the advise of counsel to the extent required to fulfill fiduciary duties of
the directors of SBB or Pacific) entertain, discuss or negotiate with, or
provide any information to, or cooperate with, any corporation, partnership,
person or other entity or group (other than SBB or Pacific, as the case may be)
concerning any acquisition of all or a substantial portion of the business,
assets or stock of SBB or Pacific, respectively. Following the receipt of any
unsolicited written offer, each party is required to promptly communicate to the
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offer, each party is required to promptly communicate to the other party the
terms of any proposal or request for information.
Other Agreements of SBB
SBB has agreed to take all action necessary to effect the Bylaw
Amendment prior to the Effective Date. See "THE SBB MEETING -- Matters to be
Considered -- The Bylaw Amendment." SBB has also agreed that, as of the
Effective Date, any executive officer or director of Pacific who becomes an
officer or director of the Surviving Corporation (including any subsidiaries
thereof) shall be included in the director and officer insurance policy of the
Surviving Corporation. See "THE MERGER -- Interests of Certain Persons in the
Merger."
Other Agreements of Pacific
Pacific has agreed that, prior to the Closing Date, it will use its
best efforts to cause certain identified employees of one of its subsidiaries to
enter into agreements not to compete with the Surviving Corporation, which
agreements would become effective on the Effective Date. See "THE MERGER --
Interests of Certain Persons in the Merger." In addition, Pacific has agreed to
make available to SBB, from time to time and upon request, a list of the
shareholders of Pacific, including their addresses, and a list showing all
transfers of the Pacific Common Stock. Pacific has also agreed to deliver to
SBB, at least 40 days prior to the Closing Date, a list identifying each person
who may reasonably be deemed to be an "affiliate" of Pacific within the meaning
of such term as used in Rule 145 under the Securities Act and to deliver to SBB,
not less than 31 days prior to the Closing Date, signed agreements from each
such "affiliate" regarding certain restrictions on the resale of SBB Common
Stock received by each such "affiliate" in the Merger. See "THE MERGER -- Resale
of SBB Common Stock."
Certain Conditions to Consummation of the Merger
Each party's obligation to effect the Merger is subject to the
fulfillment or waiver, if legally permissible, of the following conditions prior
to or at the Closing:
(i) the representations and warranties of the other party to
the Reorganization Agreement (or in any document or schedule delivered
to the other party pursuant to the Reorganization Agreement) shall be
true and correct in all material respects when made and as of the
Closing Date as though made on the Closing Date (except with respect to
those representations and warranties specifically made as of an earlier
date) (see "THE MERGER -- Representations and Warranties");
(ii) each party shall have performed or complied in all
material respect with all agreements, terms, covenants and conditions
required by the Reorganization Agreement to be performed or complied
with prior to or at the Closing (see "THE MERGER -- Conduct of Business
Pending the Merger and Certain Other Agreements");
(iii) the holders of at least a majority of the SBB Common
Stock and the Pacific Common Stock entitled to vote on the
Reorganization Agreement, the Merger Agreement and the Merger shall
have approved the Reorganization Agreement, the Merger Agreement and
the Merger, and the holders of at least a majority of the SBB Common
Stock entitled to vote on the Bylaw Amendment shall have approved the
Bylaw Amendment (see "THE SBB MEETING -- Vote Required to Approve the
Merger", "-- Vote Required to Approve the Bylaw Amendment", and "THE
PACIFIC MEETING -- Vote Required to Approve the Merger");
(iv) each party shall have received approvals, acquiescence or
consents, all on terms and conditions mutually acceptable to the
parties, of the transactions contemplated by the Agreements from all
necessary governmental agencies, authorities and third parties,
including the Commission and the Federal Reserve Board, and all
statutory waiting periods with respect to such approvals shall have
expired (see "THE MERGER -- Regulatory Approvals");
(v) no action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Reorganization Agreement and the
Merger by any federal, state or foreign government or governmental
authority or by any court, including the entry of a preliminary or
permanent injunction, that would (a) make the Reorganization Agreement
or the agreements and transactions contemplated thereby illegal,
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invalid or unenforceable, (b) require the divestiture of a material
portion of the assets of either party, (c) impose material limits in
the ability of either party to consummate the Merger, (d) otherwise
result in a Material Adverse Change (as defined below), or (e)
assuming consummation of the Merger, subject any officer, director,
shareholder or employee of either party to criminal or civil liability;
(vi) each party shall have delivered to the other the closing
deliveries identified in the Reorganization Agreement;
(vii) each party shall have received, on or before the date of
this Joint Proxy Statement/Prospectus, from its respective investment
advisor an unqualified written opinion to the effect that the Merger is
fair to the shareholders of such party from a financial point of view
(see "THE MERGER -- Opinion of Financial Advisors");
(viii) the parties shall have received an opinion from KPMG
Peat Marwick LLP, independent public accountants for Pacific, to the
effect that Pacific qualifies as an entity that may be a party to a
business combination for which the "pooling of interests" method of
accounting is available, the parties shall have received an opinion
from Arthur Andersen LLP, independent public accountants for SBB, to
the effect that the Merger will qualify for "pooling of interests"
accounting treatment, and there shall have been no determination by any
court, tribunal, regulatory agency or other governmental entity, that
the Merger fails or will fail to qualify for "pooling of interests"
accounting treatment (see "THE MERGER -- Accounting Treatment");
(ix) the Registration Statement, of which this Joint Proxy
Statement/Prospectus forms a part, shall have become effective under
the Securities Act, no stop order suspending the effectiveness of the
Registration Statement shall be in effect or proceeding for that
purpose pending before or threatened by the Commission, and all state
securities permits or approvals required by applicable state securities
laws to consummate the Merger shall have been received and remain in
effect;
(x) SBB shall have received an opinion of Jenkens & Gilchrist,
a Professional Corporation, counsel to SBB, and Pacific shall have
received a copy of such opinion, to the effect that if the Merger is
consummated in accordance with the terms set forth in the
Reorganization Agreement (a) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, (b) no
gain or loss will be recognized for federal income tax purposes by the
holders of shares of Pacific Common Stock upon receipt of the Merger
Consideration (except for cash received in lieu of fractional shares),
(c) the basis of shares of SBB Common Stock received by the
shareholders of Pacific will be the same as the basis of shares of
Pacific Common Stock exchanged therefor, and (d) the holding period of
the shares of SBB Common Stock received by such shareholders will
include the holding period of the shares of Pacific Common Stock
exchanged therefor, provided such shares were held as capital assets as
of the Effective Date (see "THE MERGER -- Federal Income Tax
Considerations");
(xi) the holders of not more than a certain percentage (not to
exceed 9.9%) of the issued and outstanding shares of Pacific Common
Stock shall have demanded or be entitled to demand payment of the fair
value of their shares as dissenting shareholders under applicable
provisions of the GCL, such that the receipt of cash pursuant to the
exercise of such appraisal rights, when combined with all other cash
transactions required to be considered under generally accepted
accounting principles, would prevent the Merger from qualifying as a
"pooling of interests";
(xii) all accounting and tax treatment, entries and
adjustments in connection with the transactions contemplated by the
Reorganization Agreement shall be reasonably satisfactory to each
party, and neither party shall have received notification from any
proper regulatory authority that such party's accounting and tax
treatment, entries and adjustments used in connection with the Merger
are improper, and neither party shall have been required by any such
regulatory authority to make any accounting or tax adjustments that
would constitute a Material Adverse Change; and
(xiii) there shall have been no Material Adverse Change with
respect to either party since December 31, 1997.
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The obligation of Pacific to effect the Merger is further subject to
the condition that SBB shall have taken all actions necessary to effect the
Bylaw Amendment.
The obligation of SBB to effect the Merger is further subject to the
condition that SBB shall have received from Pacific, at least 31 days prior to
the Closing Date, the signed letters from each "affiliate" of Pacific. See "THE
MERGER -- Resale of SBB Common Stock."
As used in the Reorganization Agreement, the term "Material Adverse
Change" means any material adverse change (excluding the occurrence of expenses
in connection with the Merger) since December 31, 1997 in the business, results
of operations, condition (financial or otherwise), assets, properties,
liabilities (absolute, accrued, contingent or otherwise), reserves of Pacific or
SBB, as the case may be, and their respective subsidiaries taken as a whole, and
specifically includes, without limitation, with respect to Pacific, any change
that reduces the tangible shareholders' equity of Pacific below $70,000,000, or,
with respect to SBB, any change that reduces the tangible shareholders' equity
of SBB below $118,000,000.
The conditions described in item (iii) and (iv) above (the receipt of
shareholder and regulatory approvals) may not be waived by either party.
Although the remaining conditions to effect the Merger may be waived by the
party entitled to the benefit thereof, neither SBB or Pacific intends to waive
any such conditions except in those circumstances where the SBB Board or the
Pacific Board, as the case may be, deems such waiver to be in the best interests
of SBB or Pacific, as the case may be, and its respective shareholders.
No assurance can be provided as to if or when all of the foregoing
conditions precedent to the Merger, including receipt of regulatory approvals
necessary to consummate the Merger, will be satisfied or waived (where
permissible) by the party permitted to do so. If the Merger is not effected on
or before January 31, 1999 (or such later date as may be mutually agreed to by
the parties), the Reorganization Agreement may be terminated by either SBB or
Pacific. See "THE MERGER -- Termination of the Reorganization Agreement."
Termination of the Reorganization Agreement
Termination or Abandonment
The Reorganization Agreement may be terminated, and the Merger may be
abandoned, at any time prior to the Effective Date, upon the occurrence of one
or more of the following events:
(a) by mutual written agreement between SBB and Pacific, if a majority
of the members of each of the SBB Board and Pacific Board so determines;
(b) by SBB or Pacific, if the Effective Date has not occurred by
January 31, 1999, or such later date as may be mutually agreed to by SBB and
Pacific;
(c) by SBB or Pacific, if there has been a Material Adverse Change with
respect to the other;
(d) by either SBB or Pacific, if the other has breached any of its
respective covenants in the Reorganization Agreement in any material respect and
has failed to correct or cure any such breach within twenty (20) business days
after notice thereof is given by the nonbreaching party;
(e) by either SBB or Pacific, if any representation or warranty given
or made by such other party in the Reorganization Agreement or in any schedule
or other document delivered by such other party in accordance with the terms of
the Reorganization Agreement is or becomes untrue or incorrect in any material
respect and is not corrected within twenty (20) business days after written
notice thereof is given by the party terminating this Agreement, provided that
any such notice shall be delivered promptly upon discovery of the breach;
(f) by either SBB or Pacific, if (i) any of the transactions
contemplated by the Agreements are disapproved by any regulatory authority whose
approval is required to consummate such transactions, (ii) any court of
competent jurisdiction in the United States or other United States (federal or
state) governmental body shall have issued an order, decree or ruling or taken
any other action restraining, enjoining, invalidating or otherwise prohibiting
the Agreements or the transactions contemplated thereby and such order, decree,
ruling or other action shall have been final and nonappealable, or (iii) either
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Pacific or SBB reasonably determines, in good faith and after consulting with
counsel, there is substantial likelihood that any necessary regulatory approval
will not be obtained or will be obtained only upon a condition or conditions
that make it inadvisable to proceed with the transactions contemplated by the
Agreements;
(g) by SBB or Pacific, if the Merger is not approved by the required
vote of shareholders of Pacific or SBB;
(h) by Pacific, if (i) a proposal for a Third Party Transaction (as
defined below) involving Pacific has been made or received and the Pacific Board
determines, in the exercise of its good faith judgment (based on written advice
of independent legal counsel) that such termination is required in order for the
Pacific Board to comply with its fiduciary duties to Pacific's shareholders, or
(ii) following receipt by Pacific of a proposal for a Third Party Transaction,
the Pacific Board shall have altered its determination to recommend that the
shareholders of Pacific approve the Agreements or shall have failed to proceed
to hold the Pacific Meeting. As used in the Reorganization Agreement, the phrase
"Third Party Transaction" means (i) any tender offer for more than 50% of the
outstanding shares of Pacific, (ii) any merger or consolidation of Pacific with
or into any entity other than SBB or an affiliate of SBB, (iii) any sale of all
or substantially all of the assets of Pacific, (iv) any reorganization of
Pacific or other transaction that results or when completed would result in a
disposition of substantially all of the assets of Pacific, or (v) the issuance,
sale or disposition of securities representing 50% or more of the common stock
of Pacific;
(i) by either SBB or Pacific, if, by October 18, 1998 and with respect
to certain environmental matters regarding all real property of the other party,
(i) the results of any environmental inspection identifies violations or
potential violations of environmental laws, (ii) such other party refuses to
conduct any reasonably necessary environmental inspection, (iii) any
environmental inspection identifies any past or present event, condition or
circumstance that potentially would require remedial or cleanup action that
would result in a Material Adverse Change, (iv) any environmental inspection
identifies the presence of any underground or above-ground storage tank that is
not shown to be in compliance with all environmental laws applicable to such
tank either now or at a future time, or that has had a release of petroleum or
other hazardous material that has not been properly cleaned up to the
satisfaction of the relevant governmental authority, or (v) any environmental
inspection reveals the presence of any asbestos-containing material in, on or
under any property, the removal of which would result in a Material Adverse
Change; provided, however, that, in the event of any of the foregoing, the
violating party shall have the opportunity to correct any such violations or
conditions to the reasonable satisfaction of the other party by November 12,
1998. In the event the violating party fails to demonstrate satisfactory
correction of the violations or conditions, the other party may terminate the
Reorganization Agreement on or before November 22, 1998;
(j) by Pacific, if the SBB Average Price should be less than $22.95;
provided, however, that if the SBB Average Price shall be less than $22.95,
Pacific and SBB shall attempt in good faith to renegotiate the Exchange Ratio,
subject to existing market conditions. Should the parties fail to so renegotiate
the Exchange Ratio within three (3) business days after determination of the SBB
Average Price, Pacific may terminate the Reorganization Agreement.
(k) by Pacific, if Pacific shall not have received the Van Kasper
Fairness Opinion, dated as of the date of this Joint Proxy Statement/Prospectus;
or
(l) by SBB, if SBB shall not have received the Advisory Fairness
Opinion, dated as of the date of this Joint Proxy Statement/Prospectus.
Payment Upon Certain Events of Termination
Generally, SBB and Pacific have agreed to bear their respective costs
and expenses incurred in connection with the consummation of the transactions
contemplated by the Agreements. However, in certain events of termination of the
Reorganization Agreement, as described below, each party has agreed to pay to
the other a termination fee and to reimburse the other for certain fees and
expenses.
Payment by Pacific. In the event the Reorganization Agreement is
terminated by SBB because (i) the Merger is not approved by the required vote of
shareholders at the Pacific Meeting, and (ii) the Pacific Board (subject to
compliance with its fiduciary duties as advised by counsel) shall have failed to
have used its best efforts to obtain shareholder approval, Pacific shall pay to
SBB within ten (10) business days after such termination a fee of $7,650,000,
plus the amount, not to exceed $250,000, of all documented fees and expenses of
SBB related to the Agreements and the transactions contemplated thereby.
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Alternatively, in the event the Reorganization Agreement is terminated
by Pacific because of a Third Party Transaction (See "THE MERGER--Termination of
the Reorganization Agreement"), Pacific shall pay to SBB within ten (10)
business days after such termination a fee of $7,650,000, plus the amount, not
to exceed $250,000, of all documented fees and expenses of SBB related to the
Agreements and the transactions contemplated thereby.
Payment by SBB. In the event the Reorganization Agreement is terminated
by Pacific because (i) the Merger is not approved by the required vote of
shareholders at the SBB Meeting, and (ii) the SBB Board (subject to compliance
with its fiduciary duties as advised by counsel) shall have failed to have used
its best efforts to obtain shareholder approval, SBB shall pay to Pacific within
ten (10) business days after such termination a termination fee of $7,650,000,
plus the amount, not to exceed $250,000, of all documented fees and expenses of
Pacific related to the Agreements and the transactions contemplated thereby.
Effect of Merger on Employee Benefit and Stock Option Plans
Employee Benefit Plans
Pursuant to the Reorganization Agreement, SBB has agreed, with respect
to each employee of Pacific or its subsidiaries who continues in employment with
the Surviving Corporation or its subsidiaries following the Effective Date of
the Merger (each a "Continued Employee"), to provide certain employee benefits.
Subject to the right of the Surviving Corporation to subsequently amend, modify
or terminate any benefit plan, and subject to eligibility and selection
criteria, Continued Employees will be entitled to participate in the employee
benefit plans or programs of SBB in effect as of the date of the Reorganization
Agreement (the "SBB Employee Plans"). Continued Employees will be eligible to
participate in the SBB Employee Plans on the same basis as similarly situated
employees of SBB and its subsidiaries. Except with respect to certain retiree
health plans currently maintained by SBB&T, the Surviving Corporation will, for
purposes of vesting and any age or period-of-service requirements for
commencement of participation with respect to any such SBB Employee Plans in
which Continued Employees may participate, credit each Continued Employee with
his or her term of service with Pacific and its subsidiaries.
Stock Option Plans
Each stock option to purchase shares of Pacific Common Stock (each a
"Pacific Stock Option") granted under (i) the Pacific Capital Bancorp 1984 Stock
Option Plan, (ii) the Pacific Capital Bancorp 1994 Stock Option Plan or (iii)
the Pacific Capital Bancorp 1991 Directors Stock Option Plan (collectively, the
"Pacific Stock Option Plans") which is outstanding and unexercised immediately
prior to the Effective Time, whether or not exercisable, will be assumed by SBB
and be converted automatically at the Effective Time into, and will become,
stock options to purchase Common Stock of the Surviving Corporation (an "Assumed
Option"). In the case of a non-statutory Pacific Stock Option, (a) the number of
shares of Common Stock of the Surviving Corporation subject to the Assumed
Option will be equal to the product of the number of shares of Pacific Common
Stock subject to the Pacific Stock Option and the Exchange Ratio, rounded to the
nearest one one-hundredth share, and (b) the exercise price per share of Common
Stock of the Surviving Corporation subject to the Assumed Option will be equal
to the exercise price per share of Pacific Common Stock under the Pacific Stock
Option divided by the Exchange Ratio, rounded to the nearest one one-hundredth
dollar. In the case of a Pacific Stock Option which is an "incentive stock
option" (as defined in Section 422 of the Code), the number of shares and the
exercise price with respect to such Assumed Options shall be determined in a
manner consistent with Section 424(a) of the Code. Each Assumed Option will
otherwise continue to be governed by the terms of the Pacific Stock Option Plans
(which will be assumed by the Surviving Corporation) pursuant to which such
options were issued.
Interests of Certain Persons in the Merger
Shareholders should be aware that certain members of the Pacific Board
and management of Pacific have interests in the Merger that are in addition to
and separate from the interests of shareholders of Pacific generally. The Boards
of Directors of SBB and Pacific were aware of these interests, and considered
them, among other matters, in approving the Reorganization Agreement, the Merger
Agreement and the transactions contemplated thereby, including the Merger.
Adoption and approval of the Reorganization Agreement, the Merger Agreement and
the Merger by the shareholders of SBB and Pacific will also constitute approval
of the following benefits to be received by certain directors, executive
officers and employees of Pacific and its subsidiaries.
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Pacific Employment Contracts
Pacific has existing employment contracts with four of its executive
officers: Messrs. D. Vernon Horton (Chairman of the Board and Chief Executive
Officer), Clayton C. Larson (President and Chief Administrative Officer), Dennis
A. DeCius (Executive Vice President and Chief Financial Officer) and Dale R.
Diederick (Executive Vice President and Loan Administrator) (collectively, the
"Pacific Executives"). Each of these employment contracts was entered into on
August 26, 1997 for a three-year term to expire on August 25, 2000, unless
earlier terminated as provided in the contract. These employment contracts
provide for annual salary and annual discretionary cash bonuses (based on
efforts and performance) to be determined in the sole discretion of the Pacific
Board.
In the event of a change in control by merger or purchase of Pacific
into or by another entity (not resulting from financial difficulties or
insolvency of Pacific), each of the Pacific Executives will receive certain
payments and benefits (described below), regardless of whether such Pacific
Executive will continue as an executive officer of the Surviving Corporation
following the Merger. With respect to Messrs Horton and Larson, such change in
control benefits include (i) a cash payment equal to 2.9 times the annual base
salary and bonus for the average of the five years immediately preceding the
effective time of the change in control, together with any salary and bonus
earned to such date (such amount to be paid in a lump sum or in installments as
directed by the executive), (ii) medical and life insurance coverage for two
years from the date of the change in control, and (iii) up to $15,000 in
outplacement services. With respect to Messrs DeCius and Diederick, such change
in control benefits include (i) a cash payment equal to 1.5 times the annual
base salary and bonus for the average of three years immediately preceding the
effective time of the change in control, together with any salary and bonus
earned to such date (such amount to be paid in a lump sum or in installments as
directed by the executive), (ii) medical and life insurance coverage for two
years from the date of the change in control, and (iii) up to $15,000 in
outplacement services. Accordingly, upon consummation of the Merger (which
constitutes a "change in control" as defined in the Employment Agreements),
estimated payments to such individuals (exclusive of medical and life insurance
coverage and outplacement service payments) are as follows: Mr. Horton -
$982,669; Mr. Larson - $966,336; Mr. DeCius - $284,372; Mr. Diederick -
$195,372.
Additional information with respect to these employment contracts is
incorporated by reference to the 1997 Annual Report on Form 10-K of Pacific,
which is incorporated herein by reference. See "INFORMATION INCORPORATED BY
REFERENCE" and " AVAILABLE INFORMATION."
It is not anticipated that SBB will enter into any new employment
contracts with officers or other employees of Pacific in connection with the
Merger.
Salary Continuation Benefits Agreements
The Pacific Executives each have an Amended and Restated Executive
Salary Continuation Benefits Agreement with Pacific (each a "Salary Continuation
Agreement"). These Salary Continuation Agreements provide that if the executive
continues to be employed by Pacific at least until such executive reaches age
65, the executive may retire or continue to work past age 65. Upon such Pacific
Executive's retirement, Pacific will pay an annual amount of $125,000, $120,000,
$82,500 and $60,000 to Messrs. Horton, Larson, DeCius and Diederick,
respectively, payable monthly for a period of 180 months following such
retirement, subject to certain conditions set forth in the agreements. Each
Pacific Executive may also elect to take "early retirement" provided he has
reached age 55 and has completed 10 years of service. If he so elects, he will
receive monthly payments determined pursuant to a formula set forth in the
Salary Continuation Agreement for a period of 180 months. Payments under the
Salary Continuation Agreements are in addition to any payments made pursuant to
the Employment Agreements described above.
In the event of a change in control of Pacific, as defined in the
agreements, the Pacific Executive will be entitled to the full retirement
benefits under the Executive Salary Continuation Agreement payable in the manner
described above commencing on the first day of the first month following the
effective date of the change in control.
Pacific purchased single premium life insurance policies on each of the
Pacific Executives in order to assist in meeting its obligations under the
Executive Salary Continuation Agreements and to indemnify Pacific against loss.
Pacific is currently named as owner and beneficiary under each of the insurance
policies.
Consummation of the Merger will constitute a "change in control" of
Pacific as defined in the Executive Salary Continuation Agreements. It is
anticipated that the Surviving Corporation will assume the obligations of
Pacific under the Executive Salary Continuation Agreements to pay the Pacific
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Executives as described above and will become owner and named beneficiary of the
insurance policies following consummation of the Merger.
Agreements not to Compete
As an inducement for SBB to enter into the Reorganization Agreement
with Pacific, Pacific has agreed to use its best efforts to cause certain
persons associated with Pacific and/or South Valley to enter into agreements not
to compete with the Surviving Corporation and its subsidiaries for a period of
two years beginning on the Effective Date, and to deliver any or all such
agreements to SBB at the Closing. The individuals identified by SBB to enter
into such agreements are Eugene R. Guglielmo (a director of Pacific and South
Valley), Mary Lou Rawitser (a director of Pacific and South Valley) and Brad L.
Smith (President and Chief Executive Officer of South Valley). The proposed
agreements generally provide that each such person will not, for a two-year
period, (i) solicit the banking business of any current customer of First
National Bank or South Valley, (ii) acquire, charter or operate, or serve as an
officer, director or agent for, any financial institution within a defined
geographic area, and (iii) recruit, hire or assist others in recruiting or
hiring, any person who is, or within the last 12 months was, an employee of
Pacific, First National Bank or South Valley. In consideration for their
willingness to enter into such agreements not to compete, SBB has agreed to pay
each of Mr. Guglielmo and Ms. Rawitser $10,000 payable in cash upon delivery of
the signed agreement at the Closing. In consideration for his willingness to
enter into such agreement not to compete, SBB has agreed to extend Mr. Smith's
existing employment contract with South Valley for one additional year through
late 1999. Such agreements have not been finalized and may be subject to further
modification prior to the Closing.
Board Composition
Pursuant to the Agreements, four (4) current directors of Pacific
(Messrs Vernon Horton, Roger C. Knopf, Clayton C. Larson and William H. Pope)
will be appointed to the SBB Board to be effective as of the first meeting of
the Board of Directors of the Surviving Corporation following the Effective Date
of the Merger. See "THE MERGER -- Management and Operations After the Merger."
SBB currently has a policy of paying non-employee directors an annual
retainer fee of $6,000 plus $500 per board meeting attended and $250 per
committee meeting attended, except for the Executive Committee and the Loan
Policy and Review Committee. Each outside director who is a member of the
Executive Committee is paid $1,000 per month and each member of the Loan Policy
and Review Committee is paid $400 per meeting.
Messrs. Knopf and Pope will be outside directors of the Surviving
Corporation and will be eligible to receive the compensation described above.
Since Messrs. Horton and Larson will be executive officers of the Surviving
Corporation, they will not receive any additional compensation for their service
as members of the Board of Directors of the Surviving Corporation. Such policy
is subject to change in the future in the discretion of the Board of Directors
of the Surviving Corporation.
Indemnification and Insurance
The Reorganization Agreement provides that, upon the Effective Date of
the Merger, SBB will include any executive officer or director of Pacific who
becomes an officer or director of SBB or any of its subsidiaries in SBB's
director and officer insurance policy. In addition, the Reorganization Agreement
provides that Pacific and its subsidiaries shall have the authority to purchase
a rider to Pacific's existing policy of directors' and officers' liability
insurance providing for the continuation of coverage provided by such policy for
a period of 36 months following the Effective Date with respect to actions
occurring prior to the Effective Date to the extent that such coverage is
obtainable for an aggregate premium not to exceed $125,000.
Employment and Employee Benefits
Pursuant to the Reorganization Agreement, SBB has agreed to provide
Continued Employees certain employee benefits. See "THE MERGER -- Effect of
Merger on Employee Benefit and Stock Option Plans -- Employee Benefit Plans."
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Stock Option Plans
The Reorganization Agreement contains certain provisions regarding the
assumption by SBB, as the Surviving Corporation in the Merger, of outstanding
Pacific Stock Options to acquire shares of Pacific Common Stock which are
described under "MERGER -- Effect of Merger on Employee Benefit and Stock Option
Plans -- Stock Option Plans." Additional information with respect to Pacific
Stock Options granted to directors and executive officers of Pacific under the
Pacific Stock Option Plans is incorporated by reference to the 1997 Annual
Report on Form 10-K of Pacific, which is incorporated herein by reference. See
"INFORMATION INCORPORATED BY REFERENCE" and "AVAILABLE INFORMATION."
Interests of SBB's Board and Management
As of the Pacific Record Date, directors and executive officers of SBB
beneficially owned 2,713 shares, or less than 1.0% of the outstanding shares, of
Pacific Common Stock, all of which shares are expected to be voted in favor of
the Merger. Assuming consummation of the Merger, such shares of Pacific Common
Stock owned by directors and executive officers of SBB will be converted into
shares of SBB Common Stock in the same manner as all other shares of Pacific
Common Stock. Except for the foregoing, no member of the SBB Board or management
of SBB or any other affiliate of SBB has an interest in the Merger other than as
a shareholder of SBB or Pacific generally.
Management and Operations After the Merger
As of the Effective Date, and assuming that the Bylaw Amendment has been
approved by the shareholders of SBB Common Stock at the SBB Meeting, the Board
of Directors of the Surviving Corporation will consist of fifteen (15)
directors; eleven (11) of whom constitute all of the current directors of SBB
and four (4) of whom are current members of the Pacific Board. Pursuant to the
terms of the Merger Agreement, the four representatives of Pacific to be
appointed to the Board of Directors of the Surviving Corporation will be: D.
Vernon Horton; Roger C. Knopf; Clayton C. Larson; and William H. Pope. Each of
Messrs. Horton, Knopf, Larson and Pope currently serve on the Pacific Board. Mr.
Horton is also the Chairman of Pacific, and Mr. Larson is the President of
Pacific. Biographical information regarding each of the proposed directors of
the Surviving Corporation follows.
DONALD M. ANDERSON is Chairman of the Board of SBB and Vice Chairman of
SBB&T. Mr. Anderson joined SBB&T in October 1969 as Vice President and
Commercial Lending Officer. He was elected President, CEO and director of SBB&T
in 1971 and served in those capacities until elected Chairman of the Board in
February 1989. He has served on numerous charitable, civic and banking
organizations.
FRANK BARRANCO, M.D. is a director of SBB and SBB&T and has served in that
capacity since 1989. Dr. Barranco is a retired physician and was a founding
director of the Community Bank of Santa Ynez Valley. Prior to his retirement, he
practiced family medicine in Solvang and was a member of the teaching staffs at
both UCLA and USC medical schools. He has been Chief of Staff at Santa Ynez
Community Hospital and has served on the Board of Trustees of the Santa Ynez
School District.
EDWARD E. BIRCH is a director of SBB and SBB&T and has served in that
capacity since 1983. Dr. Birch was Vice-Chancellor of the University of
California at Santa Barbara from 1976 until his retirement in 1993. He is
currently Executive Vice President for Westmont College in Santa Barbara,
California. He has been involved in a number of civic and community
organizations, including the Cancer Foundation of Santa Barbara, Goleta Valley
Community Hospital, the Santa Barbara Industry Education Council, and the Santa
Barbara Chamber of Commerce.
TERRILL F. COX is a director of SBB and SBB&T and has served in that
capacity since 1997. Mr. Cox is the senior partner in the law firm of Grossman,
Cox & Johnson. He is a former Municipal Court Judge. Mr. Cox was a founder and
served on the Board of First Valley Bank of Lompoc for 24 years from its
inception. At the time of the merger of First Valley Bank of Lompoc with SBB&T,
he was Chairman of the Board.
RICHARD M. DAVIS is a director of SBB and SBB&T and has served in that
capacity since 1984. Mr. Davis is a retired business executive. He is a past
Chairman of the Board of Directors of Santa Barbara Cottage Hospital, a past
Chairman of the Santa Barbara Chamber of Commerce, and a past Chairman of the
Board of United Way of Santa Barbara.
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ANTHONY GUNTERMANN is a director of SBB and SBB&T and has served in that
capacity since 1960. Mr. Guntermann, a Certified Public Accountant since 1954,
recently retired from the accounting firm of Guntermann, Thompson & Lanza,
Accountants, Inc. (now McGowen-Guntermann). He has served as a director and
President of the California State Board of Accountancy and as a member of the
Santa Barbara City Council, as well as on numerous civic and community
organizations. He was one of the organizers of SBB&T. He also was one of the
organizers of Investors Research Fund, Inc.
DALE E. HANST is a director of SBB and SBB&T and has served in that
capacity since 1983. Mr. Hanst recently retired from the law firm of Reicker,
Clough, Pfau & Pyle, LLP and was formerly a senior partner in the law firm of
Schramm & Raddue, having started with the firm in 1960. He was President of the
State Bar of California in 1984 and served on the California Commission on
Judicial Performance from 1984 to 1988. Mr. Hanst is a past President of the
Santa Barbara Zoological Society.
HARRY B. POWELL is a director of SBB and SBB&T and has served in the
capacity since 1989. Mr. Powell is a retired businessman residing in
Carpinteria. He is a past President of Rexall Clubs International, the
Carpinteria Business Association and the Carpinteria Unified School District.
DAVID W. SPAINHOUR is President and Chief Executive Officer of SBB and
Chairman of the Board of SBB&T. Mr. Spainhour joined SBB&T in 1966 as
Controller. He became Cashier in 1969, Senior Vice President in 1972, was
elected to the Board of Directors in 1974, was named Executive Vice President in
1980, and elected President in February 1989. He served as President and CEO of
SBB&T until December 1995. Mr. Spainhour serves on the boards of the Santa
Barbara Industry Education Council, Channel City Club, Covenant Benevolent
Institutions, Westmont College, and United Way of Santa Barbara.
WILLIAM S. THOMAS, JR. is the Vice Chairman and Chief Operating Officer of
SBB and President and Chief Executive Officer of SBB&T. Mr. Thomas joined the
Bank in 1994 as Manager of the Trust and Investment Services Division. Prior to
coming to SBB&T, Mr. Thomas was an Executive Vice President of Bank of America
and Manager of the Financial Institutions Group from 1992 to 1994. Prior to that
time he spent sixteen years with Security Pacific National Bank in various
capacities until its merger with Bank of America. His last position with
Security Pacific was Executive Vice President and Manager, Financial
Institutions. He is a member of the Board of Directors of the Santa Barbara
Chamber of Commerce, Santa Barbara Symphony, C.A.L.M., Los Padres Council, Boy
Scouts of America and El Adobe Corporation.
SUSAN TRESCHER is a director of SBB and SBB&T and was originally elected to
the SBB Board at the annual meeting of shareholders held in April 1998. Ms.
Trescher is an attorney practicing in Santa Barbara County since 1964. She has
held leadership positions in a number of professional and community
organizations, including President of the Legal Aid Foundation of Santa Barbara,
Second Vice President of California Women Lawyers, Director of Santa Barbara
Women Lawyers, Director of the Santa Barbara County Bar Association, Chairman of
the Land Use Section of the County Counsels' Association and President of the
Altrusa Club of Santa Barbara.
D. VERNON HORTON is Chairman of the Board and Chief Executive Officer and a
director of Pacific, First National Bank and South Valley. Mr. Horton will
become a director of the Surviving Corporation upon consummation of the Merger
and will become a Vice Chairman of the Surviving Corporation. Mr. Horton's
banking career commenced in 1964 with Valley National Bank, Salinas. He served
that bank in various capacities including lending, operations and business
development and in 1979 he was appointed Chief Executive Officer and a member of
the Board of Directors. In August of 1981 he was appointed President of Valley
National Bank. He resigned all positions with Valley National Bank on December
31, 1983, to join Pacific and First National Bank. Mr. Horton is also director
of Pacific Capital Services Corporation. He serves as a director of Cherry's
Jubilee and the California Rodeo Association.
CLAYTON C. LARSON is President and Chief Administrative Officer and a
director of Pacific, First National Bank and Vice Chairman of the Board of South
Valley. Mr. Larson will become a director of the Surviving Corporation upon
consummation of the Merger and will become a Vice Chairman of the Surviving
Corporation. Mr. Larson's banking career commenced in 1972 when he joined Valley
National Bank. During his tenure with Valley National Bank he attained the
position of Senior Vice President/Branch Administrator and in 1981 became a
director of that bank. In addition to his duties as Branch Administrator, he was
responsible for the marketing activities of the bank and was chairman of the
salary committee. Mr. Larson is also President and a director of Pacific Capital
Services Corporation. He serves on the Board of Trustees of the Monterey
Institute of International Studies, Community Hospital of the Monterey Peninsula
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Peninsula and the California State University Monterey Bay Foundation Board. He
is President of the Coalition for Research in Education (CoRE), and serves on
the Advisory Boards for Leadership Monterey Peninsula, Legal Services for
Seniors and the Monterey Peninsula Chamber of Commerce.
ROGER C. KNOPF is a director of Pacific and will become a director of
the Surviving Corporation upon consummation of the Merger. Mr. Knopf is the
President of Knopf Construction, Inc., a general building construction company
located in Morgan Hill since 1976. Mr. Knopf attended San Jose State University.
He is a past President of the Santa Clara County Landowners Association and the
Morgan Hill Rotary Club. He has served on many County of Santa Clara, City of
Morgan Hill, and Morgan Hill Unified School District committees. He is presently
Chairman of the Board of COLUMBIA Good Samaritan Health System and is a director
of the Morgan Hill Rotary Endowment Fund.
Mr. Knopf was Morgan Hill Citizen of the Year in 1989.
WILLIAM H. POPE is a director of Pacific and will become a director of
the Surviving Corporation upon consummation of the Merger. Mr. Pope is a retired
certified public accountant. In 1960, Mr. Pope was instrumental in the formation
of the firm of Kasavan and Pope, of which he was the senior partner, which now
has offices in Salinas and Monterey. He holds memberships in the American
Institute of Certified Public Accountants as well as the California Society of
CPAs.
The executive officers of the Surviving Corporation will consist of the
current executive officers of SBB plus Messrs Horton and Larson, who will each
be appointed to serve as a Vice Chairman of the Surviving Corporation.
It is anticipated that the management and operation of SBB and Pacific
will be integrated after the Merger, and, except as provided above, it is not
anticipated that the management of SBB will be affected as a result of the
Merger. Following the Merger, it is anticipated that each of SBB&T and First
National Bank (as the continuing bank in the Affiliate Merger) will continue to
operate as separate subsidiaries of the Surviving Corporation. Nevertheless, it
is anticipated that certain duplicative operations of these entities may be
consolidated.
Cost Savings and Revenue Enhancements
Management of SBB anticipates that the Merger will result in certain
cost savings and revenue enhancements for the Surviving Corporation. Cost
savings are expected as a result of the elimination of certain duplicative
administrative staff positions in the combined organization and the
corresponding reduction in staff salary and benefits. Initial estimates for
staff reduction in the areas of accounting, human resources, information
services, compliance, internal audit, marketing, general administrative
services, loan administration and executive administration amount to
approximately 69.65 full-time equivalent positions. The amount of salary and
benefits associated with such positions is estimated to be $3,067,000 in 1998.
Projected savings for the first full year of combined operations resulting from
the elimination of such duplicative positions is estimated to be $3,190,000,
which amount assumes a 4% overall increase in costs related to these positions
for 1999.
Additional identified cost savings likely to result from the Merger are
attributable to the elimination of various duplicative contracts and
relationships, including, but not limited to, external loan review, certain
insurance coverages, external independent audit, disaster recovery back-up,
corporate legal expense, shareholder service expense, computer system and
software maintenance, correspondent bank charges and ATM processing charges.
Savings in these areas is estimated to be approximately $1,333,000 for the first
year of combined operations.
Thus, the total anticipated impact of these cost savings is estimated
to be $2,670,000 on an after-tax basis, or approximately $0.10 per diluted
share, on a pro forma basis for the first year of combined operations.
In addition to these expected cost savings, management of SBB
anticipates that revenue of the Surviving Corporation will be enhanced primarily
as a result of the introduction of new products (currently offered by SBB) in
the markets now served by Pacific, including trust services, portfolio
residential real estate loans, indirect automobile lending and new deposit
service products such as PC online banking for both commercial and retail
relationships, MasterMoneysm debit cards and MasterMoneysm retail sweep
accounts. The Surviving Corporation is also expected to benefit from Pacific's
Preferred Lender status with the Small Business Administration, a designation
which SBB does not presently carry.
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Management of SBB anticipates that these enhancements to revenue will
exceed the increased operating expenses of the combined organization.
One-Time Charges
One-time charges are anticipated to be between $7.5 and $8 million
dollars and will likely be taken during the fourth quarter of 1998 upon
completion of the Merger. These charges including investment banking fees,
change in control payments to certain executive officers of Pacific, contract
termination fees with certain third party vendors, contract programming services
for system conversions, legal and shareholder expenses associated with
completion of the Merger, and the write-off of certain equipment no longer
required for operations of the combined organization.
See "PRO FORMA FINANCIAL DATA."
The Surviving Corporation will have its corporate headquarters in Santa
Barbara, California and will operate under the name "Pacific Capital Bancorp."
Accounting Treatment
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of SBB and Pacific will be carried forward after the
Effective Date into the consolidated financial statements of SBB at their
recorded amounts; the consolidated income of SBB will include income of SBB and
Pacific for the entire fiscal year in which the Merger occurs; the separately
reported income of SBB and Pacific for prior periods will be combined and
restated as consolidated income of SBB; and no goodwill will be created.
The Reorganization Agreement provides that it is a condition to the
obligations of SBB and Pacific to consummate the Merger that (i) the parties
shall have received an opinion from KPMG Peat Marwick LLP, independent public
accountants for Pacific, to the effect that Pacific qualifies as an entity that
may be a party to a business combination for which the "pooling of interests"
method of accounting under Accounting Principles Board Opinion No. 16 ("APB No.
16") is available, (ii) that the parties shall have received an opinion from
Arthur Andersen LLP, independent public accountants for SBB, to the effect that
the Merger will qualify for "pooling of interests" accounting treatment under
APB No. 16 if consummated in accordance with the Reorganization Agreement, and
(iii) that there shall have been no determination by any court, tribunal,
regulatory agency or other governmental entity, that the Merger fails or will
fail to qualify for "pooling of interests" accounting treatment. In the event
such condition is not met, the Merger will not be consummated unless the
condition was waived by SBB and Pacific. As of the date of this Joint Proxy
Statement/Prospectus, SBB and Pacific are not aware, after consultation with
Arthur Andersen LLP and KPMG Peat Marwick LLP, respectively, of any existing
facts or circumstances which would preclude such opinions from being issued by
KPMG Peat Marwick LLP and Arthur Andersen LLP.
The unaudited pro forma financial information contained in this Joint
Proxy Statement/Prospectus has been prepared using the "pooling of interests"
accounting method to account for the Merger. See "SUMMARY -- Selected
Comparative Per Share Data" and "--Selected Financial Data" and "PRO FORMA
FINANCIAL DATA."
Certain Federal Income Tax Considerations
The following is a summary of the material United States federal income
tax consequences of the Merger to SBB, Pacific and their respective
stockholders. The following discussion is based upon current provisions of the
Code, existing temporary and final regulations thereunder and current
administrative rulings and court decisions. No assurance can be given that
future legislative, judicial, or administrative actions or decisions, which may
be retroactive in effect, will not affect the accuracy of any statements in this
Joint Proxy Statement/Prospectus with respect to the transactions entered into
or contemplated prior to the effective date of such changes. No attempt has been
made to comment on all United States federal income tax consequences of the
Merger that may be relevant to U.S. stockholders of SBB and Pacific. The tax
discussion set forth below is included for general information only and should
not be construed to be, legal, or tax advice to a particular stockholder of SBB
or Pacific. Jenkens & Gilchrist, a Professional Corporation, counsel for SBB,
has reviewed the summary below and is of the opinion that such summary fairly
summarizes the federal income tax consequences that are likely to be material to
SBB and Pacific stockholders. The opinion discussed above has been filed as an
exhibit to the Registration Statement. This opinion is based on various
assumptions and subject to certain limitations, including assumptions regarding
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the accuracy of certain factual representations made by SBB and Pacific and the
parties to the Reorganization Agreement taking certain actions contemplated by,
and otherwise satisfying, their obligations under the Reorganization Agreement.
This opinion is not binding on the Internal Revenue Service (the "IRS") or any
court. No assurance can be given that the IRS will not challenge part or all of
this opinion or that a challenge would not be successful.
THE FOLLOWING DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF SBB
OR PACIFIC SHAREHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT
ORGANIZATIONS, NON-U.S. SHAREHOLDERS, HOLDERS WHOSE SHARES WERE ACQUIRED
PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS
COMPENSATION, AND HOLDERS WHO HOLD THEIR SHARES AS A HEDGE OR AS PART OF A
HEDGING STRADDLE, CONVERSION OR OTHER RISK REDUCTION TRANSACTION. SHAREHOLDERS
OF SBB AND PACIFIC ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE MERGER AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS. NEITHER SBB NOR PACIFIC HAS REQUESTED, OR WILL REQUEST, A RULING FROM THE
IRS WITH REGARD TO ANY OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.
Jenkens & Gilchrist will deliver an opinion to SBB, and a copy of such
opinion to Pacific, dated the Closing Date to the effect that, based upon
certain representations, assumptions and conditions, the Merger will be treated
for United States federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and the following United States federal
income tax consequences will occur:
(a) no gain or loss will be recognized for federal income tax
purposes by the holders of Pacific Common Stock upon the receipt of SBB
Common Stock solely in exchange for such Pacific Common Stock (except
to the extent, if any, that cash is received in lieu of fractional
shares);
(b) the aggregate tax basis of the SBB Common Stock received
by Pacific shareholders in the Merger (including any fractional shares
of SBB Common Stock) will be the same as the aggregate tax basis of the
Pacific Common Stock surrendered in exchange therefor;
(c) the holding period of the SBB Common Stock received by
each Pacific shareholder in the Merger will include the holding period
of the shares of Pacific Common Stock surrendered in exchange therefor;
(d) cash payments received by the holders of Pacific Common
Stock in lieu of fractional shares of SBB Common Stock will be treated
as if such fractional shares had been issued in the Merger and then
redeemed by SBB. A Pacific shareholder receiving such cash will
recognize gain or loss upon such payment, measured by the difference
(if any) between the amount of cash received and the basis allocated to
such fractional share. The gain or loss should be capital gain or loss,
provided that each such fractional share of SBB Common Stock was held
as a capital asset at the Effective Date of the Merger; and
(e) a holder of Pacific Common Stock who exercises dissenters'
rights with respect to a share of Pacific Common Stock and receives a
cash payment for such share generally should recognize capital gain or
loss (if each such share was held as a capital asset at the Effective
Date of the Merger) measured by the difference between the
shareholder's basis in such shares and the amount of cash received,
provided that such payment is not "essentially equivalent to a
dividend" within the meaning of Section 302 of the Code after giving
effect to the constructive ownership rules of the Code (collectively, a
"Dividend Equivalent Transaction"). A sale of shares pursuant to an
exercise of dissenters' rights generally will not be a Dividend
Equivalent Transaction if, as a result of such exercise, the
shareholder exercising the dissenters' rights owns no shares of capital
stock of SBB (either actually or constructively within the meaning of
Section 318 of the Code) immediately after the Merger.
A successful IRS challenge to the nontaxable reorganization status of
the Merger could result in significant adverse tax consequences to Pacific
shareholders. A Pacific shareholder would recognize gain or loss with respect to
each share of Pacific Common Stock surrendered equal to the difference between
the shareholder's basis in such share and the fair market value, as of the
Effective Date, of the SBB Common Stock received in exchange therefor. In such
event, a shareholder's aggregate basis in the SBB Common Stock so received
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would equal its fair market value, and the shareholder's holding period for such
stock would begin the day after the Merger is consummated.
Even if the Merger qualifies as a nontaxable reorganization, a
recipient of the SBB Common Stock would recognize income to the extent that, for
example, any such shares were determined to have been received in exchange for
services, to satisfy obligations or in consideration for anything other than the
Pacific Common Stock surrendered. In addition, to the extent that a Pacific
shareholder was treated as receiving (directly or indirectly) consideration
other than SBB Common Stock in exchange for such shareholder's Pacific Common
Stock, gain, if any, would have to be recognized.
Certain noncorporate Pacific shareholders may be subject to backup
withholding at a rate of 31% on cash payments received in lieu of a fractional
share interest in SBB Common Stock. Backup withholding will not apply, however,
to a stockholder who furnishes a correct taxpayer identification number ("TIN")
and certifies that he, she or it is not subject to backup withholding on the
substitution Form W-9 to be included in the transmittal letter or who is
otherwise exempt from backup withholding. A shareholder who fails to provide the
correct TIN on Form W-9 may be subject to a $50 penalty imposed by the IRS.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANSWER OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. THUS, HOLDERS OF
PACIFIC COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER
APPLICABLE TAX LAWS AND THE EFFECTS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
Rights of Dissenting Shareholders
Pacific.
Because Pacific Common Stock is listed on Nasdaq, dissenters' rights
will be available to shareholders of Pacific only if the holders of five percent
(5%) or more of Pacific Common Stock make a written demand upon Pacific or its
transfer agent for the purchase of dissenting shares in accordance with Chapter
13 of the GCL. If this condition is satisfied and the Merger is consummated,
shareholders of Pacific who dissent from the Merger by complying with the
procedures set forth in Chapter 13 would be entitled to receive an amount equal
to the fair market value of their shares as of July 17, 1998, the day before the
public announcement of the Merger. A copy of Chapter 13 of the GCL is attached
hereto as Appendix G and should be read for more complete information concerning
dissenters' rights. THE REQUIRED PROCEDURE SET FORTH IN CHAPTER 13 OF THE GCL
MUST BE FOLLOWED EXACTLY OR ANY DISSENTERS' RIGHTS MAY BE LOST. The information
set forth below is a general summary of dissenters' rights as they apply to
shareholders of Pacific and is qualified in its entirety by reference to
Appendix G.
In order to be entitled to exercise dissenters' rights, a shareholder
of Pacific must vote "Against" the Merger at the Pacific Meeting, either voting
in person or by proxy. Thus, any shareholder of Pacific who executes and returns
a proxy in the accompanying form and who wishes to dissent must specify that his
or her shares are to be voted "Against" the Merger. If the Pacific shareholder
returns a proxy without voting instructions or with instructions to vote "For"
the Merger, his or her shares will automatically be voted in favor of the Merger
and the Pacific shareholder will lose any dissenters' rights. In addition, if a
shareholder of Pacific "Abstains" from voting his or her shares, such
shareholder will lose his or her dissenters' rights.
Furthermore, in order to preserve his or her dissenters' rights, a
shareholder of Pacific must make a written demand upon Pacific for the purchase
of dissenting shares and payment to such Pacific shareholder of their fair
market value, specifying the number of shares held of record by such Pacific
shareholder and a statement of what the Pacific shareholder claims to be the
fair market value of those shares as of July 17, 1998. Such demand must be
addressed to Pacific Capital Bancorp, 307 South Main Street, Salinas, California
93901, Attention: Ms. Ginny Yeater, or to Pacific's transfer agent, ChaseMellon
Shareholder Services, L.L.C., Overpeck Centre, 85 Challenger Road, Ridgefield
Park, New Jersey 07660, and must be received by Pacific or its transfer agent
not later than the date of the Pacific Meeting. A vote "Against" the Merger does
not constitute such written demand.
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If the holders of five percent (5%) or more of the outstanding shares
of Pacific Common Stock have submitted a written demand for Pacific to purchase
their shares, these demands are received by Pacific or its transfer agent on or
before the date of the Pacific Meeting and the Merger is approved by the
shareholders of Pacific, Pacific will have ten days after such approval to send
to those Pacific shareholders who have voted against the approval of the Merger
written notice of such approval accompanied by a copy of Chapter 13 of the GCL,
a statement of the price determined by Pacific to represent the fair market
value of the dissenting shares as of July 17, 1998, and a brief description of
the procedure to be followed if a shareholder of Pacific desires to exercise
dissenters' rights. Within 30 days after the date on which the notice of the
approval of the Merger is mailed, the dissenting shareholder must surrender to
Pacific or its transfer agent, at the office designated in the notice of
approval, the certificates representing the dissenting shares to be stamped or
endorsed with a statement that they are dissenting shares or to be exchanged for
certificates of appropriate denomination so stamped or endorsed. If, however,
such shares are uncertificated then, within 30 days after the date on which the
notice of the approval of the Merger is mailed, the dissenting shareholder must
provide written notice to Pacific or its transfer agent of the number of shares
which the shareholder demands that the corporation purchase. Any shares of
Pacific Common Stock that are transferred prior to their submission for
endorsement or, with respect to uncertificated shares, prior to the provision of
the written notice described in the preceding sentence lose their status as
dissenting shares.
If Pacific and the dissenting shareholder agree that the surrendered
shares are dissenting shares and agree upon the price of the shares, the
dissenting shareholder will be entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of the agreement. Payment
of the fair market value of the dissenting shares shall be made within 30 days
after the amount thereof has been agreed upon or within 30 days after any
statutory or contractual conditions to the Merger have been satisfied, whichever
is later, subject to the surrender of the certificates therefor, unless provided
otherwise by agreement.
If Pacific denies that the shares surrendered are dissenting shares, or
Pacific and the dissenting shareholder fail to agree upon a fair market value of
such shares of Pacific Common Stock, then the dissenting shareholder of Pacific
must, within six months after the notice of approval is mailed, file a complaint
in the Superior Court of the proper county requesting the court to make such
determinations or intervene in any pending action brought by any other
dissenting shareholder. If the complaint is not filed or intervention in a
pending action is not made within the specified six-month period, the
dissenters' rights are lost. If the fair market value of the dissenting shares,
is at issue, the court will determine, or will appoint one or more impartial
appraisers to determine, such fair market value.
A dissenting shareholder may not withdraw his or her dissent or demand
for payment unless Pacific consents to such withdrawal.
SBB.
Because SBB Common Stock is listed on Nasdaq, dissenters' rights will
be available to shareholders of SBB only if the holders of five percent (5%) or
more of SBB Common Stock make a written demand upon SBB for the purchase of
dissenting shares in accordance with Chapter 13 of the GCL. If this condition is
satisfied and the Merger is consummated, shareholders of SBB who dissent from
the Merger by complying with the procedures set forth in Chapter 13 would be
entitled to receive an amount equal to the fair market value of their shares as
of July 17, 1998, the day before the public announcement of the Merger. A copy
of Chapter 13 of the GCL is attached hereto as Appendix G and should be read for
more complete information concerning dissenters' rights. THE REQUIRED PROCEDURE
SET FORTH IN CHAPTER 13 OF THE GCL MUST BE FOLLOWED EXACTLY OR ANY DISSENTERS'
RIGHTS MAY BE LOST. The information set forth below is a general summary of
dissenters' rights as they apply to shareholders of SBB and is qualified in its
entirety by reference to Appendix G.
In order to be entitled to exercise dissenters' rights, a shareholder
of SBB must vote "Against" the Merger at the SBB Meeting, either voting in
person or by proxy. Thus, any shareholder of SBB who executes and returns a
proxy in the accompanying form and who wishes to dissent must specify that his
or her shares are to be voted "Against" the Merger. If the SBB shareholder
returns a proxy without voting instructions or with instructions to vote "For"
the Merger, his or her shares will automatically be voted in favor of the Merger
and the SBB shareholder will lose any dissenters' rights. In addition, if a
shareholder of SBB "Abstains" from voting his or her shares, such shareholder
will lose his or her dissenters' rights.
Furthermore, in order to preserve his or her dissenters' rights, a
shareholder of SBB must make a written demand upon SBB for the purchase of
dissenting shares and payment to such SBB shareholder of their fair market
value, specifying the number of shares held of record by such SBB shareholder
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and a statement of what the SBB shareholder claims to be the fair market value
of those shares as of July 17, 1998. Such demand must be addressed to Santa
Barbara Bancorp, 1021 Anacapa Street, Santa Barbara, California, 93101,
Attention: Jay D. Smith, or its transfer agent, Norwest Bank Minnesota, N.A.,
Shareowner Services 161 North Concord Exchange, South St. Paul, Minnesota 55075,
and must be received by SBB or its transfer agent not later than the date of the
SBB Meeting. A vote "Against" the Merger does not constitute such written
demand.
If the holders of five percent (5%) or more of the outstanding shares
of SBB Common Stock have submitted a written demand for SBB to purchase their
shares, these demands are received by SBB or its transfer agent on or before the
date of the SBB Meeting and the Merger is approved by the shareholders of SBB,
SBB will have ten days after such approval to send to those SBB shareholders who
have voted against the approval of the Merger written notice of such approval
accompanied by a copy of Chapter 13 of the GCL, a statement of the price
determined by SBB to represent the fair market value of the dissenting shares as
of July 17, 1998, and a brief description of the procedure to be followed if a
shareholder of SBB desires to exercise dissenters' rights. Within 30 days after
the date on which the notice of the approval of the Merger is mailed, the
dissenting shareholder must surrender to SBB or its transfer agent, at the
office designated in the notice of approval, the certificates representing the
dissenting shares to be stamped or endorsed with a statement that they are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed. If, however, such shares are uncertificated
then, within 30 days after the date on which the notice of the approval of the
Merger is mailed, the dissenting shareholder must provide written notice to SBB
or its transfer agent of the number of shares which the shareholder demands that
the corporation purchase. Any shares of SBB Common Stock that are transferred
prior to their submission for endorsement or, with respect to uncertificated
shares, prior to the provision of the written notice described in the preceding
sentence lose their status as dissenting shares.
If SBB and the dissenting shareholder agree that the surrendered shares
are dissenting shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price with interest thereon at the
legal rate on judgments from the date of the agreement. Payment of the fair
market value of the dissenting shares shall be made within 30 days after the
amount thereof has been agreed upon or within 30 days after any statutory or
contractual conditions to the Merger have been satisfied, whichever is later,
subject to the surrender of the certificates therefor, unless provided otherwise
by agreement.
If SBB denies that the shares surrendered are dissenting shares, or SBB
and the dissenting shareholder fail to agree upon a fair market value of such
shares of SBB Common Stock, then the dissenting shareholder of SBB must, within
six months after the notice of approval is mailed, file a complaint in the
Superior Court of the proper county requesting the court to make such
determinations or intervene in any pending action brought by any other
dissenting shareholder. If the complaint is not filed or intervention in a
pending action is not made within the specified six-month period, the
dissenters' rights are lost. If the fair market value of the dissenting shares,
is at issue, the court will determine, or will appoint one or more impartial
appraisers to determine, such fair market value.
A dissenting shareholder may not withdraw his or her dissent or demand
for payment unless SBB consents to such withdrawal.
FAILURE TO TAKE ANY NECESSARY STEP WILL RESULT IN A TERMINATION OR
WAIVER OF THE RIGHTS OF THE HOLDER UNDER CHAPTER 13 OF THE GCL. A PERSON HAVING
A BENEFICIAL INTEREST IN SBB COMMON STOCK OR PACIFIC COMMON STOCK THAT IS HELD
OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A TRUSTEE OR NOMINEE, MUST ACT
PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE REQUIREMENTS OF CHAPTER 13 OF
THE GCL IN A TIMELY MANNER IF SUCH PERSON ELECTS TO DEMAND PAYMENT OF THE FAIR
MARKET VALUE OF SUCH SHARES.
It is a condition to both parties obligation to consummate the Merger
that dissenters' rights have been exercised by no more than 9.9% of the
outstanding shares of Pacific Common Stock, or such lesser amount as would cause
the Merger not to qualify for "pooling of interests" accounting treatment.
Waiver and Amendment
The Reorganization Agreement provides that, at any time prior to the
Closing Date, each party may waive any inaccuracies in the representations and
warranties contained in the Reorganization Agreement or in any document,
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<PAGE>
certificate or writing delivered thereto, or, to the extent permitted under law,
waive compliance with any of the agreements or conditions contained in the
Reorganization Agreement. Any such waiver must be in writing.
To the extent permitted by applicable law, the Agreements may be
amended by SBB and Pacific at any time before or after submission of such
Agreements for approval by the shareholders of SBB and Pacific at the SBB
Meeting and the Pacific Meeting, respectively. However, following such meetings,
no amendment may be made that (i) decreases the amount of the Merger
Consideration or (ii) materially and adversely affects the rights of the
shareholders of either SBB or Pacific without the approval of such shareholders.
Any amendment to the Agreements must be in writing.
Expenses and Fees
Each party is responsible for its respective costs, expenses and fees
during the pendency of the transactions contemplated by the Reorganization
Agreement. In the event, however, attorneys' fees or other costs are incurred to
secure the performance of any of the obligations of the parties in the
Reorganization Agreement or to establish damages for the breach thereof, or to
obtain any other appropriate relief, the prevailing party shall be entitled to
recover reasonable attorneys' fees and costs incurred thereby.
Each party will be responsible for the payment of brokerage fees,
expenses or commissions payable to any agent, representative or broker
representing such party in connection with the transactions contemplated by the
Reorganization Agreement, and each party has agreed in the Reorganization
Agreement to indemnify the other and hold the other harmless for any amounts
owed to any such agent, representative or broker. See "THE MERGER -- Opinion of
Financial Advisors."
In the event the Reorganization Agreement is terminated or the Merger
is abandoned, all costs and expenses incurred in connection with the Agreements
and the Merger shall be paid by the party incurring such costs and expenses, and
no party will have any liability to the other party except as described under
the caption "THE MERGER -- Termination Fee", and with respect to any relief
which either party may be entitled for breach of the Reorganization Agreement.
Dividends
The Reorganization Agreement provides that each of SBB and Pacific may
continue to pay regular quarterly dividends with respect to shares of SBB Common
Stock and Pacific Common Stock, respectively, during the pendency of the Merger.
The Reorganization Agreement also provides that SBB and Pacific shall cooperate
with each other to coordinate the record and payment dates of dividends with
respect to SBB Common Stock and Pacific Common Stock during the pendency of the
Merger, it being the intent of SBB and Pacific that holders thereof will not
receive two dividends, or fail to receive one dividend, for any quarter in which
they would receive a dividend in the absence of the Merger.
Nasdaq Listing
Pursuant to the terms of the Reorganization Agreement, SBB has prepared
and filed an application to list on Nasdaq the shares of SBB Common Stock to be
issued to holders of Pacific Common Stock in the Merger.
Resale of SBB Common Stock
The shares of SBB Common Stock issuable pursuant to the Merger will be
freely transferable under the Securities Act except for shares issued to any
Pacific shareholder who may be deemed to be an "affiliate" of SBB for purposes
of Rule 144 under the Securities Act or an "affiliate" of Pacific for purposes
of Rule 145 under the Securities Act. Persons who may be deemed to be
"affiliates" of Pacific or SBB generally include individuals who, or entities
which, control, are controlled by or are under common control with Pacific or
SBB and will include directors and certain officers of Pacific and SBB and may
include, if any, principal shareholders of Pacific and SBB.
Rules 144 and 145 under the Securities Act will restrict the sale of
SBB Common Stock received in the Merger by "affiliates" and certain of their
family members and related interests. Generally, during the year following the
Effective Date, those persons who are "affiliates" of Pacific at the time of the
Pacific Meeting, provided they are not also "affiliates" of SBB at or following
the Effective Date, may publicly resell any SBB Common Stock received by them in
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<PAGE>
the Merger, subject to certain limitations as to, among other things, the amount
of SBB Common Stock sold by them in any three-month period and the manner of
sale. After the one-year period, and provided they are not also "affiliates" of
SBB, such "affiliates" may resell their shares without such restriction so long
as there is adequate current public information with respect to SBB as required
by Rule 144 under the Securities Act.
The ability of "affiliates" to resell shares of SBB Common Stock
received in the Merger under Rule 144 or 145 under the Securities Act as
summarized herein generally will be subject to SBB having satisfied its Exchange
Act reporting requirements for specified periods prior to the time of sale.
"Affiliates" also would be permitted to resell shares of SBB Common Stock
received in the Merger pursuant to an effective registration statement under the
Securities Act or another available exemption from the Securities Act
registration requirements.
Guidelines of the Commission regarding qualifying for the "pooling of
interests" method of accounting also limit sales of shares of the acquiring and
acquired company by "affiliates" of either company in a business combination.
Guidelines of the Commission indicate further that the "pooling of interests"
method of accounting will generally not be challenged on the basis of sales by
affiliates of the acquiring or acquired company if they do not dispose of any of
the shares of the corporation they own or shares of a corporation they receive
in connection with a merger during the period beginning 30 days before the
merger and ending when financial results covering at least 30 days of
post-merger operations of the combined entity have been published.
The Reorganization Agreement provides that Pacific will obtain and
deliver to SBB an agreement from each "affiliate" of Pacific providing that such
"affiliate" will not transfer any shares of SBB Common Stock received in the
Merger except in compliance with the Securities Act and in compliance with the
requirements of Accounting Principles Board Opinion No. 16 regarding the
non-disposition of any shares of Pacific Common Stock or SBB Common Stock during
the period commencing 30 days prior to the Effective Date through the date on
which financial results covering at least 30 days of combined operations of SBB
and Pacific after the Merger have been published. No shares of SBB Common Stock
will be delivered to an "affiliate" of Pacific as Merger Consideration until
such "affiliate" has executed and delivered the aforementioned agreement to SBB
and satisfied the other requirements described above under the caption "MERGER
- -- Exchange of Stock Certificates."
This Joint Proxy Statement/Prospectus does not cover resales of shares
of SBB Common Stock received by any person who may be deemed to be an
"affiliate" of Pacific or SBB.
Mutual Stock Option Agreements
Concurrently with the execution of the Reorganization Agreement, SBB
executed and delivered the SBB Stock Option Agreement, pursuant to which SBB
granted to Pacific the SBB Option. At the same time, Pacific executed and
delivered the Pacific Stock Option Agreement, pursuant to which Pacific granted
to SBB the Pacific Option. SBB and Pacific approved and entered into the Stock
Option Agreements to induce each other to enter into the Reorganization
Agreement.
The Stock Option Agreements are intended to increase the likelihood
that the Merger will be consummated in accordance with the terms of the
Reorganization Agreement by making it more difficult for another party to
acquire SBB or Pacific. The ability of either party to exercise the Issuer
Option Agreements (as defined herein) and to cause additional shares of SBB
Common Stock or Pacific Common Stock, as the case may be, to be issued may be
considered a deterrent to other potential acquisitions of control of SBB or
Pacific, as it is likely to increase the cost of an acquisition of all of the
shares of SBB or Pacific, as the case may be, which would then be outstanding
and would prevent any successful bidder from accounting for such acquisition as
a pooling of interests. Consequently, certain aspects of the Stock Option
Agreements may have the effect of discouraging persons who might now or prior to
the Effective Date be interested in acquiring all of or a significant interest
in SBB or Pacific from considering or proposing such an acquisition.
Except as otherwise noted below, the terms and conditions of the SBB
Stock Option Agreement and the Pacific Stock Option Agreement are identical in
all material respects. For purposes of this Section, except as otherwise noted,
(i) the SBB Stock Option Agreement or the Pacific Option Agreement, as the case
may be, is sometimes referred to as the "Issuer Option Agreement", (ii) SBB, as
issuer of the SBB Common Stock, and Pacific, as issuer of the Pacific Common
Stock, upon the exercise of the SBB Option and the Pacific Option, respectively,
are sometimes individually referred to as the "Issuer", (iii) SBB or Pacific, as
the holder of the Pacific Option and the SBB Option, respectively, are sometimes
individually referred to as the "Optionee", (iv) the SBB Option or the Pacific
Option, as the case may be, is sometimes referred to as the "Issuer Option" and
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<PAGE>
(v) the SBB Common Stock or the Pacific Common Stock is referred to as "Issuer
Common Stock".
The SBB Stock Option Agreement provides for the purchase by Pacific of
3,002,505 shares (the "SBB Option Shares" or the "Issuer Option Shares", as the
case may be) of SBB Common Stock at an exercise price of $30.00 per share,
payable in cash, under the circumstances described herein. The SBB Option
Shares, if issued pursuant to the SBB Option Agreement, will in no event exceed
19.5% of the issued and outstanding shares of SBB Common Stock.
The Pacific Stock Option Agreement provides for the purchase by SBB of
878,269 shares (the "Pacific Option Shares" or the "Issuer Option Shares", as
the case may be) of Pacific Common Stock at an exercise price of $58.00 per
share, payable in cash, under the circumstances described herein. The Pacific
Stock Option Shares, if issued pursuant to the Pacific Option Agreement, will in
no event exceed 19.5% of the issued and outstanding shares of Pacific Common
Stock.
Provided that (i) the Optionee is not in breach of the Reorganization
Agreement or the Issuer Option Agreement, and (ii) no injunction or other court
order prohibiting delivery of the Issuer Common Stock has been issued and is in
effect, the Issuer Option is exercisable, in whole or in part, if a Purchase
Event (as defined herein) occurs after the date of the Issuer Option Agreement
and prior to an Exercise Termination Event (as defined herein), after which the
Issuer Option Agreement will terminate and be of no further force and effect.
The term "Exercise Termination Event" means the earlier to occur of any
of the following: (a) the Effective Time of the Merger, (b) termination of the
Reorganization Agreement (other than termination by the Optionee in certain
events) (an "Issuer Termination") prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event (as defined herein), (c) the close of business on
the 365th day following the occurrence of an Issuer Termination, and (d) the
close of business on the 365th day after termination of the Reorganization
Agreement (other than an Issuer Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event.
The term "Purchase Event" means any of the following events subsequent
to the date of the Issuer Option Agreement:
(i) without Optionee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed, or entered into an
agreement with any person (other than Optionee or any subsidiary of
Optionee) to effect an Acquisition Transaction. As used in the Issuer
Option Agreement, the term "Acquisition Transaction" means (A) any
tender offer for more than 50% of the outstanding shares of Issuer, (B)
any merger or consolidation of Issuer with or into any entity other
than Optionee or a subsidiary of Optionee, (C) any sale of all or
substantially all of the assets of Issuer, (D) any reorganization of
Issuer or other transaction that results or when completed would result
in a disposition of substantially all of the assets of Issuer, or (E)
the issuance, sale or other disposition of shares representing more
than 50% of the shares of Issuer; or
(ii) any person (other than Optionee or any subsidiary of
Optionee) 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) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of
more than 50% of the shares of Issuer.
The term "Preliminary Purchase Event" means any of the following events
or transactions:
(i) any person (other than the Optionee or any subsidiary of
the Optionee) shall have commenced (as such terms 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 more
than 50% of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer"); or
(ii) 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 the Reorganization
Agreement, such meeting shall not have been held or shall have been
canceled prior to termination of the Reorganization Agreement, or
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<PAGE>
Issuer's board of directors shall have withdrawn or modified in a
manner adverse to Optionee 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
Optionee or any subsidiary of Optionee) shall have (A) made, or dis-
closed an intention to make, a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer,
or (C) filed an application (or given a notice), whether in draft or
final form, under applicable banking or corporate law or any other
applicable law seeking approval to engage in an Acquisition Trans-
action.
In the event of any change in the Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares, of similar transaction, the type and number of shares subject to the
Issuer Option, and the purchase price, will be adjusted appropriately such that
the number of shares of Issuer Common Stock subject to the Issuer Option
continues to equal 19.5% of the Issuer Common Stock then issued and outstanding.
Upon the occurrence of a Repurchase Event (as defined herein) that
occurs prior to any Exercise Termination Event, at the request of Optionee,
Issuer shall, subject to regulatory restrictions, repurchase the Issuer Option
and any Issuer Common Stock theretofore purchased pursuant to the Issuer Option,
at a specified price. As defined in the Issuer Option Agreement, a "Repurchase
Event" shall occur if (i) any person (other than Optionee or any subsidiary of
Optionee) 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 in Rule 13d-5
promulgated under the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, more than 50% of the
then outstanding shares of Issuer Common Stock, or (ii) any of the following
transactions are consummated: (x) Issuer consolidates with or merges into any
person, other than Optionee or any subsidiary of Optionee, and shall not be the
continuing or surviving corporation of such consolidation or merger, (y) Issuer
permits any person, other than Optionee or any subsidiary of Optionee, 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 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 (z) Issuer sells or otherwise transfers all or substantially all of
its assets to any person, other than Optionee or a subsidiary of Optionee.
In the event that prior to the exercise or termination of the Issuer
Option, Issuer enters into an agreement to engage in any of the transactions
described in clause (ii) of the definition of Repurchase Event above, Optionee
will receive for each option share with respect to which the Issuer Option has
not been exercised an amount of consideration in the form and equal to the per
share amount of consideration that would be received by the holder of one share
of Issuer Common Stock less the purchase price of the Issuer Option (and, in the
event of an election or similar arrangement with respect to the type of
consideration to be received by holders of Issuer Common Stock, proper provision
shall be made so that Optionee would have the same election or similar rights as
would the holder of the number of shares of Issuer Common Stock for which the
Issuer Option is then exercisable).
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet as
of June 30, 1998, and the pro forma combined condensed statements of income for
the six months ended June 30, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1997, give effect to the Merger based on
the historical consolidated financial statements of SBB and Pacific and their
subsidiaries under the assumptions and adjustments set forth in the accompanying
notes to the pro forma financial statements.
The pro forma combined condensed balance sheet assumes the Merger was
consummated on June 30, 1998, and the pro forma condensed statements of income
assume that the Merger was consummated on January 1 of each period presented.
The pro forma statements may not be indicative of the results that actually
would have occurred if the Merger had been in effect on the dates indicated or
which may be obtained in the future. The pro forma financial statements should
be read in conjunction with the historical consolidated financial statements and
notes thereto of SBB and Pacific incorporated by reference herein. See
"INFORMATION INCORPORATED BY REFERENCE."
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SANTA BARBARA BANCORP/PACIFIC CAPITAL BANCORP
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(unaudited)
June 30, 1998
(in thousands)
Santa Barbara Pacific Capital Pro Forma
Bancorp Bancorp Adjustments(1)(2) Combined
------------- --------------- ----------------- ---------
ASSETS:
Cash and Noninterest-Bearing
Balances Due From Banks.............. $ 57,457 $ 51,303 $ $ 108,760
Short-Term Investments.................. 4,977 -- 4,977
Securities:
Held-to-Maturity..................... 207,290 5,644 212,934
Available-for-Sale................... 313,837 226,976 540,813
Federal Funds Sold and Securities
Purchased under Resale
Agreements........................... 60,000 52,393 112,393
Loans Available for Sale -- 12,971 12,971
Loans, Net of Unearned Income........... 938,299 438,602 1,376,901
Less Reserve for Loan Losses............ (23,322) (4,544) (27,866)
------------ ---------- ------------- ----------
Loans, Net........................... 914,977 434,058 -- 1,349,035
------------ ---------- ------------- ----------
Property and Equipment.................. 14,712 15,161 29,873
Intangibles............................. 16,553 2,234 18,787
Other Assets............................ 29,132 14,820 43,952
------------ ---------- ------------- ----------
Total Assets......................... $ 1,618,935 $ 815,560 $ -- $2,434,495
============ ========== ============= ==========
LIABILITIES AND EQUITY:
Noninterest-Bearing Deposits............ $ 272,620 $ 168,550 $ $ 441,170
Interest-Bearing Deposits............... 1,160,998 561,775 1,722,773
------------ ---------- ------------- ----------
Total Deposits.................... 1,433,618 730,325 2,163,943
Federal Funds Purchased and Other
Short-term Borrowings................ 12,043 -- 12,043
Long-term Debt.......................... 33,000 -- 33,000
Other Liabilities....................... 12,430 9,171 21,601
------------ ----------- ------------- ----------
Total Liabilities................. 1,491,091 739,496 -- 2,230,587
------------ ----------- ------------- ----------
Shareholders' Equity:
Common Stock............................ 5,130 58,444 (55,684) 7,890
Surplus................................. 32,790 -- 55,684 88,474
Retained Earnings....................... 89,250 16,769 106,019
Unrealized Net Appreciation
Available-for-Sale Securities....... 674 851 1,525
------------ ----------- ------------- ----------
Total Stockholders' Equity.............. 127,844 76,064 -- 203,908
------------ ----------- ------------- ----------
Total Liabilities and Shareholders'
Equity............................... $ 1,618,935 $ 815,560 $ -- $2,434,495
============ =========== ============= ==========
Shareholders' Equity per Share.......... $ 8.31 $ 17.60 $ 8.59
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<FN>
Notes to Pro Forma Combined Condensed Balance Sheet
(unaudited)
(1) Based on the exchange ration of 1.935 share of SBB Common Stock for
each share of Pacific Common Stock, 8,364,399 additional shares of SBB
Common Stock would have been issued as of June 30, 1998, on the
acquisition of Pacific.
(2) Merger expenses and nonrecurring charges directly related to the
business combination will be expensed as incurred. SBB estimates the
total of such charges will be approximately $8.0 to $9.0 million on a
pretax basis and $6.5 to $7.5 million on an after-tax basis, or a
reduction of $0.28 to $0.32 in earnings per share. The effect of such
charges, the majority of which are anticipated to be recorded in the
fourth quarter of 1998 upon consummation of the Merger, are not
reflected in the Pro Forma Combined Condensed Balance Sheet.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SANTA BARBARA BANCORP/PACIFIC CAPITAL BANCORP
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)
Six Months Ended June 30, Year Ended December 31,
------------------------- ------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ -----
Interest Income...................... $96,687 $83,596 $168,150 $133,536 $120,866
Interest Expense..................... 33,343 28,529 60,590 48,368 44,554
------- ------- -------- -------- --------
Net Interest Income............... 63,344 55,067 107,560 85,168 76,312
Provision for Loan Losses............ 6,933 6,817 8,500 4,949 10,451
------- ------- -------- -------- --------
Net Interest Income after
Provision for
Loan Losses....................... 56,411 48,250 99,060 80,219 65,861
------- ------- -------- -------- --------
Noninterest Income................... 19,950 14,523 28,500 22,102 20,671
Noninterest Expense(2)............... 45,182 37,925 80,989 69,316 61,321
------- ------- -------- -------- --------
Income Before Income Taxes....... 31,179 24,848 46,571 33,005 25,211
Income Tax Expense................... 11,467 8,789 16,288 11,301 8,185
------- ------- -------- -------- --------
Net Income........................... $19,712 $16,059 $30,283 $21,704 $17,026
======= ======= ======== ======== ========
Net Income Available to Common
Shareholders...................... $19,712 $16,059 $30,283 $21,704 $17,026
Net Income per Diluted Common
Share(1)................. $0.81 $0.6 $1.2 $0.9 $0.7
Average Diluted Common Shares 24,342 24,135 24,188 24,228 24,123
Outstanding..............
<FN>
Notes to Pro Forma Combined Condensed Statements of Income
(unaudited)
(1)Net income per share and average shares outstanding shown in the pro forma
analysis reflect the restatement of share amounts for SBB's 2-for-1 stock
split effective on April 16, 1998.
(2)Merger expenses and nonrecurring charges directly related to the business
combination will be expensed as incurred. SBB estimates the total of such
charges will be approximately $8.0 to $9.0 million on a pretax basis and $6.5
to $7.5 million on an after-tax basis, or a reduction of $0.28 to $0.32 in
earnings per share. The effect of such charges, the majority of which are
anticipated to be recorded in the fourth quarter of 1998 upon consummation of
the Merger, are not reflected in the Pro Forma Combined Condensed Statement
of Income.
</FN>
</TABLE>
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DESCRIPTION OF SBB CAPITAL STOCK
General
The authorized capital stock of SBB consists of 40,000,000 shares of
Common Stock, no par value. SBB is not authorized to issue shares of preferred
stock. As of the SBB Record Date, ___________ shares of SBB Common Stock were
issued and outstanding and an additional __________ shares of SBB Common Stock
were available and reserved for issuance to holders of outstanding stock options
granted under SBB's stock option plans. The following is a brief description of
the SBB Common Stock.
Voting Rights
The holders of shares of SBB Common Stock are entitled to vote on all
matters submitted for approval by the shareholders of SBB. The holders of SBB
Common Stock are entitled to one vote per share of SBB Common Stock, except with
respect to the election of directors as described below.
Shareholder approval of most actions, other than election of directors
as described below, requires the approval of a majority of the shares
represented and voting, whether in person or by proxy, assuming a quorum is
present (which shares voting affirmatively also constitute a majority of the
required quorum). A quorum for any shareholder meeting is the representation at
the meeting of holders of more than 50% of the outstanding shares entitled to
vote. California law requires the approval by the holders of more than 50% of
the outstanding shares for certain matters, including certain reorganizations
and the sale of all or substantially all of SBB's assets, the dissolution of
SBB, amendments to SBB's Articles of Incorporation, and certain amendments to
SBB's Bylaws.
Prior to the election of directors, any shareholder may cumulate votes
for any nominees, if, prior to the voting, a shareholder has given notice that
he or she intends to cumulate his or her votes. In cumulative voting, each
shareholder is entitled in the election of directors to one vote for each share
of SBB Common Stock held by the shareholder multiplied by the number of
directors to be elected and may cast all such votes for a single nominee for
director or may distribute such votes among any two or more nominees as the
shareholder determines. The director nominees receiving the highest number of
votes up to the number of directors to be elected are elected as directors. If
the Article Amendment is approved by the shareholders of SBB at the SBB Meeting,
cumulative voting will no longer be available to shareholders of SBB with
respect to the election of directors. See "THE SBB MEETING -- Matters to be
Considered -- The Article Amendment."
Nomination of Directors
SBB's Bylaws set forth procedures for the nomination of directors by
any shareholders of SBB. In order for any shareholder to nominate any person for
election as a director at any meeting of shareholders at which directors are to
be elected, the shareholder must submit a written nomination of such director to
the SBB Board not less than fourteen (14) days nor more than fifty (50) days
prior to the scheduled date for the meeting; provided that if less than
twenty-one (21) days notice of the meeting is given to the shareholders, such
nomination shall be mailed or delivered to the Secretary of SBB not later than
the close of business on the seventh (7th) day following the date on which the
notice of the meeting is mailed to the shareholders. Such statement of
nomination must include certain information regarding the nominee director and
the shareholder making the nomination. The Chairperson of any meeting of
shareholders may disregard any nomination not made in accordance with the
provisions of SBB's Bylaws and may instruct the inspectors of the election to
disregard any votes cast for such nominee. The foregoing provisions of SBB's
Bylaws apply only to nominations for directors who are to be elected at any
meeting of shareholders called by the SBB Board. The foregoing provisions do not
apply to (a) nominations for directors who are to be elected at any special
meeting of shareholders called by the shareholders at which directors are to be
elected pursuant to Section 305 of the GCL to fill a vacancy on the Board of
Directors or (b) the election of directors by written consent of shareholders
pursuant to Section 603 of the GCL.
Dividend Rights
The holders of the shares of SBB Common Stock are entitled to receive
dividends and distributions from SBB when and as declared by the SBB Board out
of funds legally available therefor. Any dividends or other distributions on
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SBB Common Stock will be distributed ratably among the holders of SBB Common
Stock based upon the number of shares owned of record.
Preemptive Rights
The holders of the shares of SBB Common Stock have no preemptive or
similar rights to participate in any future stock issuances or offerings by SBB.
Liquidation Rights
On the liquidation of SBB, the assets remaining after payment or other
satisfaction of all of SBB's outstanding debts and obligations shall be
distributed ratably among the holders of SBB Common Stock, on the basis on the
number of shares owned of record by each holder. No holder of any shares of SBB
Common Stock shall have any right to receive the distribution of any assets
other than cash.
Assessment and Redemption
The outstanding shares of SBB Common Stock are nonassessable, and SBB
has no right to redeem any or all of the SBB Common Stock at any time or upon
the occurrence of any event.
Restriction on Ownership
The BHC Act requires any "bank holding company" (as defined in the BHC
Act) to obtain the approval of the Federal Reserve Board prior to the
acquisition of 5% or more of the SBB Common Stock. Any person other than a bank
holding company is required to obtain the prior approval of the Federal Reserve
Board to acquire 10% or more of the SBB Common Stock under the Change in Bank
Control Act. Any holder of 25% or more of the SBB Common Stock (or holder of 5%
or more if such holder otherwise exercises a "controlling influence" over SBB)
is subject to regulation as a bank holding company under the BHC Act.
COMPARISON OF SHAREHOLDER RIGHTS
General
Each of SBB and Pacific are incorporated under the GCL. The rights of
Pacific shareholders are currently governed by the Articles of Incorporation of
Pacific, the Bylaws of Pacific and the GCL. The rights of SBB shareholders are
governed by the Articles of Incorporation of SBB, the Bylaws of SBB and the GCL.
At the Effective Time of the Merger, the shareholders of Pacific will become
shareholders of SBB and, accordingly, their rights as shareholders will continue
to be governed by the GCL. However, the provisions of the Articles of
Incorporation and Bylaws of SBB differ in certain respects from the Articles of
Incorporation and Bylaws of Pacific. A summary of the material differences
between the respective rights of shareholders of Pacific and those of SBB is set
forth below. This summary does not purport to be a complete discussion of, and
is qualified in its entirety by reference to, the Articles of Incorporation and
Bylaws of each of SBB and Pacific and to the GCL.
Authorized Capital Stock
As of the SBB Record Date, the authorized capital stock of SBB consists
of 40,000,000 shares of Common Stock, and the authorized capital stock of
Pacific consists of 20,000,000 shares of Common Stock and 20,000,000 shares of
undesignated Preferred Stock, all without par value. As of the SBB Record Date,
there were issued and outstanding _____ shares of SBB Common Stock, ______
shares of Pacific Common Stock and no shares of Pacific Preferred Stock.
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Shareholder Matters
Actions by Shareholders Without a Meeting
GCL Provisions. The GCL generally provides that any action that may be
taken at any meeting of shareholders of a California corporation may be taken by
the shareholders by written consent without a meeting. Generally such action by
written consent shall be effective as of the date that written consents have
been received from holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize the taking of such
action at a meeting at which all outstanding shares entitled to vote thereon
were present and voted. Generally this requires that any action taken by written
consent must be approved by a majority of the outstanding voting stock.
A California corporation is required to give prompt notice to all of
the non-consenting shareholders of any action taken by written consent and
action with respect to the following matters shall not be effective until ten
(10) days after receipt of written consents from the requisite number of
shareholders: (a) approval of a contract or other transaction with an interested
director, as determined under Section 310 of the GCL; (b) the indemnification of
any officer, director, employee or other agent of the corporation; (c) any
merger, consolidation, sale of assets or similar transaction with respect to
which shareholder approval is required under Section 1201 of the GCL; or (d) any
plan for distribution of the assets of the corporation other than in accordance
with the rights of any outstanding shares of preferred stock.
Pacific's Provisions. Pacific's Articles of Incorporation and Bylaws
have adopted these procedures and have not imposed any additional restrictions
or qualifications on the manner in which shareholders may take action by written
consent and without a meeting.
SBB's Provisions. SBB's Articles of Incorporation and Bylaws have
adopted these procedures and have also established the following additional
procedures for shareholder action by written consent and without a meeting.
(a) No corporate action taken by written consent of the shareholders
shall be effective until the later of (i) twenty (20) days after
the date of the commencement of the solicitation (as such term is
defined in Rule 14a-1 promulgated under the Exchange Act) of
consents and (ii) such date as may be specified in the proxy
statement or information statement furnished in connection with
the solicitation, provided that the foregoing shall not apply to
any action to be taken by written consent pursuant to a
solicitation of not more than ten (10) persons. A consent
solicitation shall be deemed to commence when a proxy statement
or information statement containing the information required by
law is first furnished to the shareholders of SBB.
(b) Any written consents delivered in connection with any
solicitation of consents or other proposed action by written
consent shall be effective on delivery of the original or
certified copy of the consent to SBB and shall be valid only for
a maximum of sixty (60) days after the date of the earliest dated
consent delivered to SBB. A shareholder may revoke a written
consent at any time prior to the time that written consents of
the number of shares required to authorize the proposed action
have been filed with the Secretary of SBB. A revocation of a
consent shall be effective upon receipt of the revocation by the
applicable person.
(c) SBB shall engage independent inspectors of election for the
purposes of reviewing the validity of any consents or revocations
of consents.
Shareholder Nominations
Neither the GCL nor Pacific's Articles of Incorporation or Bylaws
establish any particular procedures for the nomination of any persons for
election as Directors.
SBB's Bylaws establish procedures for a shareholder's nomination of any
person for election as a director. These procedures generally require that the
shareholder submit to the Secretary of SBB (a) a written nomination not less
than fourteen (14) nor more than fifty (50) days prior to the scheduled date for
the meeting and (b) certain information about the nominee and the shareholder.
These procedures do not apply to (i) the election of directors at a meeting
called under Section 305 of the GCL to fill a vacancy on the Board of Directors
or (ii) the election of directors by written consent without a meeting. See,
"DESCRIPTION OF CAPITAL STOCK - Nomination of Directors".
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Notice of Shareholder Proposals
Neither the GCL nor Pacific's Articles of Incorporation or Bylaws
establish any particular procedures for shareholders to submit proposals for
actions by the shareholders at any meeting of shareholders.
SBB's Bylaws establish procedures for shareholders to submit proposals,
other than nominations for election as directors, for action by the shareholders
at any meeting of shareholders. Proposals by shareholders for action at any
meeting of shareholders must be submitted as follows.
(a) If the proposal is submitted by any shareholder other than the
shareholder(s) who requested the meeting, the shareholder must
deliver written notice of the proposal to the Secretary of SBB
not less than thirty (30) nor more than sixty (60) days prior
to the scheduled date of the meeting; provided that, if less
than twenty-one (21) days' notice of the meeting is given to
the shareholders, such proposal must be mailed or delivered to
the Secretary not later than the close of business on the
fourteenth (14th) day following the day on which the notice of
the meeting was mailed to the shareholders.
(b) If the proposal is submitted by any of the shareholder(s) who
requested the meeting, the shareholder(s) must deliver written
notice of the proposal to the Secretary of SBB simultaneously
with the shareholder(s) submission of their request for the
meeting.
(c) Notwithstanding the foregoing, any shareholder may submit for
consideration at a meeting any proposal which is directly
related to a matter which is specifically identified in the
notice of the meeting as a matter on which action will be
requested.
(d) No shareholder, other than the shareholder(s) on whose behalf
the meeting is noticed and called, may submit more than one
(1) proposal for consideration at any one (1) meeting of
shareholders.
Directors
Number
Presently the authorized number of Directors of Pacific is not less
than eleven (11) nor more than twenty-one (21) with the exact number of
Directors set at eighteen (18). The Pacific Board may vary the exact number of
Directors within the foregoing range without shareholder approval.
Presently the authorized number of Directors of SBB is not less than
seven (7) nor more than thirteen (13) with the exact number of Directors set at
eleven (11). The SBB Board may vary the exact number of Directors within the
foregoing range without shareholder approval.
As a result of the Bylaw Amendment, the approval of which is a
condition to Pacific's obligations to consummate the Merger, the range of the
authorized number of Directors of SBB will be increased to not less than nine
(9) nor more than seventeen (17) with the exact number of Directors being
fifteen (15). See "THE SBB MEETING -- Matters to be Considered -- The Bylaw
Amendment." Giving effect to the Bylaw Amendment, the SBB Board may vary the
exact number of Directors within the foregoing range without shareholder
approval.
Election
Presently, holders of SBB Common Stock and Pacific Common Stock each
have the right to cumulate their votes in the election of directors. If,
however, the holders of SBB Common Stock approve the Article Amendment at the
SBB Meeting, cumulative voting will no longer be available to shareholders of
SBB with respect to the election of directors.
See "THE SBB MEETING -- Matters to be Considered -- The Article Amendment."
Amendment of Articles of Incorporation and Bylaws
The GCL and the Articles of Incorporation and Bylaws of both SBB and
Pacific generally provide that: (a) amendments of the Articles of Incorporation
must be approved by the Board of Directors and the holders of a majority of the
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outstanding shares entitled to vote; and (b) amendments of the Bylaws may be
approved by either the Board of Directors or the holders of a majority of the
outstanding shares entitled to vote, except that an amendment specifying or
changing a fixed number of directors or the maximum or minimum number of
directors or changing from a fixed to a variable number of directors, or vice
versa, must be approved by the holders of a majority of the outstanding shares
entitled to vote. In addition, an amendment of the Articles of Incorporation or
Bylaws that would reduce the fixed number of directors or the minimum number of
directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting of shareholders or the shares not consenting
in the case of action by written consent are equal to or greater than 16.67% of
the outstanding shares entitled to vote.
In addition, SBB's Articles of Incorporation provide that any amendment
or repeal of the "fair price" provisions described below must be approved by at
least 66.67% of the outstanding voting shares of SBB.
Fair Price Provision
SBB's Articles of Incorporation contain a provision of a type commonly
known as a "fair price" provision. In general the Articles require the approval
by holders of at least 66.67% of the outstanding voting shares (as defined in
the Articles) of SBB as a condition for any merger, certain other business
combinations and similar transactions involving SBB ("Business Combinations")
and any holder of 10% or more of the outstanding voting shares of SBB (a "Ten
Percent Shareholder") unless either (a) the transaction is approved by a
majority of the "Disinterested Directors" (namely, members of the Board of
Directors who are neither affiliated with the Ten Percent Shareholder nor
nominated, elected or appointed to the Board of Directors by such Shareholder)
or (b) certain minimum price, form of consideration and procedural requirements
are met. The Articles also require the approval by the holders of at least
66.67% of the outstanding voting shares of SBB to amend or repeal, or adopt
provisions inconsistent with the "fair price" provisions at any time in the
future.
The "fair price" provisions are intended to provide a measure of
assurance that all shareholders of SBB will be treated similarly in the event of
certain Business Combinations involving a Ten Percent Shareholder. The overall
effect of these proposals may be to render more difficult the accomplishment of
any merger or other Business Combinations or the assumption of control by a
substantial shareholder without the prior approval of the Board of Directors,
and thus to make more difficult the removal of management. The "fair price"
provisions in SBB's Articles are designed to protect minority shareholders from
a purchaser using two-tier pricing and similar tactics in an attempt to take
over SBB. The provisions are not designed to prevent or discourage tender offers
for all of SBB's Common Stock or Business Combinations approved by a majority of
the Disinterested Directors. They generally should not prevent a tender offer or
other Business Combination in which each shareholder receives substantially the
same price for his or her shares as each other shareholder or which the Board of
Directors has approved.
California law requires the renewal every two (2) years of all
provisions in a corporation's Articles of Incorporation which contain
super-majority vote requirements. The requirement of the "fair price" provision
that certain Business Combinations be approved by 66.67% of the outstanding
voting shares of SBB is such a super-majority vote. As a result, SBB is required
to submit the "fair price" provision for re-approval by the shareholders at
least every two years. Since the "fair price" provision was not approved by the
shareholders at the annual meeting of shareholders held in April 1998, it will
be submitted for re-approval at the next annual shareholders' meeting.
The Merger is not a Business Combination within the meaning of the
"fair price" provision. Therefore, the Merger must be approved only by holders
of a majority of the outstanding shares of SBB Common Stock.
Anti-Takeover Provisions
The "fair price" provision in SBB's Articles of Incorporation and the
provisions of SBB's Bylaws that establish procedures for shareholder nomination
of Directors, for shareholder action by written consent and without a meeting
and for submission of shareholder proposals may be considered to have an
"anti-takeover" effect and may discourage any attempt to take over control of
the Company. The "fair price" provision is likely to make it more difficult for
a large block of voting securities of SBB to acquire SBB in a merger or other
transaction which has been approved by SBB's Board of Directors. The Bylaws
provisions also may discourage any attempt to take over control of the Company
as they may limit the action that can be taken by the interested company and may
lengthen the period of time required to acquire control of SBB or to amend SBB's
Articles of Incorporation or Bylaws.
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In addition, the Article Amendment, if approved by the shareholders of
SBB at the SBB meeting, may under certain circumstances be viewed as having
anti-takeover effects. See "THE SBB MEETING -- Matters to be Considered -- The
Article Amendment -- Other Effects."
The SBB Board has determined that, while the foregoing provisions might
be deemed to have some "anti-takeover" effect, the principal effect of these
provisions is to protect the shareholders of SBB and to provide the SBB Board
and the shareholders a reasonable opportunity to evaluate and respond to any
unsolicited acquisition proposal.
LEGAL OPINION
The legality of the shares of SBB Common Stock to be issued to the
holders of Pacific Common Stock pursuant to the Merger, will be passed upon by
Jenkens & Gilchrist, a Professional Corporation. As of November ___, 1998,
attorneys in the law firm of Jenkens & Gilchrist, a Professional Corporation
owned an aggregate of ______ shares of SBB Common Stock.
EXPERTS
Independent Public Accountants for SBB
The consolidated financial statements of SBB incorporated in this Joint
Proxy Statement/Prospectus by reference from SBB's Annual Report (Form 10-K) for
the year ended December 31, 1997, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
Independent Auditors for Pacific
The consolidated financial statements of Pacific incorporated in this
Joint Proxy Statement/Prospectus by reference from Pacific's Annual Report (Form
10-K) for the year ended December 31, 1997, have been audited by KPMG Peat
Marwick LLP, independent auditors, as set forth in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
SOLICITATION OF PROXIES
In addition to solicitation of proxies from shareholders of SBB Common
Stock and Pacific Common Stock by use of the mails, solicitation of proxies may
be made in person or by telephone or other electronic means by certain
directors, officers and regular employees of SBB and Pacific, who will not
receive additional compensation for such services. It is expected that banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the soliciting materials to their principals and obtain
authorization for the execution of proxies. The cost of soliciting proxies from
holders of SBB Common Stock and Pacific Common Stock, including the cost of
reimbursing brokerage houses and other custodians, nominees or fiduciaries for
forwarding proxies and proxy statements to their principals, and the cost of
assembling and mailing the Joint Proxy Statement/Prospectus and all papers which
now accompany or hereafter may supplement such materials, will be borne by each
respective party.
SHAREHOLDER PROPOSALS
SBB expects to hold its next annual meeting of shareholders after the
Merger during April 1999. Under rules established by the Commission, shareholder
proposals for the annual meeting of SBB's shareholders to be held in April 1999
must be received by SBB not later than November 17, 1998 and must meet the
requirements established by the Commission for shareholder proposals in order to
be considered for inclusion in the 1999 proxy statement. Any such proposal
should be mailed to Santa Barbara Bancorp, 1021 Anacapa Street, Santa Barbara,
California 93101, Attention: Secretary. Upon receipt of any such proposal, SBB
will determine whether or not to include such proposal in the proxy statement
and proxy in accordance with the Commission's regulations governing the
solicitation of proxies.
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If the Merger is not consummated for any reason, Pacific expects that
its 1999 annual meeting of shareholders will be held in ____________ 1999.
Shareholder proposals for the annual meeting of Pacific to be held in 1999
(assuming that the Merger has not then been consummated for any reason) must be
received by Pacific not later than ___________, 1998 and must meet the
requirements established by the Commission for shareholder proposals in order to
be considered for inclusion in the 1999 proxy statement of Pacific.
OTHER BUSINESS
The SBB Board does not intend to bring any matter before the SBB
Meeting other than as specifically set forth in the Notice of Special Meeting of
Shareholders, nor does it know of any matter to be brought before the SBB
Meeting by others. If, however, any other matters properly come before the SBB
Meeting or at any and all adjournments or postponements thereof, it is the
intention of the proxy holders named in the accompanying proxies to vote the
shares of SBB Common Stock represented by such proxies in accordance with their
best judgment.
The Pacific Board does not intend to bring any matter before the
Pacific Meeting other than as specifically set forth in the Notice of Special
Meeting of Shareholders, nor does it know of any matter to be brought before the
Pacific Meeting by others. If, however, any other matters properly come before
the Pacific Meeting or at any and all adjournments or postponements thereof, it
is the intention of the proxy holders named in the accompanying proxies to vote
the shares of Pacific Common Stock represented by such proxies in accordance
with their best judgment.
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APPENDIX A
----------
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
SANTA BARBARA BANCORP,
AND
PACIFIC CAPITAL BANCORP,
Dated as of July 20, 1998
================================================================================
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS
ARTICLE I.
TERMS OF THE MERGER AND CLOSING........................................................................A-2
SECTION 1.01 Merger of Pacific with and into SBB......................................................A-2
SECTION 1.02 Effective Date...........................................................................A-2
SECTION 1.03 Effects of the Merger....................................................................A-3
SECTION 1.04 Conversion of Pacific Common Stock.......................................................A-3
SECTION 1.05 SBB Common Stock.........................................................................A-4
SECTION 1.06 Stock Options............................................................................A-4
SECTION 1.07 Exchange Procedures; Surrender of Common Certificates....................................A-5
SECTION 1.08 Articles of Incorporation................................................................A-7
SECTION 1.09 Bylaws...................................................................................A-7
SECTION 1.10 Directors and Officers...................................................................A-7
SECTION 1.11 Headquarters of Surviving Corporation....................................................A-7
SECTION 1.12 Tax Consequences.........................................................................A-8
SECTION 1.13 Employee Benefits........................................................................A-8
SECTION 1.14 Severance Payments......................................................................A-8
SECTION 1.15 Mutual Stock Option Agreements...........................................................A-8
ARTICLE II.
THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE...................................................A-9
SECTION 2.01 Time and Place of the Closing and Closing Date...........................................A-9
SECTION 2.02 Actions to be Taken at the Closing by Pacific............................................A-9
SECTION 2.03 Actions to be Taken at the Closing by SBB...............................................A-11
A-i
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PACIFIC.............................................................A-13
SECTION 3.01 Organization and Qualification..........................................................A-13
SECTION 3.02 Execution and Delivery..................................................................A-14
SECTION 3.03 Capitalization..........................................................................A-15
SECTION 3.04 Compliance with Laws, Permits and Instruments...........................................A-15
SECTION 3.05 Financial Statements....................................................................A-16
SECTION 3.06 Undisclosed Liabilities.................................................................A-17
SECTION 3.07 Litigation..............................................................................A-17
SECTION 3.08 Consents and Approvals..................................................................A-17
SECTION 3.09 Title to Assets.........................................................................A-18
SECTION 3.10 Absence of Certain Changes or Events....................................................A-18
SECTION 3.11 Leases, Contracts and Agreements........................................................A-20
SECTION 3.12 Taxes...................................................................................A-21
SECTION 3.13 Insurance...............................................................................A-22
SECTION 3.14 No Adverse Change.......................................................................A-22
SECTION 3.15 Patents, Trademarks and Copyrights......................................................A-22
SECTION 3.16 Transactions with Certain Persons and Entities..........................................A-23
SECTION 3.17 Evidences of Indebtedness...............................................................A-23
SECTION 3.18 Condition of Assets.....................................................................A-23
SECTION 3.19 Environmental Compliance................................................................A-23
SECTION 3.20 Regulatory Compliance...................................................................A-24
SECTION 3.21 Securities and Exchange Commission Reports..............................................A-25
SECTION 3.22 Absence of Certain Business Practices...................................................A-25
SECTION 3.23 Registration Statement; Joint Proxy Statement/Prospectus................................A-25
SECTION 3.24 Dissenting Shareholders.................................................................A-26
SECTION 3.25 Pooling of Interests....................................................................A-26
SECTION 3.26 Books and Records.......................................................................A-26
SECTION 3.27 Forms of Instruments, Etc...............................................................A-26
SECTION 3.28 Fiduciary Responsibilities..............................................................A-26
SECTION 3.29 Guaranties..............................................................................A-26
SECTION 3.30 Voting Trust or Buy-Sell Agreements.....................................................A-26
SECTION 3.31 Employee Relationships..................................................................A-26
SECTION 3.32 Employee Benefit Plans..................................................................A-27
SECTION 3.33 Interest Rate Risk Management Instruments...............................................A-28
SECTION 3.34 Year 2000...............................................................................A-29
SECTION 3.35 Representations Not Misleading..........................................................A-30
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SBB.................................................................A-30
SECTION 4.01 Organization and Qualification..........................................................A-30
SECTION 4.02 Execution and Delivery..................................................................A-32
SECTION 4.03 Capitalization..........................................................................A-32
SECTION 4.04 Compliance with Laws, Permits and Instruments. ........................................A-32
SECTION 4.05 Financial Statements....................................................................A-33
SECTION 4.06 Undisclosed Liabilities.................................................................A-34
A-ii
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SECTION 4.07 Litigation..............................................................................A-34
SECTION 4.08 Consents and Approvals..................................................................A-34
SECTION 4.09 Title to Assets.........................................................................A-35
SECTION 4.10 Absence of Certain Changes or Events....................................................A-35
SECTION 4.11 Leases, Contracts and Agreements........................................................A-38
SECTION 4.12 Taxes...................................................................................A-38
SECTION 4.13 Insurance...............................................................................A-39
SECTION 4.14 No Adverse Change.......................................................................A-39
SECTION 4.15 Patents, Trademarks and Copyrights......................................................A-39
SECTION 4.16 Transactions with Certain Persons and Entities..........................................A-40
SECTION 4.17 Evidences of Indebtedness...............................................................A-40
SECTION 4.18 Condition of Assets.....................................................................A-40
SECTION 4.19 Environmental Compliance................................................................A-41
SECTION 4.20 Regulatory Compliance...................................................................A-41
SECTION 4.21 Securities and Exchange Commission Reports..............................................A-42
SECTION 4.22 Absence of Certain Business Practices...................................................A-42
SECTION 4.23 Registration Statement; Joint Proxy Statement/Prospectus................................A-42
SECTION 4.24 Pooling of Interests....................................................................A-43
SECTION 4.25 Books and Records.......................................................................A-43
SECTION 4.26 Forms of Instruments, Etc...............................................................A-43
SECTION 4.27 Fiduciary Responsibilities..............................................................A-43
SECTION 4.28 Guaranties..............................................................................A-43
SECTION 4.29 Voting Trust or Buy-Sell Agreements.....................................................A-43
SECTION 4.30 Employee Relationships..................................................................A-43
SECTION 4.31 Employee Benefit Plans..................................................................A-44
SECTION 4.32 Interest Rate Risk Management Instruments...............................................A-45
SECTION 4.33 Year 2000...............................................................................A-45
SECTION 4.34 Representations Not Misleading..........................................................A-46
ARTICLE V.
COVENANTS OF PACIFIC..................................................................................A-47
SECTION 5.01 Best Efforts............................................................................A-47
SECTION 5.02 Merger Agreement........................................................................A-47
SECTION 5.04 Information for Applications and Statements.............................................A-48
SECTION 5.05 Required Acts of Pacific................................................................A-48
SECTION 5.06 Prohibited Acts of Pacific..............................................................A-49
SECTION 5.07 Access; Pre-Closing Investigation.......................................................A-52
SECTION 5.08 Director and Committee Meetings.........................................................A-52
SECTION 5.09 Additional Financial Statements.........................................................A-52
SECTION 5.10 Untrue Representations..................................................................A-52
SECTION 5.11 Litigation and Claims...................................................................A-53
SECTION 5.12 Adverse Changes.........................................................................A-53
SECTION 5.13 No Negotiation with Others..............................................................A-53
SECTION 5.14 Consents and Approvals..................................................................A-53
SECTION 5.15 Environmental Investigation; Right to Terminate Agreement...............................A-53
SECTION 5.16 Restrictions on Resales.................................................................A-55
SECTION 5.17 Shareholder Lists.......................................................................A-55
A-iii
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SECTION 5.18 Employee Pension Plans..................................................................A-55
SECTION 5.19 Employee Welfare Benefit Plans..........................................................A-55
SECTION 5.20 Director Voting.........................................................................A-55
SECTION 5.21 Dividends...............................................................................A-56
SECTION 5.22 Non-Compete Agreements..................................................................A-56
SECTION 5.23 Pooling of Interests Accounting Treatment...............................................A-56
SECTION 5.24 Disclosure Schedules....................................................................A-56
ARTICLE VI.
COVENANTS OF SBB......................................................................................A-56
SECTION 6.01 Best Efforts............................................................................A-56
SECTION 6.02 Merger Agreement........................................................................A-57
SECTION 6.03 Regulatory Approvals and Registration Statement.........................................A-57
SECTION 6.04 Submission of Merger and Related Matters to Shareholders................................A-58
SECTION 6.05 Information for Applications and Statements.............................................A-58
SECTION 6.06 Required Acts of SBB....................................................................A-59
SECTION 6.07 Prohibited Acts of SBB..................................................................A-59
SECTION 6.08 Access; Pre-Closing Investigation.......................................................A-62
SECTION 6.09 Director and Committee Meeting..........................................................A-62
SECTION 6.10 Additional Financial Statements.........................................................A-62
SECTION 6.11 Untrue Representations..................................................................A-63
SECTION 6.12 Litigation and Claims...................................................................A-63
SECTION 6.13 Adverse Change..........................................................................A-63
SECTION 6.14 No Negotiation with Others..............................................................A-63
SECTION 6.15 Consents and Approvals..................................................................A-64
SECTION 6.16 Environmental Investigation; Right to Terminate Agreement...............................A-64
SECTION 6.17 Stock Options...........................................................................A-65
SECTION 6.18 Director and Officer Liability Insurance................................................A-66
SECTION 6.19 Dividends...............................................................................A-66
SECTION 6.20 Conduct of Business in the Ordinary Course..............................................A-66
SECTION 6.21 Additions to SBB Board of Directors.....................................................A-66
SECTION 6.22 Director Voting.........................................................................A-66
SECTION 6.23 Pooling of Interests Accounting Treatment...............................................A-66
SECTION 6.24 Disclosure Schedules....................................................................A-66
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC....................................................A-67
SECTION 7.01 Compliance with Representations, Warranties and Agreements.
............................................................................................A-67
SECTION 7.02 Shareholder Approvals...................................................................A-67
SECTION 7.03 Government and Other Approvals..........................................................A-67
SECTION 7.04 No Litigation...........................................................................A-67
SECTION 7.05 Delivery of Closing Documents...........................................................A-68
SECTION 7.06 Receipt of Fairness Opinion.............................................................A-68
SECTION 7.07 Receipt of Pooling Opinions.............................................................A-68
SECTION 7.08 Registration Statement..................................................................A-68
SECTION 7.10 Dissenting Shareholders.................................................................A-69
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<PAGE>
SECTION 7.11 Accounting Treatment....................................................................A-69
SECTION 7.12 Bylaw Amendment.........................................................................A-69
SECTION 7.13 No Material Adverse Change..............................................................A-69
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBB........................................................A-69
SECTION 8.01 Compliance with Representations, Warranties and Agreements.
............................................................................................A-69
SECTION 8.02 Shareholder Approvals...................................................................A-70
SECTION 8.03 Government and Other Approvals..........................................................A-70
SECTION 8.04 No Litigation...........................................................................A-70
SECTION 8.05 Delivery of Closing Documents...........................................................A-71
SECTION 8.06 Receipt of Shareholder Letters..........................................................A-71
SECTION 8.07 Receipt of Fairness Opinion.............................................................A-71
SECTION 8.08 Dissenting Shareholders.................................................................A-71
SECTION 8.09 Receipt of Pooling Opinions.............................................................A-71
SECTION 8.10 Registration Statement..................................................................A-71
SECTION 8.11 Federal Tax Opinion.....................................................................A-71
SECTION 8.12 Accounting Treatment....................................................................A-72
SECTION 8.13 No Material Adverse Change..............................................................A-72
ARTICLE IX.
EXPENSES, TERMINATION AND ABANDONMENT.................................................................A-72
SECTION 9.01 Expenses.................................................................................A-72
SECTION 9.02 Termination.............................................................................A-73
SECTION 9.03 Notice of Termination...................................................................A-75
SECTION 9.04 Effect of Termination...................................................................A-75
ARTICLE X.
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................................................A-75
SECTION 10.01 Nonsurvival of Representations and Warranties..........................................A-75
ARTICLE XI.
CONFIDENTIAL INFORMATION..............................................................................A-75
SECTION 11.01 Definition of "Recipient," "Disclosing Party," "Representative"
and "Person".................................................................................A-75
SECTION 11.02 Definition of "Subject Information"....................................................A-76
SECTION 11.03 Confidentiality........................................................................A-76
SECTION 11.04 Securities Law Concerns................................................................A-76
SECTION 11.05 Return of Subject Information..........................................................A-77
SECTION 11.06 Specific Performance/Injunctive Relief.................................................A-77
ARTICLE XII.
MISCELLANEOUS.........................................................................................A-77
SECTION 12.01 Brokerage Fees and Commissions.........................................................A-77
SECTION 12.02 Entire Agreement.......................................................................A-77
SECTION 12.03 Further Cooperation....................................................................A-78
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<PAGE>
SECTION 12.04 Severability...........................................................................A-78
SECTION 12.05 Notices................................................................................A-78
SECTION 12.06 GOVERNING LAW..........................................................................A-79
SECTION 12.07 Multiple Counterparts..................................................................A-79
SECTION 12.08 Certain Definitions....................................................................A-80
SECTION 12.09 Specific Performance. .................................................................A-81
SECTION 12.10 Attorneys' Fees and Costs..............................................................A-81
SECTION 12.11 Rules of Construction..................................................................A-81
SECTION 12.12 Binding Effect; Assignment.............................................................A-81
SECTION 12.13 Public Disclosure......................................................................A-82
SECTION 12.14 Extension; Waiver......................................................................A-82
SECTION 12.15 Amendments.............................................................................A-83
SECTION 12.16 Access; Due Diligence. ...............................................................A-83
EXHIBITS
Exhibit "A" - Agreement and Plan of Merger
- -----------
Exhibit "B" - SBB Option Agreement
- -----------
Exhibit "C" - Pacific Option Agreement
- -----------
Exhibit "D" - Opinion Matters of Counsel to Pacific
- -----------
Exhibit "E" - Opinion Matters of Counsel to SBB
- -----------
Exhibit "F" - Form of Shareholder Letter
- -----------
Exhibit "G" - Persons to Deliver Non-Compete Agreements
- -----------
Exhibit "H" - Form of Non-Compete Agreement
- -----------
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of the 20th day of July, 1998, by and between Santa Barbara
Bancorp, a California corporation and registered bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA") with its principal
offices at 1021 Anacapa Street, Santa Barbara, California 93101 ("SBB"), and
Pacific Capital Bancorp, a California corporation and registered bank holding
company under the BHCA with its principal offices at 307 Main Street, Salinas,
California 93901 ("Pacific").
W I T N E S S E T H:
WHEREAS, Pacific is a California corporation duly organized and
existing under the laws of the State of California; and
WHEREAS, SBB is a California corporation duly organized and existing
under the laws of the State of California; and
WHEREAS, SBB and Pacific desire to combine their respective businesses;
and
WHEREAS, in furtherance of the combination of their respective
businesses, SBB and Pacific desire that Pacific shall be merged (the "Merger")
with and into SBB, under the articles of incorporation of SBB and with the
resulting name "Pacific Capital Bancorp" (SBB as it will exist from and after
the Effective Date (defined herein) being referred to herein as the "Surviving
Corporation"), and that (i) all of the issued and outstanding shares of common
stock of Pacific (other than shares held by dissenting shareholders, fractional
share interests and as otherwise set forth herein) shall be converted into and
exchanged for shares of common stock of the Surviving Corporation, (ii) all
outstanding options to acquire common stock of Pacific shall be converted into
options to acquire common stock of the Surviving Corporation, and (iii) all of
the issued and outstanding shares of capital stock of SBB shall continue to be
issued and outstanding shares of capital stock of the Surviving Corporation, all
pursuant to an Agreement and Plan of Merger substantially in the form attached
hereto as Exhibit "A" (the "Merger Agreement"); and
WHEREAS, it is the intent of the respective Boards of Directors of SBB
and Pacific that the Merger be structured as a "merger of equals" of SBB and
Pacific and that the Surviving Corporation be governed and operated on this
basis; and
WHEREAS, as a condition to, and immediately after the execution of,
this Agreement, SBB and Pacific are entering into mutual stock option agreements
in substantially the forms attached hereto as Exhibit "B" and Exhibit "C".
WHEREAS, SBB and Pacific believe that the Merger, as provided for, and
subject to the terms and conditions set forth in this Agreement and all
exhibits, schedules and supplements hereto, is in the best interests of SBB and
Pacific and their respective shareholders; and
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<PAGE>
WHEREAS, the respective Boards of Directors of SBB and Pacific have
approved this Agreement and the proposed transactions substantially on the terms
and conditions set forth in this Agreement and the schedules and exhibits hereto
and have authorized the execution thereof.
WHEREAS, this Agreement and the Merger Agreement will be submitted for
approval of the respective shareholders of SBB and Pacific at special meetings
of their respective shareholders; and
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, SBB and Pacific desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement and certain additional agreements
related to the transactions contemplated hereby.
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the conditions set
forth below, the parties hereto undertake, promise, covenant and agree with each
other as follows:
ARTICLE I.
TERMS OF THE MERGER AND CLOSING
SECTION 1.01 Merger of Pacific with and into SBB. Subject to the terms
and conditions of this Agreement and the Merger Agreement, in accordance with
the provisions of Section 1107 of the California General Corporation Law (the
"GCL"), on the Effective Date (as such term is defined in Section 1.02), Pacific
shall merge with and into SBB. SBB shall be the Surviving Corporation in the
Merger and shall continue its corporate existence under the laws of the State of
California. Upon consummation of the Merger, the separate corporate existence of
Pacific shall terminate.
SECTION 1.02 Effective Date. Subject to the terms and conditions of
this Agreement, upon the filing with the Secretary of State of the State of
California (the "California Secretary") of a duly executed Merger Agreement
substantially in the form attached hereto as Exhibit "A" for the merger of
Pacific with and into SBB and officers' certificates prescribed by Section 1103
of the GCL, the Merger shall become effective. The date on which the Merger is
effective as prescribed in the Merger Agreement shall be referred to herein as
the "Effective Date", which the parties shall use their best efforts to cause to
occur on the Closing Date (as defined in Section 2.01(a)).
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<PAGE>
SECTION 1.03 Effects of the Merger. The Merger shall have the effects
provided by this Agreement and as set forth in Section 1107 of the GCL. The
Surviving Corporation shall be the successor to each of SBB and Pacific; shall
be subject to all the liabilities, obligations, duties and relations of each
merging party; and shall without the necessity of any conveyance, assignment or
transfer, become the owner of all of the assets of every kind and character
formerly belonging to SBB and Pacific. The name of the Surviving Corporation
shall be "Pacific Capital Bancorp", and Pacific shall provide SBB any consents
necessary to permit the Surviving Corporation to use such name as of the
Effective Date.
SECTION 1.04 Conversion of Pacific Common Stock.
(a) On the Effective Date, by virtue of the Merger and without any
action on the part of the holders of the following-described security, each
share of the common stock, no par value per share, of Pacific (the "Pacific
Common Stock") issued and outstanding immediately prior to the Effective Date
(other than shares of Pacific Common Stock (i) as to which dissenters' rights
have been perfected, or (ii) held directly or indirectly by Pacific or SBB
(except for Trust Account Shares or DPC Shares as defined in Section 1.04(d))
shall be converted into the right to receive 1.935 shares (the "Exchange Ratio")
of the fully-paid, nonassessable and registered common stock, no par value per
share, of SBB (the "SBB Common Stock") (together with any cash payment in lieu
of fractional shares, as provided below, the "Merger Consideration").
(b) No fractional shares of SBB Common Stock shall be issued and, in
lieu thereof, holders of shares of Pacific Common Stock who would otherwise be
entitled to a fractional share interest (after taking into account all shares of
Pacific Common Stock held by such holder) shall be paid an amount in cash equal
to the product of such fractional share interest and the average of the closing
bid and asked price of a share of SBB Common Stock on the Nasdaq National Market
("Nasdaq") on the business day immediately preceding the Effective Date.
(c) All of the shares of Pacific Common Stock converted into SBB Common
Stock pursuant to this Section 1.04 shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist as of the
Effective Date, and each certificate (each a "Certificate") previously
representing any such shares of Pacific Common Stock shall thereafter represent
the right to receive (i) a certificate representing the number of whole shares
of SBB Common Stock and (ii) cash in lieu of fractional shares into which the
shares of Pacific Common Stock represented by such Certificate have been
converted pursuant to this Section 1.04. Certificates previously representing
shares of Pacific Common Stock shall be exchanged for certificates representing
whole shares of SBB Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 1.07, without any interest thereon. Such certificates representing
whole shares of SBB Common Stock exchanged for certificates previously
representing shares of Pacific Common Stock shall bear the name of the Surviving
Corporation.
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<PAGE>
(d) On the Effective Date, all shares of Pacific Common Stock that are
owned, directly or indirectly, by Pacific or SBB or any of their respective
subsidiaries (other than (i) shares of Pacific Common Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Pacific Common Stock which are similarly held, whether
held directly or indirectly by Pacific or SBB, as the case may be, being
referred to herein as "Trust Account Shares") and (ii) shares of Pacific Common
Stock held by Pacific or any of its subsidiaries in respect of a debt previously
contracted (any such shares being referred to herein as "DPC Shares")) shall be
canceled and shall cease to exist and no stock of SBB or other consideration
shall be delivered in exchange therefor. All shares of SBB Common Stock that are
owned by Pacific or any of its subsidiaries (other than Trust Account Shares and
DPC Shares with respect to SBB Common Stock) shall be retired.
(e) If, between the date hereof and the Effective Date, the outstanding
shares of SBB Common Stock or Pacific Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar change in
capitalization (a "Share Adjustment"), then the number of shares of SBB Common
Stock into which a share of Pacific Common Stock shall be converted pursuant to
subsection (a) above shall be appropriately and proportionately adjusted so that
each shareholder of Pacific shall be entitled to receive such number of shares
of SBB Common Stock as such shareholder would have received pursuant to such
Share Adjustment had the record date therefor been immediately following the
Effective Date.
(f) If any of the shares of Pacific Common Stock are "dissenting
shares" as defined under applicable provisions of Chapter 13 of the GCL, any
Certificate representing such shares shall not be converted as described in this
Section 1.04, but from and after the Effective Date shall represent only the
right to receive such value as may be determined pursuant to Chapter 13 of the
GCL; provided, however, that each dissenting share of Pacific Common Stock which
shall cease to be a dissenting share shall have only such rights as are provided
under the GCL.
(g) On the Effective Date, the stock transfer books of Pacific shall be
closed, and no transfer of Pacific Common Stock theretofore outstanding shall
thereafter be made.
SECTION 1.05 SBB Common Stock. On and after the Effective Date, each
share of SBB Common Stock issued and outstanding immediately prior to the
Closing Date shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger. References to SBB
Common Stock in this Agreement as of and after the Effective Date shall be
deemed to mean the common stock of the Surviving Corporation.
SECTION 1.06 Stock Options.
(a) Between the date of this Agreement and the Effective Date, each
person holding one or more options to purchase shares of Pacific Common Stock
pursuant to any Pacific Stock Option Plan (as defined in Section 6.17), shall
A-4
<PAGE>
continue to have the right to exercise any vested Pacific Stock Option (as
defined in Section 6.17) prior to the Effective Date.
(b) On the Effective Date, each non-statutory Pacific Stock Option
which is outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Pacific Common Stock and shall be assumed
by the Surviving Corporation and converted automatically into an option to
purchase shares of SBB Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the Pacific
Stock Option Plans and the agreements evidencing grants thereunder):
(i) The number of shares of SBB Common Stock to be subject to
the converted option shall be equal to the product of the number of
shares of Pacific Common Stock subject to the original option and the
Exchange Ratio (provided that such number of shares shall be rounded to
the nearest one one-hundredth of a share); and
(ii) The exercise price per share of SBB Common Stock under
the converted option shall be equal to the exercise price per share of
Pacific Common Stock under the original option divided by the Exchange
Ratio (provided that such exercise price shall be rounded to the
nearest one one-hundredth of a dollar).
(c) On the Effective Date, each Pacific Stock Option which is an
"incentive stock option" (as defined in Section 422 of the Code) and which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Pacific Common Stock and shall be assumed by the
Surviving Corporation and converted automatically into an option to purchase
shares of SBB Common Stock in an amount and at an exercise price determined in a
manner which is consistent with Section 424(a) of the Code. The duration and
other terms of the converted option shall be the same as the original option,
except that all references to Pacific shall be deemed to be references to the
Surviving Corporation.
SECTION 1.07 Exchange Procedures; Surrender of Common Certificates.
(a) Norwest Bank Minnesota (or any successor in interest) shall act as
the Exchange Agent in the Merger (the "Exchange Agent").
(b) As soon as practicable after the Effective Date, and in no event
later than three (3) business days thereafter, the Exchange Agent shall mail to
each holder of record of one or more Certificates (as indicated on the certified
shareholder list to be delivered to SBB in accordance with Section 2.02(I)
hereof, each a "Pacific Shareholder") 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 instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration into which the shares of Pacific Common
Stock represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement.
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<PAGE>
(i) Promptly after receipt of such Certificates and letters of
transmittal, the Exchange Agent shall review the executed letters of
transmittal in order to verify proper execution thereof.
(ii) Upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such properly
completed letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) a
certificate representing that number of whole shares of SBB Common
Stock to which such holder of Pacific Common Stock shall have become
entitled pursuant to the provisions of Section 1.04, and (B) a check
representing the amount of any cash in lieu of fractional shares which
such holder has the right to receive in respect of the Certificate
surrendered pursuant to this Section 1.07, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each
such outstanding Certificate shall be deemed for all purposes, subject
only to Chapter 13 of the GCL, to evidence solely the right to receive
such Merger Consideration from SBB as described in Section 1.04. No
interest will be paid or accrued on any cash in lieu of fractional
shares or on any unpaid dividends and distributions payable to holders
of Certificates.
(iii) Shareholders who do not provide properly completed
letters of transmittal and all appropriate Certificates to the Exchange
Agent shall receive their Merger Consideration promptly following
receipt of those properly completed documents and appropriate
Certificates by the Exchange Agent. In the event that a letter of
transmittal contains an error, is incomplete or is not accompanied by
all appropriate Certificates, then the Exchange Agent will notify such
Pacific Shareholder promptly of the need for further information.
(c) If any certificate representing shares of SBB Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of SBB Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or required for
any other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Pacific
Shareholder claiming such Certificate to be lost, stolen or destroyed and, if
required by SBB in its sole discretion, the posting by such person of a bond in
such amount as SBB may determine is reasonably necessary as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
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<PAGE>
(e) Neither the Exchange Agent nor any other party to this Agreement
shall be liable to any holder of any Certificates for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.
(f) Notwithstanding anything to the contrary contained herein, no
certificates representing shares of SBB Common Stock shall be delivered to a
Pacific Shareholder who is an "affiliate" (as such term is used in Section 5.16
and Section 8.06) of Pacific unless such "affiliate" shall have theretofore
executed and delivered to SBB the Shareholder Letter referred to in Section 5.16
and Section 8.06 hereof.
(g) No dividends or other distributions of any kind which are declared
payable to the shareholders of record of the Surviving Corporation after the
Effective Date shall be paid to persons entitled to receive such certificates
for SBB Common Stock until such persons surrender their Certificates. Upon
surrender of such Certificates, the holder thereof shall be paid, without
interest, any dividends or other distributions with respect to the SBB Common
Stock as to which the record date and payment date occurred on or after the
Effective Date and before the date of surrender.
(h) Notwithstanding anything in this Agreement to the contrary, for a
period of ninety (90) days after the Closing Date, holders of Certificates
representing shares of Pacific Common Stock shall be entitled to vote as holders
of shares of SBB Common Stock notwithstanding that such Certificates
representing Pacific Common Stock have not been exchanged for shares of SBB
Common Stock as provided in this Section 1.07.
SECTION 1.08 Articles of Incorporation. Subject to the terms and
conditions of this Agreement, on the Effective Date, the Articles of
Incorporation of SBB shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law, except
that such Articles of Incorporation shall be amended to provide that the name of
the Surviving Corporation shall be "Pacific Capital Bancorp".
SECTION 1.09 Bylaws. Subject to the terms and conditions of this
Agreement, on the Effective Date, the Bylaws of SBB shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
SECTION 1.10 Directors and Officers.
(a) From and after the Effective Date, the Board of Directors of the
Surviving Corporation shall consist of the persons as set forth in the Merger
Agreement attached hereto as Exhibit "A".
(b) From and after the Effective Date, the officers of the Surviving
Corporation shall be as set forth in the Merger Agreement attached hereto as
Exhibit "A".
SECTION 1.11 Headquarters of Surviving Corporation. On the Effective
Date, the headquarters and principal executive offices of the Surviving
Corporation shall be located in Santa Barbara, California.
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<PAGE>
SECTION 1.12 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code, and that this Agreement shall constitute a "plan of reorganization" for
the purpose of Section 368 of the Code.
SECTION 1.13 Employee Benefits. SBB shall, with respect to each
employee of Pacific or its Subsidiaries at the Effective Date who continues in
employment with the Surviving Corporation or its Subsidiaries (each a "Continued
Employee"), provide the benefits described in this Section 1.13. Subject to the
right of subsequent amendment, modification or termination in the sole
discretion of the Surviving Corporation as provided in Section 5.18 and Section
5.19 hereof, each Continued Employee shall be entitled, as an employee of the
Surviving Corporation or its Subsidiaries, to participate in SBB Employee
Benefit Plans (as defined in Section 4.31(a)) in effect as of the date of this
Agreement, if such Continued Employee shall be eligible and, if required,
selected for participation therein under the terms thereof. Continued Employees
shall be eligible to participate on the same basis as similarly situated
employees of SBB and its Subsidiaries. All such participation shall be subject
to such terms of such plans as may be in effect from time to time and this
Section 1.13 is not intended to give any Continued Employee any rights or
privileges superior to those of other employees of SBB or its Subsidiaries. The
provisions of this Section 1.13 shall not be deemed or construed so as to
provide duplication of similar benefits but, subject to that qualification, the
Surviving Corporation shall, for purposes of vesting and any age or period of
service requirements for commencement of participation with respect to any SBB
Employee Plans in which a Continued Employee may participate, credit each
Continued Employee with his or her term of service with Pacific and its
Subsidiaries. Notwithstanding the foregoing, no such credit for term of service
with Pacific and its Subsidiaries shall be given to any Continued Employee with
respect to participation in or benefits received pursuant to the Santa Barbara
Bank & Trust Key Employee Retiree Health Plan and the Santa Barbara Bank & Trust
Retiree Health Plan, but such credit shall begin to accrue under such plan with
respect to Continued Employees as of the Effective Date.
SECTION 1.14 Severance Payments. The severance benefits set forth in
Schedule 1.14 hereto shall be provided to employees of Pacific who may be
terminated (i) by Pacific on the Effective Date upon confirmation that such
employees would be entitled to the severance benefit, or (ii) by the Surviving
Corporation or any of its Subsidiaries without cause within one year following
the Effective Date.
SECTION 1.15 Mutual Stock Option Agreements. As a condition to the
execution of this Agreement, SBB and Pacific are executing and delivering each
to the other an Option Agreement in substantially the form attached hereto as
Exhibit "B" and Exhibit "C".
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ARTICLE II.
THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE
SECTION 2.01 Time and Place of the Closing and Closing Date.
(a) On a date mutually agreeable to SBB and Pacific which is not less
than 10 business days nor more than 30 calendar days after the receipt of all
necessary regulatory, corporate, shareholder and other approvals and the
expiration of any mandatory waiting periods, or on such other date mutually
agreeable to SBB and Pacific (herein called the "Closing Date"), a meeting (the
"Closing") will take place at which the parties to this Agreement will exchange
certificates, opinions, letters and other documents in order to determine
whether all of the conditions set forth in Articles VII and VIII of this
Agreement have been satisfied or waived or whether any condition exists that
would permit a party to this Agreement to terminate this Agreement. If no such
condition then exists, or if no party elects to exercise any right it may have
to terminate this Agreement, then and thereupon the appropriate parties shall
execute such documents and instruments as may be necessary or appropriate in
order to effect the transactions contemplated by this Agreement.
(b) The Closing shall take place at the offices of Santa Barbara Bank &
Trust ("SBB&T"), 1021 Anacapa Street, Santa Barbara, California 93101-2036 on
the Closing Date, or at such other place to which the parties may mutually
agree.
SECTION 2.02 Actions to be Taken at the Closing by Pacific. At the
Closing, Pacific shall execute and acknowledge, or cause to be executed and
acknowledged (as appropriate), and deliver to SBB such documents and
certificates necessary or appropriate to carry out the terms and provisions of
this Agreement, including without limitation, the following (all of such actions
constituting conditions precedent to SBB's obligations to close hereunder):
A. True, correct and complete copies of the Articles of
Incorporation of Pacific and all amendments thereto, duly certified as
of a recent date by the California Secretary.
B. True, correct and complete copies of the Articles of
Association of First National Bank of Central California and South
Valley National Bank (collectively, the "Subsidiary Banks") and all
amendments thereto, duly certified as of a recent date by the Office of
the Comptroller of the Currency (the "OCC").
C. True, correct and complete copies of the Articles of
Incorporation of the Pacific Subsidiaries (as defined in Section
3.01(a)), other than the Subsidiary Banks, and all amendments thereto,
duly certified as of a recent date by the California Secretary.
D. A certificate of existence, dated as of a recent date,
issued by the California Secretary, duly certifying as to the existence
of Pacific and the Pacific Subsidiaries, other than the Subsidiary
Banks, under the laws of the State of California.
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<PAGE>
E. Certificates to do business, dated as of a recent date,
issued by the OCC, duly certifying as to the authority of each of the
Subsidiary Banks to transact the business of banking under the laws of
the United States.
F. Certificates of good standing, dated as of a recent date,
issued by the California Franchise Tax Board, duly certifying as to the
good standing of Pacific and each of the Pacific Subsidiaries in the
State of California.
G. Certificates, dated as of a recent date, issued by the
Federal Deposit Insurance Corporation (the "FDIC"), duly certifying
that the deposits of each of the Subsidiary Banks are insured by the
FDIC pursuant to the Federal Deposit Insurance Act.
H. A letter, dated as of a recent date, from the Federal
Reserve Bank of San Francisco, to the effect that Pacific is a
registered bank holding company under the BHCA.
I. A certificate, dated as of the Closing Date, executed by
the Secretary or other appropriate executive officer of Pacific,
pursuant to which such officer shall certify: (a) the due adoption by
the Board of Directors of Pacific of corporate resolutions attached to
such certificate authorizing the execution and delivery of this
Agreement and the other agreements and documents contemplated hereby,
including, but not limited to, the Merger Agreement, and the taking of
all actions contemplated hereby and thereby; (b) the due adoption by
the shareholders of Pacific of resolutions authorizing the Merger and
the execution and delivery of this Agreement and the Merger Agreement
and the other agreements and documents contemplated hereby and thereby
and the taking of all actions contemplated hereby and thereby; (c) the
incumbency and true signatures of those officers of Pacific duly
authorized to act on its behalf in connection with the transactions
contemplated by this Agreement and to execute and deliver this
Agreement and the Merger Agreement and other agreements and documents
contemplated hereby and thereby and the taking of all actions
contemplated hereby and thereby on behalf of Pacific; (d) that the copy
of the Bylaws of Pacific attached to such certificate is true and
correct and such Bylaws have not been amended except as reflected in
such copy; and (e) a true and correct copy of the list of Pacific
Shareholders as of the Closing Date.
J. A certificate, dated as of the Closing Date, executed by an
executive officer of Pacific, pursuant to which Pacific shall certify,
to the best knowledge of such executive officer, that (i) all of the
representations and warranties made in Article III of this Agreement
are true and correct in all material respects on and as of the date of
such certificate as if made on such date and that, except as expressly
permitted by this Agreement, there shall have been no Material Adverse
Change (as defined in Section 12.08(C) hereof) with respect to Pacific
since December 31, 1997, and (ii) Pacific has performed and complied in
all material respects with all of its obligations and agreements
required to be performed on or prior to the Closing Date under this
Agreement.
K. Any signed Non-Compete Agreements (as defined in Section
5.22) from those persons identified on Exhibit "G" attached hereto as
Pacific, consistent with Pacific's obligations to use its best efforts
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as set forth in Section 5.22 hereof, has been able to obtain on or
before the Closing Date.
L. All consents required to be obtained by Pacific from third
parties to consummate the transactions contemplated by this Agreement.
M. An opinion of counsel to Pacific substantially in the form
of Exhibit "D" attached hereto.
N. All other documents required to be delivered to SBB by
Pacific under the provisions of this Agreement, and all other
documents, certificates and instruments as are reasonably requested by
SBB or its counsel.
SECTION 2.03 Actions to be Taken at the Closing by SBB. At the Closing,
SBB shall execute and acknowledge (as appropriate) and deliver to Pacific such
documents and certificates necessary or appropriate to carry out the terms and
provisions of this Agreement, including without limitation, the following (all
of such actions constituting conditions precedent to Pacific's obligations to
close hereunder):
A. True, correct and complete copies of SBB's Articles of
Incorporation and all amendments thereto, duly certified as of a recent
date by the California Secretary.
B. True, correct and complete copies of the Articles of
Incorporation of SBB&T, and all amendments thereto, duly certified as
of a recent date by the Commissioner of Financial Institutions of the
State of California (the "California Commissioner").
C. True, correct and complete copies of the Articles of
Incorporation of Sanbarco Mortgage Company ("Sanbarco") and all
amendments thereto, duly certified as of a recent date by the
California Secretary.
D. Good standing and existence certificates for SBB and
Sanbarco, dated as of a recent date, issued by the appropriate state
officials, duly certifying as to the existence and good standing of
each of SBB and Sanbarco in the State of California.
E. Certificate of Existence, dated as of a recent date, issued
by the California Commissioner, duly certifying as to the existence of
SBB&T under the laws of the State of California.
F. Certificates of good standing, dated as of a recent date,
issued by the California Franchise Tax Board, duly certifying as to the
good standing of SBB and each of the SBB Subsidiaries in the State of
California.
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G. Certificate, dated as of a recent date, issued by the FDIC,
duly certifying that the deposits of SBB&T are insured by the FDIC
pursuant to the Federal Deposit Insurance Act.
H. A letter, dated as of a recent date, from the Federal
Reserve Bank of San Francisco, to the effect that SBB is a registered
bank holding company under the BHCA.
I. A certificate, dated as of the Closing Date, executed by
the Secretary or an Assistant Secretary of SBB pursuant to which such
officer shall certify: (a) the due adoption by the Board of Directors
of SBB of corporate resolutions attached to such certificate
authorizing the execution and delivery of this Agreement and the other
agreements and documents contemplated hereby and the taking of all
actions contemplated hereby and thereby; (b) the due adoption by the
shareholders of SBB of resolutions authorizing the Merger and the
execution and delivery of this Agreement and the Merger Agreement and
the other agreements and documents contemplated hereby and thereby and
the taking of all actions contemplated hereby and thereby; (c) the
incumbency and true signatures of those officers of SBB duly authorized
to act on its behalf in connection with the transactions contemplated
by this Agreement and to execute and deliver this Agreement and other
agreements and documents contemplated hereby and the taking of all
actions contemplated hereby and thereby on behalf of SBB, and (d) that
the copy of the Bylaws of SBB attached to such certificate is true and
correct and such Bylaws have not been amended except as reflected in
such copy.
J. A certificate, dated as of the Closing Date, executed by a
duly authorized officer of SBB, pursuant to which SBB shall certify, to
the best knowledge of such officer, that (i) all of the representations
and warranties made in Article IV of this Agreement are true and
correct in all material respects on and as of the date of such
certificate as if made on such date and that, except as expressly
permitted by this Agreement, there shall have been no Material Adverse
Change (as defined in Section 12.08(C) hereof) with respect to SBB
since December 31, 1997, and (ii) SBB has performed and complied in all
material respects with all of its obligations and agreements required
to be performed on or prior to the Closing Date under this Agreement.
K. All consents required to be obtained by SBB from third
parties to consummate the transactions contemplated by this Agreement.
L. An opinion of counsel to SBB substantially in the form of
Exhibit "E" attached hereto.
M. All other documents required to be delivered to Pacific by
SBB under the provisions of this Agreement, and all other documents,
certificates and instruments as are reasonably requested by Pacific or
its counsel.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PACIFIC
Pacific hereby makes the representations and warranties set forth in
this Article III to SBB.
SECTION 3.01 Organization and Qualification.
(a) Pacific is a California corporation duly organized, validly
existing under the laws of the State of California, and in good standing under
all laws, rules and regulations applicable to corporations located in the State
of California. Pacific is a bank holding company registered under the BHCA.
Pacific has all requisite corporate power and authority (including all licenses,
franchises, permits and other governmental authorizations as are legally
required) to carry on its business as now being conducted, to own, lease and
operate its properties and assets, including, but not limited to, as now owned,
leased or operated, and to enter into and carry out its obligations under this
Agreement and the Merger Agreement. Schedule 3.01(a) sets forth a complete list
of each Subsidiary (as defined in Section 12.08(B)) of Pacific (collectively,
the "Pacific Subsidiaries"). Except as set forth on Schedule 3.01(a), Pacific
does not own or control any Affiliate (as defined in Section 12.08(A) hereof)
other than the Pacific Subsidiaries. True and complete copies of the Articles of
Incorporation and Bylaws of Pacific and the Pacific Subsidiaries (other than the
Subsidiary Banks), as amended to date, certified by the Secretary of Pacific and
each Pacific Subsidiary, as applicable, have been delivered to SBB.
(b) Each of the Subsidiary Banks is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America, and in good standing under all laws, rules, and regulations
applicable to national banking associations located in the State of California.
Each of the Subsidiary Banks has all requisite corporate power and authority
(including all licenses, franchises, permits and other governmental
authorizations as are legally required) to carry on their respective businesses
as now being conducted, to own, lease and operate its properties and assets,
including, but not limited to, as now owned, leased or operated. True and
complete copies of the Articles of Association and Bylaws of each of the
Subsidiary Banks, as amended to date, certified by the Secretary of each
Subsidiary Bank, have been delivered to SBB. Each of the Subsidiary Banks is an
insured bank as defined in the Federal Deposit Insurance Act (the "FDIA").
Neither of the Subsidiary Banks own or control any Affiliate (as defined in
Section 12.08(A) hereof) or Subsidiary (as defined in Section 12.08(B) hereof).
Except for assessability under 12 U.S.C. ss.55, all of the issued and
outstanding shares of capital stock of the Subsidiary Banks are owned by Pacific
free and clear of all liens, encumbrances, rights of first refusal, options or
other restrictions of any nature whatsoever, and all such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights of any person. There are no options, warrants or rights
outstanding to acquire any capital stock of the Subsidiary Banks and no person
or entity has any other right to purchase or acquire any unissued shares of
stock of any of the Subsidiary Banks, nor does any such Subsidiary Bank have any
obligation of any nature with respect to its unissued shares of stock.
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(c) Each of Pacific Subsidiaries, other than the Subsidiary Banks, is a
California corporation duly organized, validly existing and in good standing
under the laws of the State of California, and in good standing under all laws,
rules, and regulations applicable to corporations located in the State of
California. Each such Pacific Subsidiary has all requisite corporate power and
authority (including all licenses, franchises, permits and other governmental
authorizations as are legally required) to carry on their respective businesses
as now being conducted, to own, lease and operate its properties and assets,
including, but not limited to, as now owned, leased or operated. All of the
issued and outstanding shares of capital stock of each such Pacific Subsidiary
is owned by Pacific free and clear of all liens, encumbrances, rights of first
refusal, options or other restrictions of any nature whatsoever, and all such
shares are duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights of any person. There are no options, warrants or
rights outstanding to acquire any capital stock of the Pacific Subsidiaries and
no person or entity has any other right to purchase or acquire any unissued
shares of stock of any of the Pacific Subsidiaries, nor does any such Pacific
Subsidiary have any obligation of any nature with respect to its unissued shares
of stock.
(d) Except as required by the National Bank Act, the nature of the
business of Pacific and the Pacific Subsidiaries does not require any of them to
be licensed or qualified to do business in any jurisdiction other than the State
of California. Except as disclosed on Schedule 3.01(d), neither Pacific nor the
Pacific Subsidiaries have any equity interest, direct or indirect, in any other
bank or corporation or in any partnership, joint venture or other business
enterprise or entity, except as acquired through settlement of indebtedness,
foreclosure, the exercise of creditors' remedies or in a fiduciary capacity, and
the business carried on by Pacific and the Pacific Subsidiaries has not been
conducted through any other direct or indirect Subsidiary or Affiliate of
Pacific or the Pacific Subsidiaries.
(e) Neither Pacific nor any of Pacific Subsidiaries that is neither a
bank, a bank operating subsidiary or a bank service corporation, directly or
indirectly, engages in any activity prohibited by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"). Without limiting the generality
of the foregoing, any equity investment of Pacific and each Pacific Subsidiary
that is not a bank, a bank operating subsidiary or a bank service corporation,
is not prohibited by the Federal Reserve.
(f) Neither of the Subsidiary Banks, directly or indirectly, engages in
any activity prohibited by the OCC.
SECTION 3.02 Execution and Delivery. Pacific has taken all corporate
action necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party, including, but not limited to, the Merger Agreement. This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not limited to, the Merger Agreement, have been or at Closing will be, duly
executed by Pacific and each constitutes and will constitute the legal, valid
and binding obligation of Pacific, enforceable in accordance with its respective
terms and conditions, except as enforceability may be limited by bankruptcy,
conservatorship, insolvency, moratorium, reorganization, receivership or similar
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laws and judicial decisions affecting the rights of creditors generally and by
general principles of equity (whether applied in a proceeding at law or in
equity).
SECTION 3.03 Capitalization. The entire authorized capital stock of
Pacific consists of (i) 20,000,000 shares of Pacific Common Stock, 4,503,945
shares of which are fully paid, validly issued, nonassessable and outstanding,
and 321,376 additional shares of which have been reserved for issuance to
holders of outstanding Pacific Stock Options (as defined in Section 6.17
hereto), and (ii) 20,000,000 shares of preferred stock, no par value per share
(the "Pacific Preferred Stock"), of which no shares of Pacific Preferred Stock
are issued or outstanding. Schedule 3.03 contains a list of each of the Pacific
Stock Option Plans, including (i) the number of outstanding options with respect
to each Pacific Stock Option Plan, (ii) the weighted average exercise price per
share with respect to each Pacific Stock Option Plan, (iii) a list of all option
holders with respect to each Pacific Stock Option Plan, and (iv) the number of
vested and unvested Pacific Stock Options with respect to each such option
holder in each Pacific Stock Option Plan. All Pacific Stock Options were issued
and, upon issuance in accordance with the terms of the outstanding option
agreements, the shares of Pacific Common Stock shall be issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.03, there
are no (i) other outstanding equity securities of any kind or character,
including but not limited to preferred stock, (ii) outstanding subscriptions,
options, convertible securities, rights, warrants, calls or other agreements or
commitments of any kind issued or granted by, or binding upon, Pacific to
purchase or otherwise acquire any security of or equity interest in Pacific or
(iii) outstanding subscriptions, options, rights, warrants, calls, convertible
securities, irrevocable proxies or other agreements or commitments obligating
Pacific to issue any shares of, restricting the transfer of or otherwise
relating to shares of its capital stock of any class. All of the issued and
outstanding shares of Pacific Common Stock have been duly authorized, validly
issued and are fully paid and nonassessable, and have not been issued in
violation of the preemptive rights of any person. Such shares of Pacific Common
Stock have been issued in full compliance with applicable law. There are no
restrictions applicable to the payment of dividends on the shares of Pacific
Common Stock, except pursuant to applicable laws and regulations, and all
dividends declared prior to the date of this Agreement have been paid.
SECTION 3.04 Compliance with Laws, Permits and Instruments.
(a) Except as set forth in Schedule 3.04, Pacific and the Pacific
Subsidiaries, as applicable, are in compliance with, and are not in default (or
with the giving of notice or the passage of time will be in default) under, or
in violation of, (i) any provision of the Articles of Incorporation or Bylaws of
Pacific or the Pacific Subsidiaries (other than the Subsidiary Banks), (ii) any
provision of the Articles of Association or Bylaws of the Subsidiary Banks (iii)
any material provision of any loan agreement, security or pledge agreement,
mortgage, indenture, lease, contract, agreement or other instrument applicable
to Pacific or the Pacific Subsidiaries or their respective assets, operations,
properties or businesses now conducted or heretofore conducted or (iv) any
permit, concession, grant, franchise, license, authorization, judgment, writ,
injunction, order, decree, award, statute, federal, state or local law,
ordinance, rule or regulation of any court, arbitrator or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality applicable to Pacific, the Pacific Subsidiaries or their
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respective assets, operations, properties or businesses now conducted or
heretofore conducted, which noncompliance or violation would, individually or in
the aggregate, reasonably be anticipated to have a material adverse effect on
the business results of operations, financial condition or (insofar as they can
reasonably be foreseen) prospects of Pacific taken as a whole.
(b) The execution, delivery and (provided the required regulatory and
shareholder approvals are obtained) performance of this Agreement and the other
agreements contemplated hereby, including, but not limited to the Merger
Agreement, and the consummation of the transactions contemplated hereby and
thereby will not conflict with, or result, by itself or with the giving of
notice or the passage of time, in any violation of or default or loss of a
benefit under, (i) any provision of the Articles of Incorporation or Bylaws of
Pacific and the Pacific Subsidiaries (other than the Subsidiary Banks), (ii) any
provision of the Articles of Association or Bylaws of the Subsidiary Banks,
(iii) any material provision of any mortgage, indenture, lease, contract,
agreement or other instrument applicable to Pacific, the Pacific Subsidiaries or
their assets, operations, properties or businesses, or (iv) any permit,
concession, grant, franchise, license, authorization, judgment, writ,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to Pacific, the Pacific Subsidiaries or their assets, operations,
properties or businesses.
SECTION 3.05 Financial Statements.
(a) Pacific has furnished to SBB true and complete copies of (i) the
audited consolidated balance sheets of Pacific as of December 31, 1996 and 1997,
and the related audited consolidated statements of income, stockholders' equity
and cash flows for the years ended December 31, 1995, 1996 and 1997, (ii) an
unaudited consolidated balance sheet of Pacific as of March 31, 1998, and the
related unaudited consolidated statement of income for the three-month period
ended March 31, 1998 (such balance sheets and the related statements of income,
stockholders' equity and cash flows are collectively referred to herein as the
"Pacific Financial Statements"). Except as described in the notes to the Pacific
Financial Statements, the Pacific Financial Statements fairly present, in all
material respects, the consolidated financial position of Pacific as of the
respective dates thereof and the results of operations and changes in financial
position of Pacific for the periods then ended, in conformity with generally
accepted accounting principles ("GAAP"), applied on a basis consistent with
prior periods (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and the fact that they do not contain
all of the footnote disclosures required by GAAP), except as otherwise noted
therein, and the accounting records underlying the Pacific Financial Statements
accurately and fairly reflect in all material respects the transactions of
Pacific. The Pacific Financial Statements do not contain any items of
extraordinary or nonrecurring income or any other income not earned in the
ordinary course of business except as expressly specified therein.
(b) Pacific has furnished, or has caused the Subsidiary Banks to
furnish, to SBB with true and complete copies of the Report of Condition and
Income ("Call Reports") for each of the Subsidiary Banks for the periods ended
December 31, 1996, December 31, 1997 and March 31, 1998. Such Call Reports
fairly presents, in all material respects, the financial position of the
Subsidiary Banks and the results of their operations at the dates and for the
periods indicated in conformity with the Instructions for the Preparation of
Call Reports as promulgated by applicable regulatory authorities. The Call
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Reports do not contain any items of special or nonrecurring income or any other
income not earned in the ordinary course of business except as expressly
specified therein. Each of the Subsidiary Banks has calculated its allowance for
loan losses in accordance with GAAP, which includes regulatory accounting
principles ("RAP") where applicable, as applied to banking institutions and in
accordance with all applicable rules and regulations. To the best knowledge of
Pacific, the allowance for loan losses account for each of the Subsidiary Banks
is, and as of the Closing Date will be, adequate in all material respects to
provide for all losses, net of recoveries relating to loans previously charged
off, on all outstanding loans of each such Subsidiary Bank.
SECTION 3.06 Undisclosed Liabilities. Neither Pacific nor any of the
Pacific Subsidiaries has any material liability or obligation, accrued,
absolute, contingent or otherwise and whether due or to become due (including,
without limitation, unfunded obligations under any service recognition or
severance agreement, whether written or oral, or Pacific Employee Plans (as
defined in Section 3.32 hereof) or material liabilities for federal, state or
local taxes or assessments or material liabilities under any agreement that are
not reflected in or disclosed in the Pacific Financial Statements, except (i)
those liabilities and expenses incurred in the ordinary course of business and
consistent with prudent business practices since the date of the Pacific
Financial Statements or (ii) as disclosed on Schedule 3.06.
SECTION 3.07 Litigation. Except as set forth on Schedule 3.07, there
are no actions, claims, suits, investigations, reviews or other legal,
quasi-judicial or administrative proceedings of any kind or nature now pending
or, to the best knowledge of Pacific, threatened against or affecting Pacific,
any of the Pacific Subsidiaries or any of their respective current or former
officers and directors (while acting in such capacity) at law or in equity, or
by or before any federal, state or municipal court or other governmental or
administrative department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that in any manner involves Pacific, the Pacific
Subsidiaries or any of their current or former officers or directors (while
acting in such capacity) or any of their properties or capital stock that would
reasonably be anticipated to result in a Material Adverse Change with respect to
Pacific or materially and adversely affect the transactions contemplated by this
Agreement, and Pacific does not know or have any reason to be aware of any basis
for the same. No legal action, suit or proceeding or judicial, administrative or
governmental investigation is pending or, to the knowledge of Pacific,
threatened against Pacific or any of the Pacific Subsidiaries that questions the
validity of this Agreement or the agreements contemplated hereby, including, but
not limited to, the Merger Agreement, or any actions taken or to be taken by
Pacific pursuant hereto or thereto or seeks to enjoin or otherwise restrain the
transactions contemplated hereby or thereby.
SECTION 3.08 Consents and Approvals. Pacific's Board of Directors (at a
meeting called and duly held) has resolved, subject to its fiduciary duties to
the shareholders of Pacific, to recommend approval and adoption by Pacific's
shareholders of the Merger, this Agreement and the Merger Agreement. Except for
shareholder and regulatory approvals and except as disclosed in Schedule 3.08,
no approval, consent, order or authorization of, or registration, declaration or
filing with, any governmental authority or other third party is required on the
part of Pacific in connection with the execution, delivery or performance of
this Agreement or the agreements contemplated hereby, including, but not limited
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to, the Merger Agreement, or the consummation by Pacific of the transactions
contemplated hereby or thereby.
SECTION 3.09 Title to Assets. Pacific and each of the Pacific
Subsidiaries has good and indefeasible title to all of its assets and properties
including, without limitation, all personal and intangible properties reflected
in the Pacific Financial Statements or acquired subsequent thereto, subject to
no liens, mortgages, security interests, encumbrances or charges of any kind,
except (i) as described in Schedule 3.09, (ii) as noted in the Pacific Financial
Statements, or as set forth in the documents delivered to SBB pursuant to this
Section 3.09, (iii) statutory liens not yet delinquent, (iv) consensual landlord
liens, (v) minor defects and irregularities in title and encumbrances that do
not materially impair the use thereof for the purpose for which they are held,
(vi) pledges of assets in the ordinary course of business to secure public funds
deposits, and (vii) those assets and properties disposed of for fair value in
the ordinary course of business since the dates of the Pacific Financial
Statements. Schedule 3.09 includes a copy of the title policy of insurance with
respect to each parcel of real property owned by Pacific and the Pacific
Subsidiaries.
SECTION 3.10 Absence of Certain Changes or Events. Except as disclosed
on Schedule 3.10, since December 31, 1997, Pacific, including the Pacific
Subsidiaries, has conducted its business only in the ordinary course and has
not, other than in the ordinary course of business and consistent with past
practices and safe and sound banking practices:
A. Incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, which
individually or in the aggregate, has had a material adverse effect on
the business, results of operations, financial condition, or (insofar
as they can reasonably be foreseen) prospects of Pacific and the
Pacific Subsidiaries taken as a whole, except for deposits taken and
federal funds purchased and current liabilities for trade or business
obligations;
B. Discharged or satisfied any lien, charge or encumbrance or
paid any obligation or liability, whether absolute or contingent, due
or to become due;
C. Declared or made any payment of dividends or other
distribution to its shareholders, or purchased, retired or redeemed, or
obligated itself to purchase, retire or redeem, any of its shares of
capital stock or other securities;
D. Issued, reserved for issuance, granted, sold or authorized
the issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any
kind relating to the issuance thereto;
E. Acquired any capital stock or other equity securities or
acquired any equity or ownership interest in any bank, corporation,
partnership or other entity (except (i) through settlement of
indebtedness, foreclosure, or the exercise of creditors' remedies or
(ii) in a fiduciary capacity, the ownership of which does not expose it
to any liability from the business, operations or liabilities of such
person);
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F. Mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible except (i) as described in
Schedule 3.09, (ii) statutory liens not yet delinquent, (iii)
consensual landlord liens, (iv) minor defects and irregularities in
title and encumbrances that do not materially impair the use thereof
for the purpose for which they are held, (v) pledges of assets to
secure public funds deposits, and (vi) for those assets and properties
disposed of for fair value since the dates of the Pacific Financial
Statements.
G. Sold, transferred, leased to others or otherwise disposed of
any of its assets or canceled or compromised any debt or claim, or
waived or released any right or claim of material value;
H. Terminated, canceled or surrendered, or received any notice
of or threat of termination or cancellation of any contract, lease or
other agreement or suffered any damage, destruction or loss (whether or
not covered by insurance), which, in any case or in the aggregate,
would have a material adverse effect on the business, results of
operations, financial condition, or (insofar as they can reasonably be
foreseen) prospects of Pacific and the Pacific Subsidiaries taken as a
whole;
I. Disposed of, permitted to lapse, transferred or granted any
rights under, or entered into any settlement regarding the breach or
infringement of, any United States or foreign license or Pacific
Proprietary Right (as defined in Section 3.15 hereof) or modified any
existing rights with respect thereto;
J. Made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance or vacation pay, to or
for the benefit of any of its shareholders, directors, officers,
employees or agents, or entered into any employment or consulting
contract or other agreement with any director, officer or employee or
adopted, amended in any material respect or terminated any pension,
employee welfare, retirement, stock purchase, stock option, stock
appreciation rights, termination, severance, income protection, golden
parachute, savings or profit-sharing plan (including trust agreements
and insurance contracts embodying such plans), any deferred
compensation, or collective bargaining agreement, any group insurance
contract or any other incentive, welfare or employee benefit plan or
agreement maintained by it for the benefit of its directors, employees
or former employees, except (i) compensation adjustments contemplated
within Pacific's 1998 budget and approved in advance by SBB (which
approval shall not be unreasonably withheld), (ii) employee severance
benefits contemplated by Section 12.16 of this Agreement, and (iii)
periodic increases consistent with past practices;
K. Except for improvements or betterments relating to Pacific
Properties (as defined in Section 3.19 hereof), made any capital
expenditures or capital additions or betterments in excess of an
aggregate of $1,000,000;
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L. Instituted, had instituted against it, settled or agreed to
settle any litigation, action or proceeding before any court or
governmental body, other than routine collection suits instituted by it
to collect amounts owed or suits in which the amount in controversy is
less than $100,000;
M. Permitted any change, event or condition that, in any case
or in the aggregate, has caused or may result in a Material Adverse
Change, or any Material Adverse Change in earnings or costs or
relations with its employees, agents, depositors, loan customers,
correspondent banks or suppliers;
N. Except for the transactions contemplated by this Agreement
or as otherwise permitted hereunder, entered into any transaction, or
entered into, modified or amended any contract or commitment;
O. Entered into or given any promise, assurance or guarantee of
the payment, discharge or fulfillment of any undertaking or promise
made by any person, firm or corporation other than letters of credit
issued in the ordinary course of business;
P. Sold, or knowingly disposed of, or otherwise divested itself
of the ownership, possession, custody or control, of any corporate
books or records of any nature that, in accordance with sound business
practice, normally are retained for a period of time after their use,
creation or receipt, except at the end of the normal retention period;
Q. Made any, or acquiesced with any, change in any accounting
methods, principles or material practices, except as required by GAAP
or RAP;
R. Sold (provided, however, that payment at maturity is not
deemed a sale) any investment securities in a single transaction
involving a book gain or loss of more than $100,000 on such sale or
purchased any investment securities, other than purchases of U.S.
Treasury securities with a maturity of two years or less;
S. Made, renewed, extended the maturity of, or altered any of
the material terms of any criticized loan to any single borrower and
his related interests without regard to whether such transaction was in
the ordinary course of business or whether it was consistent with past
or safe and sound banking practices; or
T. Entered into any agreement or made any commitment whether in
writing or otherwise to take any of the types of action described in
subsections A. through S. above.
SECTION 3.11 Leases, Contracts and Agreements. Schedule 3.11 sets forth
a complete listing of all leases, subleases, licenses, contracts and agreements
to which Pacific, including any of the Pacific Subsidiaries, is a party (the
"Pacific Contracts"), and which (i) relate to real property used by Pacific in
its operation, (ii) involve payments to or by Pacific in excess of $100,000
during the term of such Pacific Contracts (exclusive of unfunded loan
commitments and letters of credit issued by Pacific), or (iii) involve any
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unfunded loan commitments and letters of credit issued by Pacific where the
borrower's total direct and indirect indebtedness to Pacific is in excess of
$2,000,000. True and correct copies of all such Pacific Contracts (other than
unfunded loan commitments and letters of credit issued by Pacific) are included
with Schedule 3.11. For the purposes of this Agreement, the Pacific Contracts
shall be deemed not to include loans made by, Federal funds sold or purchased
by, repurchase agreements made by, spot foreign exchange transactions of,
bankers acceptances of or deposits by Pacific. Except as set forth in Schedule
3.11, no participations or loans have been sold which have buy back, recourse or
guaranty provisions which create contingent or direct liabilities of Pacific. To
the knowledge of Pacific, all of the Pacific Contracts are legal, valid and
binding obligations of the parties to the Pacific Contracts enforceable in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and to general equitable principles, and are in full force and effect.
Except as described in Schedule 3.11, all rent and other payments by Pacific and
any Pacific Subsidiary under the Pacific Contracts are current, there are no
existing defaults by Pacific or any Pacific Subsidiary under the Pacific
Contracts and no termination, condition or other event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default. Pacific and each Pacific Subsidiary
has a good and indefeasible leasehold interest in each parcel of real property
leased by it free and clear of all mortgages, pledges, liens, encumbrances and
security interests.
SECTION 3.12 Taxes. Pacific has duly and timely filed with the
appropriate Federal, state and local governmental agencies all tax returns and
reports required to be filed, including, without limitation, income, excise,
property, sales, use, franchise, value added, unemployment, employees' income
withholding and social security taxes, imposed by the United States or by any
foreign country or by any state, municipality, subdivision or instrumentality of
the United States or of any foreign country, or by any other taxing authority,
and has paid, or has established adequate reserves for the payment of, all taxes
and assessments that are or are claimed to be due, payable or owed by Pacific,
or for which Pacific may have liability, whether as a result of its own
activities or by virtue of its affiliation with other entities and all interest
and penalties thereon, whether disputed or not. All such tax returns and reports
are accurately prepared and all deposits required by law to be made by Pacific
with respect to employees' withholding taxes have been duly made. Pacific is not
and has not been delinquent in the payment of any foreign or domestic tax,
assessment or governmental charge or deposit and has no tax deficiency or claim
outstanding, proposed or assessed against it, and, to Pacific's knowledge, there
is no basis for any such deficiency or claim. Except as set forth in Schedule
3.12, within the last six (6) years, Pacific's Federal income tax return has not
been audited or examined and no such audit is currently pending or, to Pacific's
knowledge, threatened. Pacific has not been granted any extension of time with
respect to the date on which any tax return not yet filed was or is due to be
filed by or with respect to Pacific or any waiver or agreement by Pacific for
the extension of time for the assessment or collection of any tax. Except as set
forth in Schedule 3.12, Pacific (i) within the past six (6) years, has not
committed any violation of any applicable Federal, state, local or foreign tax
laws, and (ii) with respect to all prior years, has not committed any violation
of any applicable Federal, state, local or foreign tax laws that is likely to
result in a Material Adverse Change with respect to Pacific.
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The amounts set up as provisions for current or deferred taxes on the
Pacific Financial Statements are sufficient in all material respects for the
payment of all unpaid Federal, state, county, local, foreign or other taxes
(including any interest or penalties) of or on behalf of Pacific applicable to
the periods covered by the Pacific Financial Statements, and all years and
periods prior thereto. True and complete copies of the Federal income tax
returns of Pacific as filed with the Internal Revenue Service (the "IRS") for
the years ended December 31, 1995, 1996, and 1997, have been delivered to SBB.
SECTION 3.13 Insurance. Schedule 3.13 contains an accurate and complete
list and brief description of all policies of insurance, including fidelity and
bond insurance, of Pacific, including the Pacific Subsidiaries. All such
policies (a) are valid, outstanding and enforceable except as enforceability may
be limited by bankruptcy, conservatorship, insolvency, moratorium,
reorganization, receivership, or similar laws and judicial decisions affecting
the rights of creditors generally and by general principles of equity (whether
applied in a proceeding at law or equity), (b) will not in any significant
respect be affected by, and will not terminate or lapse by reason of, the
transactions contemplated by this Agreement, and (c) are presently in full force
and effect, no notice has been received of the cancellation, or threatened or
proposed cancellation, of any such policy and there are no unpaid premiums due
thereon. Pacific, including the Pacific Subsidiaries, is not in default with
respect to the provisions of any such policy and has not failed to give any
notice or present any claim thereunder in a due and timely fashion. Except as
set forth on Schedule 3.13, neither Pacific nor any of the Pacific Subsidiaries
has been refused any insurance with respect to its assets or operations, nor has
its insurance been limited by any insurance carrier to which Pacific and the
Pacific Subsidiaries has applied for any such insurance within the last two (2)
years. Each property of Pacific, including the Pacific Subsidiaries, is insured
for the benefit of Pacific in amounts deemed adequate by Pacific's management
against risks customarily insured against. There have been no claims under any
fidelity bonds of Pacific or any of the Pacific Subsidiaries within the last
three (3) years, and Pacific is not aware of any facts that would form the basis
of a claim under such bonds.
SECTION 3.14 No Adverse Change. Except as disclosed in the Schedules to
this Agreement or in the representations and warranties made in this Article
III, there has not been any Material Adverse Change since December 31, 1997, nor
has any event or condition occurred that has resulted in, or has a reasonable
possibility of resulting in the future, in a Material Adverse Change with
respect to Pacific.
SECTION 3.15 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 3.15, Pacific and the Pacific Subsidiaries do not own or require the
use of any patent, patent application, patent right, invention, process,
trademark (whether registered or unregistered), trademark application, trademark
right, trade name, service name, service mark, copyright or any trade secret
("Pacific Proprietary Rights") for their respective businesses or operations,
except for licensed computer software. To the knowledge of Pacific, neither
Pacific nor any of the Pacific Subsidiaries are infringing upon or otherwise
acting adversely to any Pacific Proprietary Right owned by any other person or
persons. There is no claim or action by any such person pending, or, to the
knowledge of Pacific, threatened, with respect thereto.
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SECTION 3.16 Transactions with Certain Persons and Entities. Except as
disclosed in Schedule 3.16, neither Pacific nor any of the Pacific Subsidiaries
owe any amount to (excluding deposit liabilities), or have any loan (excluding
loans to participants from the Pacific Capital 401(k) Plan), contract, lease,
commitment or other obligation from or to any of the respective present or
former directors or executive officers (other than compensation for current
services not yet due and payable and reimbursement of expenses arising in the
ordinary course of business) of Pacific and the Pacific Subsidiaries, and none
of such persons owes any amount to Pacific or the Pacific Subsidiaries. Except
as set forth in Schedule 3.16, there are no understandings, agreements (whether
written or oral), instruments, commitments, perquisites, extensions of credit,
tax sharing or allocation agreements or other contractual agreements of any kind
between or among Pacific and the Pacific Subsidiaries, whether on its own behalf
or in its capacity as trustee or custodian for the funds of any employee benefit
plan (as defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), and any present or former officers or directors of Pacific
or the Pacific Subsidiaries. True and correct copies of any such written
understandings, agreements, instruments, etc., are included with Schedule 3.16.
SECTION 3.17 Evidences of Indebtedness. All evidences of indebtedness
and leases that are reflected as assets of Pacific and the Pacific Subsidiaries
are, to Pacific's best knowledge, legal, valid and binding obligations of the
respective obligors thereof, enforceable in accordance with their respective
terms (except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors generally and the availability
of injunctive relief, specific performance and other equitable remedies) and are
not subject to any known or threatened defenses, offsets or counterclaims that
may be asserted against Pacific, the Pacific Subsidiaries or the present holder
thereof, except as disclosed in Schedule 3.17. The credit files of Pacific,
including the Pacific Subsidiaries, contain all material information (excluding
general, local or national industry, economic or similar conditions) known to
Pacific that is reasonably required to evaluate in accordance with generally
prevailing practices in the banking industry the collectibility of the loan
portfolio of Pacific (including loans that will be outstanding if any of them
advances funds they are obligated to advance). Pacific has disclosed all of the
substandard, doubtful, loss, nonperforming or loans identified as problem loans
on the internal watch list of each of the Subsidiary Banks, a copy of which as
of May 31, 1998, has been provided to SBB. Except as disclosed in Schedule 3.17,
Pacific is not aware of, nor has Pacific received notice of, any past or present
conditions, events, activities, practices or incidents that may result in a
violation of any Environmental Law (as defined in Section 12.08(D) hereof) with
respect to any real property securing any indebtedness reflected as an asset of
Pacific or any Pacific Subsidiary.
SECTION 3.18 Condition of Assets. All tangible assets used by Pacific,
including the Pacific Subsidiaries, are in good operating condition, ordinary
wear and tear excepted, and conform with all applicable ordinances, regulations,
zoning and other laws, whether Federal, state or local. None of Pacific's or the
Pacific Subsidiaries' premises or equipment are in need of maintenance or
repairs other than ordinary routine maintenance and repairs that are not
material in nature or cost.
SECTION 3.19 Environmental Compliance.
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(a) Pacific is not aware of, nor has Pacific received notice of, any
past or present conditions, events, activities, practices or incidents that are
in violation of Environmental Laws (as defined in Section 12.08(D) hereof) or
that may interfere with or prevent Pacific's continued compliance in all
respects with all Environmental Laws.
(b) Pacific and the Pacific Subsidiaries have obtained all permits,
licenses and authorizations that are required under any Environmental Laws.
(c) To Pacific's knowledge, no Hazardous Materials (as defined in
Section 12.08(E) hereof) exist on, about, or within any of the Pacific
Properties (as defined in this Section 3.19), nor, to Pacific's knowledge, have
any Hazardous Materials previously existed on, about or within or been used,
generated, stored, transported, disposed of, on or released from any of the
Pacific Properties in violation of any Environmental Law. The use that Pacific,
including the Pacific Subsidiaries, makes and intends to make of the Pacific
Properties will not result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Material on, in or from any
of the Pacific Properties in violation of any Environmental Law.
(d) There is no action, suit, proceeding, investigation or inquiry
before any court, administrative agency or other governmental authority pending
or, to Pacific's knowledge, threatened against Pacific or any Pacific Subsidiary
relating in any way to any Environmental Law. To the best of Pacific's
knowledge, neither Pacific nor any Pacific Subsidiary has any liability for
remedial action under any Environmental Law. Pacific has not received any
request for information by any governmental authority with respect to the
condition, use or operation of any of the Pacific Properties nor has Pacific
received any notice of any kind from any governmental authority or other person
with respect to any violation of or claimed or potential liability of any kind
under any Environmental Law (including, without limitation, any letter, notice
or inquiry from any person or governmental entity informing Pacific that it is
or may be liable in any way under any Environmental Law, or requesting
information to enable such a determination to be made).
(e) As used in this Section 3.19, the term "Pacific Property" or
"Pacific Properties" shall include all real property currently owned or leased
by Pacific or any of the Pacific Subsidiaries, including, but not limited to,
properties that Pacific or any Pacific Subsidiary has foreclosed on as well as
the Subsidiary Banks' respective banking premises and all improvements and
fixtures thereon. The phrase "to Pacific's knowledge" or similar phrases as used
in this Section 3.19 shall mean the current actual knowledge of executive
management of Pacific.
SECTION 3.20 Regulatory Compliance. All reports, records,
registrations, statements, notices and other documents or information required
to be filed by Pacific and the Pacific Subsidiaries during the last two (2)
years with any federal or state regulatory authority including, without
limitation, the Federal Reserve, the OCC, the FDIC and the IRS have been duly
and timely filed and all information and data contained in such reports, records
or other documents are true, accurate, correct and complete. Except as disclosed
on Schedule 3.20, Pacific and the Pacific Subsidiaries are not now nor have
been, within the past six (6) years subject to any memorandum of understanding,
cease and desist order, written agreement or other formal administrative action
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with any such regulatory bodies. Pacific does not believe any such regulatory
bodies have any present intent to place Pacific or the Pacific Subsidiaries
under any new administrative action. Except as set forth on Schedule 3.20, there
are no actions or proceedings pending or threatened against Pacific or any
Pacific Subsidiary by or before any such regulatory bodies or any other nation,
state or subdivision thereof, or any other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
SECTION 3.21 Securities and Exchange Commission Reports. Pacific has
previously made available to SBB an accurate and complete copy of each (a) final
registration statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1995 by Pacific with the Securities and
Exchange Commission (the "S.E.C.") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and prior to the date hereof (the "Pacific
Reports"), and (b) communication mailed by Pacific to its shareholders since
January 1, 1995 and prior to the date hereof, and no such registration
statement, prospectus, report, schedule, proxy statement or communication
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be deemed to modify
information as of an earlier date. Since January 1, 1995, Pacific has timely
filed all Pacific Reports and other documents required to be filed by it under
the Securities Act and the Exchange Act, and, as of their respective dates, all
Pacific Reports complied in all material respects with the published rules and
regulations of the S.E.C. with respect thereto.
SECTION 3.22 Absence of Certain Business Practices. Except as set forth
on Schedule 3.22, neither Pacific, any of the Pacific Subsidiaries nor any
officer, employee or agent of Pacific or the Pacific Subsidiaries, nor any other
person acting on their behalf, has, directly or indirectly, within the past ten
(10) years, given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other person who is or may be in a position
to help or hinder the business of Pacific as a whole (or assist Pacific in
connection with any actual or proposed transaction) that (i) would subject
Pacific or any of the Pacific Subsidiaries to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, would have resulted in a Material Adverse Change with respect to
Pacific, or (iii) if not continued in the future would result in a Material
Adverse Change with respect to Pacific or would subject Pacific to suit or
penalty in any private or governmental litigation or proceeding.
SECTION 3.23 Registration Statement; Joint Proxy Statement/Prospectus.
None of the information supplied or to be supplied by Pacific or any of its
directors, officers, employees or agents for inclusion in the Registration
Statement (as defined in Section 5.03(c)) or the Joint Proxy
Statement/Prospectus (as defined in Section 5.03(c)), or any amendment thereof
or supplement thereto, will be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or at the time of the Pacific Shareholders' Meeting and the SBB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
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Pacific Shareholders' Meeting and the SBB Shareholders' Meeting. All documents
that Pacific is responsible for filing with any regulatory or governmental
agency in connection with the Merger will comply in all material respects with
the provisions of applicable law.
SECTION 3.24 Dissenting Shareholders. Except as set forth on Schedule
3.24, Pacific has no knowledge of any plan or intention on the part of any of
the shareholders of Pacific to make written demand for payment of the fair value
of their shares of Pacific Common Stock in the manner provided by applicable
law.
SECTION 3.25 Pooling of Interests. As of the date of this Agreement,
Pacific has no reason to believe that the Merger will not qualify as a "pooling
of interests" for accounting purposes.
SECTION 3.26 Books and Records. The minute books, stock certificate
books and stock transfer ledgers of Pacific and the Pacific Subsidiaries (i)
have been kept accurately in the ordinary course of business, (ii) are complete
and correct in all material respects, (iii) reflect transactions representing
bona fide transactions, and (iv) do not fail to reflect transactions involving
the business of Pacific or the Pacific Subsidiaries that were required to have
been set forth therein and that have not been accurately so set forth.
SECTION 3.27 Forms of Instruments, Etc. Pacific will make available to
SBB upon written request copies of all standard forms of notes, mortgages, deeds
of trust and other routine documents of a like nature used on a regular and
recurring basis by Pacific and the Pacific Subsidiaries in the ordinary course
of their businesses.
SECTION 3.28 Fiduciary Responsibilities. Except as disclosed in
Schedule 3.28, Pacific and the Subsidiary Banks have performed in all material
respects all of their duties as a trustee, custodian, guardian or as an escrow
agent in a manner that complies in all material respects with all applicable
laws, regulations, orders, agreements, instruments and common law standards.
SECTION 3.29 Guaranties. None of the obligations or liabilities of
Pacific or the Pacific Subsidiaries are guaranteed by any other person, firm or
corporation, nor is any outstanding obligation or liability of any other person,
firm or corporation guaranteed by Pacific or the Pacific Subsidiaries, except in
the ordinary course of business, according to prudent business practices and in
compliance with applicable law.
SECTION 3.30 Voting Trust or Buy-Sell Agreements. Pacific is not aware
of any agreement between or among any of its shareholders relating to a right of
first refusal with respect to the purchase or sale by any such shareholder of
capital stock of Pacific or any voting agreement or voting trust with respect to
shares of capital stock of Pacific (other than that contemplated by Section
5.20).
SECTION 3.31 Employee Relationships. Pacific and the Pacific
Subsidiaries (including their respective officers and directors while acting in
such capacities) have complied in all material respects with all applicable laws
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relating to its relationships with its employees, and Pacific believes that the
relationships between Pacific, including the Pacific Subsidiaries (including
their respective officers and directors while acting in such capacities), and
its employees are good. To the knowledge of Pacific, no key executive officer or
manager of any of the operations operated by Pacific and the Pacific
Subsidiaries or any group of employees of Pacific and the Pacific Subsidiaries
have any present plans to terminate their employment with Pacific or any Pacific
Subsidiary. Neither Pacific nor any of the Pacific Subsidiaries is a party to
any oral or written contracts or agreements granting benefits or rights to
employees or any collective bargaining agreement or to any conciliation
agreement with the Department of Labor, the Equal Employment Opportunity
Commission or any federal, state or local agency that requires equal employment
opportunities or affirmative action in employment. There are no unfair labor
practice complaints pending against Pacific, including any of the Pacific
Subsidiaries, before the National Labor Relations Board and no similar claims
pending before any similar state, local or foreign agency. There is no activity
or proceeding of any labor organization (or representative thereof) or employee
group to organize any employees of Pacific, including any Pacific Subsidiary,
nor of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by
or with respect to any such employees. Pacific and the Pacific Subsidiaries are
in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and neither Pacific nor any of the Pacific Subsidiaries are
engaged in any unfair labor practice.
SECTION 3.32 Employee Benefit Plans.
(a) Set forth on Schedule 3.32(a) is a complete and correct list of all
"employee benefit plans" (as defined in ERISA), all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus, incentive,
compensation, deferred compensation, profit sharing, stock option, stock
appreciation right, stock bonus, stock purchase, employee stock ownership,
savings, severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan or any other
similar plan, agreement, policy or understanding (whether written or oral,
qualified or nonqualified, currently effective or terminated), and any trust,
escrow or other agreement related thereto, which (a) is maintained or
contributed to by Pacific or any Pacific Subsidiary, or with respect to which
Pacific and the Pacific Subsidiaries has any liability, and (b) provides
benefits, or describes policies or procedures applicable to any officer,
employee, service provider, former officer or former employee of Pacific or any
Pacific Subsidiary, or the dependents of any such person, regardless of whether
funded (the "Pacific Employee Plans").
(b) No Pacific Employee Plan is a defined benefit plan within the
meaning of section 3(35) of ERISA. Pacific has delivered or made available to
SBB true, accurate and complete copies of the documents comprising each Pacific
Employee Plan, and such other documents, records or other materials related
thereto reasonably requested by SBB. To the best knowledge of Pacific, there
have been no prohibited transactions, breaches of fiduciary duty or any other
breaches or violations of any law applicable to the Pacific Employee Plans that
would subject SBB or Pacific to any liabilities. Each Pacific Employee Plan
intended to be qualified under section 401(a) of the Code has a current
favorable determination letter and, to the best knowledge of Pacific, has been
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operated in compliance with applicable law and in accordance with its terms.
However, Pacific has a ruling request pending with the Internal Revenue Service
that compensation elected to be deferred by employees pursuant to the "Executive
Compensation Deferral Plan" and the transfer and retention of those sums
deferred to the "Executive Compensation Deferral Trust" will result in no
current inclusion of the income to those employees or their beneficiaries
pursuant to Sections 83, 451 or 402(b) of the Code. There are no pending claims,
lawsuits or actions relating to any Pacific Employee Plan (other than ordinary
course claims for benefits) and, to the best knowledge of Pacific, none are
threatened. No written or oral representations have been made to any employee or
former employee of Pacific or the Pacific Subsidiaries promising or guaranteeing
any employer payment or funding for the continuation of medical, dental, life or
disability coverage for any period of time beyond the end of the current plan
year (except to the extent of coverage required under section 4980B of the
Code). Compliance with FAS 106 will not create any material change to the
Pacific Financial Statements. Except as required in connection with qualified
plan amendments required by tax law changes and except for those plans
identified on Schedule 3.32(b), the consummation of the transactions
contemplated by this Agreement will not accelerate the time of payment or
vesting, or increase the amount, of compensation due to any employee, officer,
former employee or former officer of Pacific or any Pacific Subsidiary.
(c) With respect to each "employee benefit plan" (as defined in ERISA)
maintained or contributed to or required to be contributed to, currently or in
the past, by any trade or business with which Pacific is required by any of the
rules contained in the Code or ERISA to be treated as a single employer (the
"Controlled Group Plans"):
(i) To the knowledge of Pacific, all Controlled Group Plans
that are "group health plans" (as defined in the Code and ERISA) have
been operated up to the Closing in a manner so as to not subject
Pacific to any material liability under Section 4980B of the Code; and
(ii) There is no Controlled Group Plan that is a defined
benefit plan (as defined in Section 3(35) of ERISA), nor has there been
in the last five (5) calendar years.
(iii) There is no Controlled Group Plan that is a "multiple
employer plan" or "multiemployer plan" (as either such term is defined
in ERISA), nor has there been in the last five (5) calendar years.
SECTION 3.33 Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of Pacific or any
Pacific Subsidiary or for the account of a customer of Pacific or any Pacific
Subsidiary, were entered into in the ordinary course of business and, to
Pacific's knowledge, in accordance with prudent banking practice and applicable
rules, regulations and policies of any regulatory authority and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations of Pacific or a Pacific Subsidiary enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in full force and
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effect. Pacific and each Pacific Subsidiary have duly performed in all material
respects all of their material obligations thereunder to the extent that such
obligations to perform have accrued; and, to Pacific's knowledge, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party thereunder.
SECTION 3.34 Year 2000.
(a) To the best of Pacific's knowledge, Pacific and the Subsidiary
Banks are in compliance with those certain guidances and statements issued by
the Federal Financial Institutions Examination Council (the "FFIEC") in
connection with the century date change that will take place on January 1, 2000,
which guidances are dated as of June 1996, May 5, 1997, December 17, 1997, March
17, 1998, April 10, 1998, and May 13, 1998 (together with any subsequent FFIEC
issuances on the Year 2000, the "Interagency Statements"). Pacific and the
Subsidiary Banks have:
(i) Inventoried and assessed the technologies it uses,
particularly its computer hardware and software, to identify potential
problems areas related to the Year 2000;
(ii) Developed and implemented a Year 2000 Plan, including
comprehensive testing plans, to prepare its "mission critical"
information technology to: (a) process date/time data accurately and
without interruption (including, but not limited to, calculating,
comparing, and sequencing) from, into, and between the years 1999 and
2000, and leap year calculations; (b) respond to two-digit year-date
input in a way that resolves the ambiguity as to century in a
disclosed, defined, and predetermined manner; and (c) store and provide
output of date information in ways that are unambiguous as to century;
and
(iii) Commenced the development of, and by September 30, 1998
will have completed the development of, contingency plans to ensure
continuity of business in the event of: (a) failure to complete any
tasks required by the Year 2000 Plan, such as remediation or
validation; or (b) any externally caused business interruption related
to the century date change.
(iv) Taken commercially reasonable steps to investigate and
test the ability of its "mission critical" information technology to
share and exchange date/time data accurately and without interruption
or material delay with its key vendors and suppliers.
(b) If Pacific and the Subsidiary Banks have been examined by federal
or state regulators for Year 2000 readiness, they have not received a rating
that would cause delay or denial of any regulatory approval of this Agreement
and the transactions contemplated hereby.
(c) Pacific's estimate of the out-of-pocket expenses payable to third
parties necessary to complete its consolidated Year 2000 Compliance efforts is
not in excess of $500,000.
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SECTION 3.35 Representations Not Misleading. To Pacific's knowledge,
all material facts relating to the business operations, properties, assets,
liabilities (contingent or otherwise) and financial condition of Pacific and the
Pacific Subsidiaries have been disclosed to SBB in or in connection with this
Agreement. No representation or warranty by Pacific contained in this Agreement,
nor any statement, exhibit or schedule furnished to SBB by Pacific under and
pursuant to, or in anticipation of or in connection with, this Agreement,
contains or will contain on the Closing Date any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which it was or will be made, not misleading and such representations and
warranties would continue to be true and correct following disclosure to any
governmental authority having jurisdiction over Pacific or its properties of the
facts and circumstances upon which they were based. Except as disclosed herein,
there is no matter that materially adversely affects Pacific or Pacific's
ability to perform the transactions contemplated by this Agreement or the other
agreements contemplated hereby, or to the knowledge of Pacific, will in the
future result in a Material Adverse Change with respect to Pacific, other than
general economic conditions. No information material to the Merger and that is
necessary to make the representations and warranties herein contained not
misleading, has been withheld by Pacific.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SBB
SBB hereby makes the representations and warranties set forth in this
Article IV to Pacific.
SECTION 4.01 Organization and Qualification.
(a) SBB is a corporation, duly organized, validly existing under the
laws of the State of California, and in good standing under all laws, rules, and
regulations applicable to corporations located in the State of California. SBB
is a bank holding company registered under the BHCA. SBB has all requisite
corporate power and authority (including all licenses, franchises, permits and
other governmental authorizations as are legally required) to carry on its
business as now being conducted, to own, lease and operate its properties and
assets, including, but not limited to, as now owned, leased or operated and to
enter into and carry out its obligations under this Agreement and the Merger
Agreement. Schedule 4.01(a) sets forth a complete list of each Subsidiary (as
defined in Section 12.08(B)) of SBB (collectively, the "SBB Subsidiaries").
Except as set forth on Schedule 4.01(a), SBB does not own or control any
Affiliate (as defined in Section 12.08(A) hereof) other than the SBB
Subsidiaries, and neither of the SBB Subsidiaries owns or controls any Affiliate
or Subsidiary. True and complete copies of the Articles of Incorporation and
Bylaws of SBB and the SBB Subsidiaries, as amended to date, certified by the
Secretary of SBB and each SBB Subsidiary, as applicable, have been delivered to
Pacific.
(b) SBB&T is a California banking corporation duly organized, validly
existing and in good standing under the laws of the State of California. SBB&T
has all requisite corporate power and authority (including all licenses,
franchises, permits and other governmental authorizations as are legally
required) to carry on its business as now being conducted, to own, lease and
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operate its properties and assets, including, but not limited to, as now owned,
leased or operated. SBB&T is an insured bank as defined in the FDIA. All of the
issued and outstanding shares of capital stock of SBB&T are owned by SBB free
and clear of all liens, encumbrances, rights of first refusal, options or other
restrictions of any nature whatsoever, and all such shares are duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights of any person. There are no options, warrants or rights outstanding to
acquire any capital stock of the SBB&T, and no person or entity has any other
right to purchase or acquire any unissued shares of stock of SBB&T, nor does
SBB&T have any obligation of any nature with respect to its unissued shares of
stock.
(c) Each of the SBB Subsidiaries, other than SBB&T, is a California
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and in good standing under all laws, rules, and
regulations applicable to corporations located in the State of California. Each
such SBB Subsidiary has all requisite corporate power and authority (including
all licenses, franchises, permits and other governmental authorizations as are
legally required) to carry on their respective businesses as now being
conducted, to own, lease and operate its properties and assets, including, but
not limited to, as now owned, leased or operated. All of the issued and
outstanding shares of capital stock of each such SBB Subsidiary is owned by SBB
free and clear of all liens, encumbrances, rights of first refusal, options or
other restrictions of any nature whatsoever, and all such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights of any person. There are no options, warrants or rights
outstanding to acquire any capital stock of the SBB Subsidiaries and no person
or entity has any other right to purchase or acquire any unissued shares of
stock of any of the SBB Subsidiaries, nor does any such SBB Subsidiary have any
obligation of any nature with respect to its unissued shares of stock.
(d) The nature of the business of SBB and the SBB Subsidiaries do not
require any of them to be licensed or qualified to do business in any
jurisdiction other than the State of California. Except as disclosed on Schedule
4.01(d), neither SBB nor any of the SBB Subsidiaries has any equity interest,
direct or indirect, in any other bank or corporation or in any partnership,
joint venture or other business enterprise or entity, except as acquired through
settlement of indebtedness, foreclosure, the exercise of creditors' remedies or
in a fiduciary capacity, and the business carried on by SBB and the SBB
Subsidiaries has not been conducted through any other direct or indirect
Subsidiary or Affiliate of SBB or the SBB Subsidiaries.
(e) Neither SBB nor any of the SBB Subsidiaries that is neither a bank,
a bank operating subsidiary or a bank service corporation, directly or
indirectly, engages in any activity prohibited by the Federal Reserve. Without
limiting the generality of the foregoing, any equity investment of SBB and each
subsidiary that is not a bank, a bank operating subsidiary or a bank service
corporation, is not prohibited by the Federal Reserve.
(f) SBB&T does not, directly or indirectly, engage in any activity
prohibited by the Federal Reserve or the California Commissioner.
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SECTION 4.02 Execution and Delivery. SBB has taken all corporate action
necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party, including, but not limited to, the Merger Agreement. This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not limited to, the Merger Agreement, have been or at Closing will be, duly
executed by SBB and each constitutes the valid and binding obligation of SBB,
enforceable in accordance with its respective terms and conditions, except as
enforceability may be limited by bankruptcy, conservatorship, insolvency,
moratorium, reorganization, receivership or similar laws and judicial decisions
affecting the rights of creditors generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
SECTION 4.03 Capitalization. The entire authorized capital stock of SBB
consists of 40,000,000 shares of SBB Common Stock, 15,397,463 shares of which
are fully paid, validly issued, nonassessable and outstanding, and 1,128,680
additional shares of which have been reserved for issuance to holders of
outstanding stock options to purchase shares of SBB Common Stock. Schedule 4.03
contains a list of each plan administered by SBB or any SBB Subsidiary pursuant
to which options to purchase shares of SBB Common Stock ("SBB Stock Options")
have been or may be granted (the "SBB Stock Option Plans"), including (i) the
number of outstanding options with respect to each SBB Stock Option Plan, (ii)
the weighted average exercise price per share with respect to each SBB Stock
Option Plan, (iii) a list of all option holders with respect to each SBB Stock
Option Plan, and (iv) the number of vested and unvested SBB Stock Options with
respect to each such option holder in each SBB Stock Option Plan. All SBB Stock
Options were issued and, upon issuance in accordance with the terms of the
outstanding option agreements, the shares of SBB Common Stock shall be issued in
compliance with all applicable securities laws. Except as disclosed in Schedule
4.03, there are no (i) other outstanding equity securities of any kind or
character, (ii) outstanding subscriptions, options, convertible securities,
rights, warrants, calls or other agreements or commitments of any kind issued or
granted by, or binding upon, SBB to purchase or otherwise acquire any security
of or equity interest in SBB or (iii) outstanding subscriptions, options,
rights, warrants, calls, convertible securities, irrevocable proxies or other
agreements or commitments obligating SBB to issue any shares of, restricting the
transfer of or otherwise relating to shares of its capital stock of any class.
All of the issued and outstanding shares of SBB Common Stock have been duly
authorized, validly issued and are fully paid and nonassessable, and have not
been issued in violation of the preemptive rights of any person. Such shares of
SBB Common Stock have been issued in full compliance with applicable law. There
are no restrictions applicable to the payment of dividends on the shares of SBB
Common Stock, except pursuant to applicable laws and regulations, and all
dividends declared prior to the date of this Agreement have been paid.
SECTION 4.04 Compliance with Laws, Permits and Instruments.
(a) Except as set forth in Schedule 4.04, SBB and the SBB Subsidiaries,
as applicable, are in compliance with, and are not in default (or with the
giving of notice or the passage of time will be in default) under, or in
violation of, (i) any provision of the Articles of Incorporation or Bylaws of
SBB or any SBB Subsidiary, (ii) any material provision of any loan agreement,
security or pledge agreement, mortgage, indenture, lease, contract, agreement or
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other instrument applicable to SBB or any SBB Subsidiary or their respective
assets, operations, properties or businesses now conducted or heretofore
conducted or (iii) any permit, concession, grant, franchise, license,
authorization, judgment, writ, injunction, order, decree, award, statute,
federal, state or local law, ordinance, rule or regulation of any court,
arbitrator or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality applicable to SBB, the SBB
Subsidiaries or their respective assets, operations, properties or businesses
now conducted or heretofore conducted, which noncompliance or violation would,
individually or in the aggregate, reasonably be anticipated to have a material
adverse effect on the business, results of operations, financial condition, or
(insofar as they can reasonably be foreseen) prospects of SBB taken as a whole.
(b) The execution, delivery and (provided the required regulatory and
shareholder approvals are obtained) performance of this Agreement and the other
agreements contemplated hereby, including but not limited to the Merger
Agreement, and the consummation of the transactions contemplated hereby and
thereby, will not conflict with, or result, by itself or with the giving of
notice or the passage of time, in any violation of or default or loss of a
benefit under, (i) any provision of the Articles of Incorporation or Bylaws of
SBB or any SBB Subsidiary, (ii) any material provision of any mortgage,
indenture, lease, contract, agreement or other instrument applicable to SBB, the
SBB Subsidiaries or their assets, operations, properties or businesses, or (iii)
any permit, concession, grant, franchise, license, authorization, judgment,
writ, injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to SBB, the SBB Subsidiaries or their assets, operations, properties
or businesses.
SECTION 4.05 Financial Statements.
(a) SBB has furnished to Pacific true and complete copies of (i) the
audited consolidated balance sheets of SBB as of December 31, 1996 and 1997, and
the related audited consolidated statements of income, stockholders' equity and
cash flows for the years ended December 31, 1995, 1996 and 1997, (ii) an
unaudited consolidated balance sheet of SBB as of March 31, 1998, and the
related unaudited consolidated statement of income for the three-month period
ended March 31, 1998 (such balance sheets and the related statements of income,
stockholders' equity and cash flows are collectively referred to herein as the
"SBB Financial Statements"). Except as described in the notes to the SBB
Financial Statements, the SBB Financial Statements fairly present, in all
material respects, the consolidated financial position of SBB as of the
respective dates thereof and the results of operations and changes in financial
position of SBB for the periods then ended, in conformity with GAAP, applied on
a basis consistent with prior periods (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and the fact that
they do not contain all of the footnote disclosures required by GAAP), except as
otherwise noted therein, and the accounting records underlying the SBB Financial
Statements accurately and fairly reflect in all material respects the
transactions of SBB. The SBB Financial Statements do not contain any items of
extraordinary or nonrecurring income or any other income not earned in the
ordinary course of business except as expressly specified therein.
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(b) SBB has furnished, or has caused SBB&T to furnish, to Pacific with
true and complete copies of the Call Reports of SBB&T for the periods ended
December 31, 1996, December 31, 1997 and March 31, 1998. Such Call Reports
fairly presents, in all material respects, the financial position of SBB&T and
the results of its operations at the dates and for the periods indicated in
conformity with the Instructions for the Preparation of Call Reports as
promulgated by applicable regulatory authorities. The Call Reports do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business except as expressly specified therein.
SBB&T has calculated its allowance for loan losses in accordance with GAAP,
which includes RAP where applicable, as applied to banking institutions and in
accordance with all applicable rules and regulations. To the best knowledge of
SBB, the allowance for loan losses account for SBB&T is, and as of the Closing
Date will be, adequate in all material respects to provide for all losses, net
of recoveries relating to loans previously charged off, on all outstanding loans
of SBB&T.
SECTION 4.06 Undisclosed Liabilities. Neither SBB nor any of the SBB
Subsidiaries has any material liability or obligation, accrued, absolute,
contingent or otherwise and whether due or to become due (including, without
limitation, unfunded obligations under any service recognition or severance
agreement, whether written or oral, or SBB Employee Plans (as defined in Section
4.31 hereof) or material liabilities for federal, state or local taxes or
assessments or material liabilities under any agreement that are not reflected
in or disclosed in the SBB Financial Statements, except (i) those liabilities
and expenses incurred in the ordinary course of business and consistent with
prudent business practices since the date of the SBB Financial Statements or
(ii) as disclosed on Schedule 4.06.
SECTION 4.07 Litigation. Except as set forth on Schedule 4.07, there
are no actions, claims, suits, investigations, reviews or other legal,
quasi-judicial or administrative proceedings of any kind or nature now pending
or, to the best knowledge of SBB, threatened against or affecting SBB, any of
the SBB Subsidiaries or any of their respective current or former officers and
directors (while acting in such capacity) at law or in equity, or by or before
any federal, state or municipal court or other governmental or administrative
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that in any manner involves SBB, the SBB Subsidiaries or any of their
current or former officers or directors (while acting in such capacity) or any
of their properties or capital stock that would reasonably be anticipated to
result in a Material Adverse Change with respect to SBB, or materially and
adversely affect the transactions contemplated by this Agreement, and SBB does
not know or have any reason to be aware of any basis for the same. No legal
action, suit or proceeding or judicial, administrative or governmental
investigation is pending or, to the knowledge of SBB, threatened against SBB or
any of the SBB Subsidiaries that questions the validity of this Agreement or the
agreements contemplated hereby, including, but not limited to, the Merger
Agreement, or any actions taken or to be taken by SBB pursuant hereto or thereto
or seeks to enjoin or otherwise restrain the transactions contemplated hereby or
thereby.
SECTION 4.08 Consents and Approvals. SBB's Board of Directors (at a
meeting called and duly held) has resolved, subject to its fiduciary duties to
the shareholders of SBB, to recommend approval and adoption by SBB's
shareholders of the Merger, this Agreement and the Merger Agreement. Except for
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shareholder and regulatory approvals and except as disclosed in Schedule 4.08,
no approval, consent, order or authorization of, or registration, declaration or
filing with, any governmental authority or other third party is required on the
part of SBB in connection with the execution, delivery or performance of this
Agreement or the agreements contemplated hereby, including, but not limited to,
the Merger Agreement, or the consummation by SBB of the transactions
contemplated hereby or thereby.
SECTION 4.09 Title to Assets. SBB and each of the SBB Subsidiaries has
good and indefeasible title to all of its assets and properties including,
without limitation, all personal and intangible properties reflected in the SBB
Financial Statements or acquired subsequent thereto, subject to no liens,
mortgages, security interests, encumbrances or charges of any kind, except (i)
as described in Schedule 4.09, (ii) as noted in the SBB Financial Statements,
(iii) statutory liens not yet delinquent, (iv) consensual landlord liens, (v)
minor defects and irregularities in title and encumbrances that do not
materially impair the use thereof for the purpose for which they are held, (vi)
pledges of assets in the ordinary course of business to secure public funds
deposits, and (vii) those assets and properties disposed of for fair value in
the ordinary course of business since the dates of the SBB Financial Statements.
Schedule 4.09 includes a copy of the title policy of insurance with respect to
each parcel of real property owned by SBB and the SBB Subsidiaries.
SECTION 4.10 Absence of Certain Changes or Events. Except as disclosed
on Schedule 4.10, since December 31, 1997, SBB, including the SBB Subsidiaries,
has conducted its business only in the ordinary course and has not, other than
in the ordinary course of business and consistent with past practices and safe
and sound banking practices:
A. Incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, which
individually or in the aggregate, has had a material adverse effect on
the business, results of operations, financial condition, or (insofar
as they can reasonably be foreseen) prospects of SBB and the SBB
Subsidiaries taken as a whole, except for deposits taken and federal
funds purchased and current liabilities for trade or business
obligations;
B. Discharged or satisfied any lien, charge or encumbrance or
paid any obligation or liability, whether absolute or contingent, due
or to become due;
C. Declared or made any payment of dividends or other
distribution to its shareholders, or purchased, retired or redeemed, or
obligated itself to purchase, retire or redeem, any of its shares of
capital stock or other securities;
D. Issued, reserved for issuance, granted, sold or authorized
the issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any
kind relating to the issuance thereto;
E. Acquired any capital stock or other equity securities or
acquired any equity or ownership interest in any bank, corporation,
partnership or other entity (except (i) through settlement of
indebtedness, foreclosure, or the exercise of creditors' remedies or
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(ii) in a fiduciary capacity, the ownership of which does not expose it
to any liability from the business, operations or liabilities of such
person);
F. Mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible except (i) as described in
Schedule 4.09, (ii) statutory liens not yet delinquent, (iii)
consensual landlord liens, (iv) minor defects and irregularities in
title and encumbrances that do not materially impair the use thereof
for the purpose for which they are held, (v) pledges of assets to
secure public funds deposits, and (vi) for those assets and properties
disposed of for fair value since the dates of the SBB Financial
Statements.
G. Sold, transferred, leased to others or otherwise disposed of
any of its assets or canceled or compromised any debt or claim, or
waived or released any right or claim of material value;
H. Terminated, canceled or surrendered, or received any notice
of or threat of termination or cancellation of any contract, lease or
other agreement or suffered any damage, destruction or loss (whether or
not covered by insurance), which, in any case or in the aggregate,
would have a material adverse effect on the business, results of
operations, financial condition, or (insofar as they can reasonably be
foreseen) prospects of SBB and the SBB Subsidiaries taken as a whole;
I. Disposed of, permitted to lapse, transferred or granted any
rights under, or entered into any settlement regarding the breach or
infringement of, any United States or foreign license or SBB
Proprietary Right (as defined in Section 4.15 hereof) or modified any
existing rights with respect thereto;
J. Made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance or vacation pay, to or
for the benefit of any of its shareholders, directors, officers,
employees or agents, or entered into any employment or consulting
contract or other agreement with any director, officer or employee or
adopted, amended in any material respect or terminated any pension,
employee welfare, retirement, stock purchase, stock option, stock
appreciation rights, termination, severance, income protection, golden
parachute, savings or profit-sharing plan (including trust agreements
and insurance contracts embodying such plans), any deferred
compensation, or collective bargaining agreement, any group insurance
contract or any other incentive, welfare or employee benefit plan or
agreement maintained by it for the benefit of its directors, employees
or former employees, except (i) compensation adjustments contemplated
within SBB's 1998 budget and approved in advance by Pacific (which
approval shall not be unreasonably withheld), and (ii) periodic
increases consistent with past practices;
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K. Except for improvements or betterments relating to SBB
Properties (as defined in Section 4.19(e) hereof), made any capital
expenditures or capital additions or betterments in excess of an
aggregate of $4,000,000;
L. Instituted, had instituted against it, settled or agreed to
settle any litigation, action or proceeding before any court or
governmental body, other than routine collection suits instituted by it
to collect amounts owed or suits in which the amount in controversy is
less than $200,000;
M. Permitted any change, event or condition that, in any case
or in the aggregate, has caused or may result in a Material Adverse
Change, or any Material Adverse Change in earnings or costs or
relations with its employees, agents, depositors, loan customers,
correspondent banks or suppliers;
N. Except for the transactions contemplated by this Agreement
or as otherwise permitted hereunder, entered into any transaction, or
entered into, modified or amended any contract or commitment;
O. Entered into or given any promise, assurance or guarantee of
the payment, discharge or fulfillment of any undertaking or promise
made by any person, firm or corporation other than letters of credit
issued in the ordinary course of business;
P. Sold, or knowingly disposed of, or otherwise divested itself
of the ownership, possession, custody or control, of any corporate
books or records of any nature that, in accordance with sound business
practice, normally are retained for a period of time after their use,
creation or receipt, except at the end of the normal retention period;
Q. Made any, or acquiesced with any, change in any accounting
methods, principles or material practices, except as required by GAAP
or RAP;
R. Sold (provided, however, that payment at maturity is not
deemed a sale) any investment securities in a single transaction
involving a book gain or loss of more than $200,000 on such sale or
purchased any investment securities, other than purchases of U.S.
Treasury securities with a maturity of two years or less;
S. Made, renewed, extended the maturity of, or altered any of
the material terms of any criticized loan to any single borrower and
his related interests without regard to whether such transaction was in
the ordinary course of business or whether it was consistent with past
or safe and sound banking practices; or
T. Entered into any agreement or made any commitment whether in
writing or otherwise to take any of the types of action described in
subsections A. through S. above.
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SECTION 4.11 Leases, Contracts and Agreements. Schedule 4.11 sets forth
a complete listing of all leases, subleases, licenses, contracts and agreements
to which SBB, including any of the SBB Subsidiaries, is a party (the "SBB
Contracts"), and which (i) relate to real property used by SBB in its operation,
(ii) involve payments to or by SBB in excess of $200,000 during the term of such
SBB Contracts (exclusive of unfunded loan commitments and letters of credit
issued by SBB), or (iii) involve any unfunded loan commitments and letters of
credit issued by SBB where the borrower's total direct and indirect indebtedness
to SBB is in excess of $4,000,000. True and correct copies of all such SBB
Contracts (other than unfunded loan commitments and letters of credit issued by
SBB) are included with Schedule 4.11. For the purposes of this Agreement, the
SBB Contracts shall be deemed not to include loans made by, Federal funds sold
or purchased by, repurchase agreements made by, spot foreign exchange
transactions of, bankers acceptances of or deposits by SBB. Except as set forth
in Schedule 4.11, no participations or loans have been sold which have buy back,
recourse or guaranty provisions which create contingent or direct liabilities of
SBB. To the knowledge of SBB, all of the leases, subleases, licenses, contracts
and agreements to which SBB or any SBB Subsidiary is a party are legal, valid
and binding obligations of the parties to such contracts enforceable in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and to general equitable principles, and are in full force and effect.
Except as described in Schedule 4.11, all rent and other payments by SBB and any
SBB Subsidiary under such contracts are current, there are no existing defaults
by SBB or any SBB Subsidiary under such contracts, and no termination, condition
or other event has occurred which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute a default.
SBB and each SBB Subsidiary has a good and indefeasible leasehold interest in
each parcel of real property leased by it free and clear of all mortgages,
pledges, liens, encumbrances and security interests.
SECTION 4.12 Taxes. SBB has duly and timely filed with the appropriate
Federal, state and local governmental agencies all tax returns and reports
required to be filed, including, without limitation, income, excise, property,
sales, use, franchise, value added, unemployment, employees' income withholding
and social security taxes, imposed by the United States or by any foreign
country or by any state, municipality, subdivision or instrumentality of the
United States or of any foreign country, or by any other taxing authority, and
has paid, or has established adequate reserves for the payment of, all taxes and
assessments that are or are claimed to be due, payable or owed by SBB, or for
which SBB may have liability, whether as a result of its own activities or by
virtue of its affiliation with other entities and all interest and penalties
thereon, whether disputed or not. All such tax returns and reports are
accurately prepared and all deposits required by law to be made by SBB with
respect to employees' withholding taxes have been duly made. SBB is not and has
not been delinquent in the payment of any foreign or domestic tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and, to SBB's knowledge, there is no basis for
any such deficiency or claim. Except as set forth in Schedule 4.12, within the
last six (6) years, SBB's Federal income tax return has not been audited or
examined and no such audit is currently pending or, to SBB's knowledge,
threatened. SBB has not been granted any extension of time with respect to the
date on which any tax return not yet filed was or is due to be filed by or with
respect to SBB or any waiver or agreement by SBB for the extension of time for
the assessment or collection of any tax. Except as set forth in Schedule 4.12,
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SBB (i) within the past six (6) years, has not committed any violation of any
applicable Federal, state, local or foreign tax laws, and (ii) with respect to
all prior years, has not committed any violation of any applicable Federal,
state, local or foreign tax laws that is likely to result in a Material Adverse
Change with respect to SBB.
The amounts set up as provisions for current or deferred taxes on the
SBB Financial Statements are sufficient in all material respects for the payment
of all unpaid Federal, state, county, local, foreign or other taxes (including
any interest or penalties) of or on behalf of SBB applicable to the periods
covered by the SBB Financial Statements, and all years and periods prior
thereto. True and complete copies of the Federal income tax returns of SBB as
filed with the IRS for the years ended December 31, 1995, 1996, and 1997, have
been delivered to Pacific.
SECTION 4.13 Insurance. Schedule 4.13 contains an accurate and complete
list and brief description of all policies of insurance, including fidelity and
bond insurance, of SBB, including the SBB Subsidiaries. All such policies (a)
are valid, outstanding and enforceable except as enforceability may be limited
by bankruptcy, conservatorship, insolvency, moratorium, reorganization,
receivership, or similar laws and judicial decisions affecting the rights of
creditors generally and by general principles of equity (whether applied in a
proceeding at law or equity), (b) will not in any significant respect be
affected by, and will not terminate or lapse by reason of, the transactions
contemplated by this Agreement, and (c) are presently in full force and effect,
no notice has been received of the cancellation, or threatened or proposed
cancellation, of any such policy and there are no unpaid premiums due thereon.
SBB, including the SBB Subsidiaries, is not in default with respect to the
provisions of any such policy and has not failed to give any notice or present
any claim thereunder in a due and timely fashion. Except as set forth on
Schedule 4.13, neither SBB nor any SBB Subsidiary has been refused any insurance
with respect to its assets or operations, nor has its insurance been limited by
any insurance carrier to which SBB and the SBB Subsidiaries has applied for any
such insurance within the last two (2) years. Each property of SBB, including
the SBB Subsidiaries, is insured for the benefit of SBB in amounts deemed
adequate by SBB's management against risks customarily insured against. There
have been no claims under any fidelity bonds of SBB or any of the SBB
Subsidiaries within the last three (3) years, and SBB is not aware of any facts
that would form the basis of a claim under such bonds.
SECTION 4.14 No Adverse Change. Except as disclosed in the Schedules to
this Agreement or in the representations and warranties made in this Article IV,
there has not been any Material Adverse Change since December 31, 1997, nor has
any event or condition occurred that has resulted in, or has a reasonable
possibility of resulting in the future, in a Material Adverse Change with
respect to SBB.
SECTION 4.15 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 4.15, SBB and the SBB Subsidiaries do not own or require the use of any
patent, patent application, patent right, invention, process, trademark (whether
registered or unregistered), trademark application, trademark right, trade name,
service name, service mark, copyright or any trade secret ("SBB Proprietary
Rights") for their respective businesses or operations, except for licensed
computer software. To the knowledge of SBB, neither SBB nor any of the SBB
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Subsidiaries are infringing upon or otherwise acting adversely to any SBB
Proprietary Right owned by any other person or persons. There is no claim or
action by any such person pending, or, to the knowledge of SBB, threatened, with
respect thereto.
SECTION 4.16 Transactions with Certain Persons and Entities. Except as
disclosed in Schedule 4.16, neither SBB nor any of the SBB Subsidiaries owe any
amount to (excluding deposit liabilities), or have any loan (excluding loans to
participants from the Santa Barbara Bank & Trust 401(k) Plan), contract, lease,
commitment or other obligation from or to any of the present or former directors
or executive officers (other than compensation for current services not yet due
and payable and reimbursement of expenses arising in the ordinary course of
business) of SBB and the SBB Subsidiaries, and none of such persons owes any
amount to SBB or the SBB Subsidiaries. Except as set forth in Schedule 4.16,
there are no understandings, agreements (whether written or oral), instruments,
commitments, perquisites, extensions of credit, tax sharing or allocation
agreements or other contractual agreements of any kind between or among SBB and
the SBB Subsidiaries, whether on its own behalf or in its capacity as trustee or
custodian for the funds of any employee benefit plan (as defined in ERISA) and
any present or former officers or directors of SBB or the SBB Subsidiaries. True
and correct copies of any such written understandings, agreements, instruments,
etc., are included with Schedule 4.16.
SECTION 4.17 Evidences of Indebtedness. All evidences of indebtedness
and leases that are reflected as assets of SBB and the SBB Subsidiaries are, to
SBB's best knowledge, legal, valid and binding obligations of the respective
obligors thereof, enforceable in accordance with their respective terms (except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors generally and the availability of injunctive
relief, specific performance and other equitable remedies) and are not subject
to any known or threatened defenses, offsets or counterclaims that may be
asserted against SBB, the SBB Subsidiaries or the present holder thereof, except
as disclosed in Schedule 4.17. The credit files of SBB, including the SBB
Subsidiaries, contain all material information (excluding general, local or
national industry, economic or similar conditions) known to SBB that is
reasonably required to evaluate in accordance with generally prevailing
practices in the banking industry the collectibility of the loan portfolio of
SBB (including loans that will be outstanding if any of them advances funds they
are obligated to advance). SBB has disclosed all of the substandard, doubtful,
loss, nonperforming or loans identified as problem loans on the internal watch
list of SBB&T, a copy of which as of May 31, 1998, has been provided to Pacific.
Except as disclosed in Schedule 4.17, SBB is not aware of, nor has SBB received
notice of, any past or present conditions, events, activities, practices or
incidents that may result in a violation of any Environmental Law (as defined in
Section 12.08(D) hereof) with respect to any real property securing any
indebtedness reflected as an asset of SBB or any SBB Subsidiary.
SECTION 4.18 Condition of Assets. All tangible assets used by SBB,
including the SBB Subsidiaries, are in good operating condition, ordinary wear
and tear excepted, and conform with all applicable ordinances, regulations,
zoning and other laws, whether Federal, state or local. Except as set forth on
Schedule 4.18, none of SBB's or the SBB Subsidiaries' premises or equipment are
in need of maintenance or repairs other than ordinary routine maintenance and
repairs that are not material in nature or cost.
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SECTION 4.19 Environmental Compliance.
(a) Except as set forth on Schedule 4.19(a), SBB is not aware of, nor
has SBB received notice of, any past or present conditions, events, activities,
practices or incidents that are in violation of Environmental Laws (as defined
in Section 12.08(D) or that may interfere with or prevent SBB's continued
compliance in all respects with all Environmental Laws.
(b) SBB and the SBB Subsidiaries have obtained all permits, licenses
and authorizations that are required under any Environmental Laws.
(c) Except as set forth on Schedule 4.19(c), to SBB's knowledge, no
Hazardous Materials (as defined in Section 12.08(E) hereof) exist on, about, or
within any of the SBB Properties (as defined in this Section 4.19), nor, to
SBB's knowledge, have any Hazardous Materials previously existed on, about or
within or been used, generated, stored, transported, disposed of, on or released
from any of the SBB Properties in violation of any Environmental Law. The use
that SBB, including the SBB Subsidiaries, makes and intends to make of the SBB
Properties will not result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Material on, in or from any
of the SBB Properties in violation of any Environmental Law.
(d) There is no action, suit, proceeding, investigation or inquiry
before any court, administrative agency or other governmental authority pending
or, to SBB's knowledge, threatened against SBB or any SBB Subsidiary relating in
any way to any Environmental Law. To the best of SBB's knowledge, neither SBB
nor any SBB Subsidiary has any liability for remedial action under any
Environmental Law. SBB has not received any request for information by any
governmental authority with respect to the condition, use or operation of any of
the SBB Properties nor has SBB received any notice of any kind from any
governmental authority or other person with respect to any violation of or
claimed or potential liability of any kind under any Environmental Law
(including, without limitation, any letter, notice or inquiry from any person or
governmental entity informing SBB that it is or may be liable in any way under
any Environmental Law, or requesting information to enable such a determination
to be made).
(e) As used in this Section 4.19, the term "SBB Property" or "SBB
Properties" shall include all real property currently owned or leased by SBB or
any of the SBB Subsidiaries, including, but not limited to, properties that SBB
or any SBB Subsidiary has foreclosed on as well as SBB&T's respective banking
premises and all improvements and fixtures thereon. The phrase "to SBB's
knowledge" or similar phrases as used in this Section 4.19 shall mean the
current actual knowledge of executive management of SBB.
SECTION 4.20 Regulatory Compliance. All reports, records,
registrations, statements, notices and other documents or information required
to be filed by SBB and the SBB Subsidiaries during the last two (2) years with
any federal or state regulatory authority including, without limitation, the
Federal Reserve, the FDIC, the California Commissioner and the IRS have been
duly and timely filed and all information and data contained in such reports,
records or other documents are true, accurate, correct and complete. Except as
disclosed on Schedule 4.20, SBB and the SBB Subsidiaries are not now nor have
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been, within the past six (6) years subject to any memorandum of understanding,
cease and desist order, written agreement or other formal administrative action
with any such regulatory bodies. SBB does not believe any such regulatory bodies
have any present intent to place SBB or the SBB Subsidiaries under any new
administrative action. Except as set forth on Schedule 4.20, there are no
actions or proceedings pending or threatened against SBB or any SBB Subsidiary
by or before any such regulatory bodies or any other nation, state or
subdivision thereof, or any other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
SECTION 4.21 Securities and Exchange Commission Reports. SBB has
previously made available to Pacific an accurate and complete copy of each (a)
final registration statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1995 by SBB with the S.E.C. pursuant to the
Securities Act or the Exchange Act, and prior to the date hereof (the "SBB
Reports"), and (b) communication mailed by SBB to its shareholders since January
1, 1995 and prior to the date hereof, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. Since January 1, 1995, SBB has timely filed all SBB
Reports and other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all SBB Reports
complied in all material respects with the published rules and regulations of
the S.E.C. with respect thereto.
SECTION 4.22 Absence of Certain Business Practices. Except as set forth
on Schedule 4.22, neither SBB, the SBB Subsidiaries nor any officer, employee or
agent of SBB or the SBB Subsidiaries, nor any other person acting on their
behalf, has, directly or indirectly, within the past ten (10) years, given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the business of SBB as a whole (or assist SBB in connection with any
actual or proposed transaction) that (i) would subject SBB or any of the SBB
Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, would have resulted in
a Material Adverse Change with respect to SBB, or (iii) if not continued in the
future, would result in a Material Adverse Change with respect to SBB or would
subject SBB to suit or penalty in any private or governmental litigation or
proceeding.
SECTION 4.23 Registration Statement; Joint Proxy Statement/Prospectus.
None of the information supplied or to be supplied by SBB or any of its
directors, officers, employees or agents for inclusion in the Registration
Statement (as defined in Section 5.03(c)) or the Joint Proxy
Statement/Prospectus (as defined in Section 5.03(c)), or any amendment thereof
or supplement thereto, will be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or at the time of the Pacific Shareholders' Meeting and the SBB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
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Pacific Shareholders' Meeting and the SBB Shareholders' Meeting. All documents
that SBB is responsible for filing with any regulatory or governmental agency in
connection with the Merger will comply in all material respects with the
provisions of applicable law.
SECTION 4.24 Pooling of Interests. As of the date of this Agreement,
SBB has no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
SECTION 4.25 Books and Records. The minute books, stock certificate
books and stock transfer ledgers of SBB and the SBB Subsidiaries (i) have been
kept accurately in the ordinary course of business, (ii) are complete and
correct in all material respects, (iii) reflect transactions representing bona
fide transactions, and (iv) do not fail to reflect transactions involving the
business of SBB or the SBB Subsidiaries that were required to have been set
forth therein and that have not been accurately so set forth.
SECTION 4.26 Forms of Instruments, Etc. SBB will make available to
Pacific upon written request copies of all standard forms of notes, mortgages,
deeds of trust and other routine documents of a like nature used on a regular
and recurring basis by SBB and the SBB Subsidiaries in the ordinary course of
their businesses.
SECTION 4.27 Fiduciary Responsibilities. Except as disclosed in
Schedule 4.27, SBB and the SBB Subsidiaries have performed in all material
respects all of their duties as a trustee, custodian, guardian or as an escrow
agent in a manner that complies in all material respects with all applicable
laws, regulations, orders, agreements, instruments and common law standards.
SECTION 4.28 Guaranties. None of the obligations or liabilities of SBB
or the SBB Subsidiaries are guaranteed by any other person, firm or corporation,
nor is any outstanding obligation or liability of any other person, firm or
corporation guaranteed by SBB or the SBB Subsidiaries, except in the ordinary
course of business, according to prudent business practices and in compliance
with applicable law.
SECTION 4.29 Voting Trust or Buy-Sell Agreements. SBB is not aware of
any agreement between or among any of its shareholders relating to a right of
first refusal with respect to the purchase or sale by any such shareholder of
capital stock of SBB or any voting agreement or voting trust with respect to
shares of capital stock of SBB.
SECTION 4.30 Employee Relationships. SBB and the SBB Subsidiaries
(including their respective officers and directors while acting in such
capacities) has complied in all material respects with all applicable laws
relating to its relationships with its employees, and SBB believes that the
relationships between SBB, including the SBB Subsidiaries (including their
respective officers and directors while acting in such capacities) and its
employees are good. To the knowledge of SBB, no key executive officer or manager
of any of the operations operated by SBB and the SBB Subsidiaries or any group
of employees of SBB and the SBB Subsidiaries have any present plans to terminate
their employment with SBB or any SBB Subsidiary. Neither SBB nor any of the SBB
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Subsidiaries is a party to any oral or written contracts or agreements granting
benefits or rights to employees or any collective bargaining agreement or to any
conciliation agreement with the Department of Labor, the Equal Employment
Opportunity Commission or any federal, state or local agency that requires equal
employment opportunities or affirmative action in employment. There are no
unfair labor practice complaints pending against SBB, including any of the SBB
Subsidiaries, before the National Labor Relations Board and no similar claims
pending before any similar state, local or foreign agency. There is no activity
or proceeding of any labor organization (or representative thereof) or employee
group to organize any employees of SBB, including any SBB Subsidiary, nor of any
strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with
respect to any such employees. SBB and the SBB Subsidiaries are in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and neither SBB nor any of the SBB Subsidiaries are engaged in any unfair labor
practice.
SECTION 4.31 Employee Benefit Plans.
(a) Set forth on Schedule 4.31 is a complete and correct list of all
"employee benefit plans" (as defined in ERISA), all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus, incentive,
compensation, deferred compensation, profit sharing, stock option, stock
appreciation right, stock bonus, stock purchase, employee stock ownership,
savings, severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, group insurance,
vacation, holiday, sick leave, fringe benefit or welfare plan or any other
similar plan, agreement, policy or understanding (whether written or oral,
qualified or nonqualified, currently effective or terminated), and any trust,
escrow or other agreement related thereto, which (a) is maintained or
contributed to by SBB or any SBB Subsidiary, or with respect to which SBB and
the SBB Subsidiaries has any liability, and (b) provides benefits, or describes
policies or procedures applicable to any officer, employee, service provider,
former officer or former employee of SBB or any SBB Subsidiary, or the
dependents of any such person, regardless of whether funded (the "SBB Employee
Plans").
(b) No SBB Employee Plan is a defined benefit plan within the meaning
of section 3(35) of ERISA. SBB has delivered or made available to Pacific true,
accurate and complete copies of the documents comprising each SBB Employee Plan,
and such other documents, records or other materials related thereto reasonably
requested by Pacific. To the best knowledge of SBB, there have been no
prohibited transactions, breaches of fiduciary duty or any other breaches or
violations of any law applicable to the SBB Employee Plans that would subject
SBB to any liabilities. Each SBB Employee Plan intended to be qualified under
section 401(a) of the Code has a current favorable determination letter and, to
the best knowledge of SBB, has been operated in compliance with applicable law
and in accordance with its terms. There are no pending claims, lawsuits or
actions relating to any SBB Employee Plan (other than ordinary course claims for
benefits) and, to the best knowledge of SBB, none are threatened. No written or
oral representations have been made to any employee or former employee of SBB or
the SBB Subsidiaries promising or guaranteeing any employer payment or funding
for the continuation of medical, dental, life or disability coverage for any
period of time beyond the end of the current plan year (except to the extent of
coverage required under section 4980B of the Code). SBB is in compliance with
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FAS 106. Except as required in connection with qualified plan amendments
required by tax law changes, the consummation of the transactions contemplated
by this Agreement will not accelerate the time of payment or vesting, or
increase the amount, of compensation due to any employee, officer, former
employee or former officer of SBB or any SBB Subsidiary.
(c) With respect to each "employee benefit plan" (as defined in ERISA)
maintained or contributed to or required to be contributed to, currently or in
the past, by any trade or business with which SBB is required by any of the
rules contained in the Code or ERISA to be treated as a single employer (the
"Controlled Group Plans"):
(i) To the knowledge of SBB, all Controlled Group Plans that are
"group health plans" (as defined in the Code and ERISA) have
been operated to the Closing in a manner so as to not subject
SBB to any material liability under Section 4980B of the Code;
and
(ii) There is no Controlled Group Plan that is a defined benefit
plan (as defined in Section 3(35) of ERISA), nor has there
been in the last five (5) calendar years.
(iii) There is no Controlled Group Plan that is a "multiple employer
plan" or "multiemployer plan" (as either such term is defined
in ERISA), nor has there been in the last five (5) calendar
years.
SECTION 4.32 Interest Rate Risk Management Instruments. All interest
rate swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of SBB or any SBB
Subsidiary or for the account of a customer of SBB or any SBB Subsidiary, were
entered into in the ordinary course of business and, to SBB's knowledge, in
accordance with prudent banking practice and applicable rules, regulations and
policies of any regulatory authority and with counterparties believed to be
financially responsible at the time and are legal, valid and binding obligations
of SBB or an SBB Subsidiary enforceable in accordance with their terms (except
as may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. SBB and each SBB
Subsidiary have duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to perform have
accrued; and, to SBB's knowledge, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
SECTION 4.33 Year 2000.
(a) To the best of SBB's knowledge, SBB and SBB&T are in compliance
with those certain guidances and statements issued by the FFIEC in connection
with the century date change that will take place on January 1, 2000, which
guidances are dated as of June 1996, May 5, 1997, December 17, 1997, March 17,
1998, April 10, 1998, and May 13, 1998 (together with any subsequent FFIEC
issuances on the Year 2000, the "Interagency Statements"). SBB and SBB&T have:
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(i) Inventoried and assessed the technologies it uses,
particularly its computer hardware and software, to identify potential
problems areas related to the Year 2000;
(ii) Developed and implemented a Year 2000 Plan, including
comprehensive testing plans, to prepare its "mission critical"
information technology to: (a) process date/time data accurately and
without interruption (including, but not limited to, calculating,
comparing, and sequencing) from, into, and between the years 1999 and
2000, and leap year calculations; (b) respond to two-digit year-date
input in a way that resolves the ambiguity as to century in a
disclosed, defined, and predetermined manner; and (c) store and provide
output of date information in ways that are unambiguous as to century;
and
(iii) Commenced the development of, and by September 30, 1998
will have completed the development of, contingency plans to ensure
continuity of business in the event of: (a) failure to complete any
tasks required by the Year 2000 Plan, such as remediation or
validation; or (b) any externally caused business interruption related
to the century date change.
(iv) Taken commercially reasonable steps to investigate and
test the ability of its "mission critical" information technology to
share and exchange date/time data accurately and without interruption
or material delay with its key vendors and suppliers.
(b) If SBB and SBB&T have been examined by federal or state regulators
for Year 2000 readiness, neither has received a rating that would cause delay or
denial of any regulatory approval of this Agreement and the transactions
contemplated hereby.
(c) SBB's estimate of the out-of -pocket expenses payable to third
parties to complete its consolidated Year 2000 Compliance efforts is not in
excess of $1,300,000.
SECTION 4.34 Representations Not Misleading. To SBB's knowledge, all
material facts relating to the business operations, properties, assets,
liabilities (contingent or otherwise) and financial condition of SBB and the SBB
Subsidiaries have been disclosed to Pacific in or in connection with this
Agreement. No representation or warranty by SBB contained in this Agreement, nor
any statement, exhibit or schedule furnished to Pacific by SBB under and
pursuant to, or in anticipation of or in connection with, this Agreement,
contains or will contain on the Closing Date any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which it was or will be made, not misleading and such representations and
warranties would continue to be true and correct following disclosure to any
governmental authority having jurisdiction over SBB or its properties of the
facts and circumstances upon which they were based. Except as disclosed herein,
there is no matter that materially adversely affects SBB or SBB's ability to
perform the transactions contemplated by this Agreement or the other agreements
contemplated hereby, or to the knowledge of SBB, will in the future result in a
Material Adverse Change with respect to SBB, other than general economic
conditions. No information material to the Merger and that is necessary to make
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the representations and warranties herein contained not misleading, has been
withheld by SBB.
ARTICLE V.
COVENANTS OF PACIFIC
Pacific hereby makes the covenants set forth in this Article V to SBB.
SECTION 5.01 Best Efforts. Pacific will use its best efforts to perform
and fulfill all conditions and obligations on its part to be performed or
fulfilled under this Agreement and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions of this
Agreement.
SECTION 5.02 Merger Agreement. Pacific will, as soon as practicable
after the execution of this Agreement, duly authorize and enter into the Merger
Agreement, the form of which is attached hereto as Exhibit "A", and perform all
of its obligations thereunder.
SECTION 5.03 Submission of Merger to Shareholders. Pacific shall:
(a) Duly call, give notice of, convene and hold, on a date
mutually selected by Pacific and SBB, a meeting of its shareholders
(the "Pacific Shareholders' Meeting") as soon as practicable for the
purpose of approving and adopting the Merger and the Merger Agreement
and the transactions contemplated hereby and thereby as required by the
GCL;
(b) Not impose a requirement that the holders of more than the
minimum required percentage (as set forth in Pacific's current Articles
of Incorporation, current Bylaws or pursuant to provisions of the GCL
requiring the lowest percentage vote) of the Pacific Common Stock
entitled to vote on the Merger and the Merger Agreement approve the
Merger and the Merger Agreement;
(c) Cooperate and assist SBB in (i) preparing a Registration
Statement on Form S-4 relating to the shares of SBB Common Stock to be
issued to the Shareholders of Pacific as the Merger Consideration (the
"Registration Statement") and a Joint Proxy Statement/Prospectus,
including letter to shareholders, notice of special meeting, proxy
statement and form of proxy (collectively, the "Joint Proxy
Statement/Prospectus") and (ii) filing the Registration Statement and
the Joint Proxy Statement/Prospectus (forming a part of the
Registration Statement) with the S.E.C., including furnishing to SBB
all information concerning Pacific that SBB may reasonably request in
connection with preparation of such Registration Statement and Joint
Proxy Statement/Prospectus;
(d) Subject to the fiduciary duties of the Pacific Board of
Directors to the shareholders of Pacific, (i) include in the Joint
Proxy Statement/Prospectus the recommendation of the Pacific Board of
Directors that the shareholders of Pacific vote in favor of the
approval and adoption of the Merger and the Merger Agreement and the
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transactions contemplated hereby and thereby, (ii) use its best efforts
to obtain such shareholder approval of the Merger and the Merger
Agreement, and (iii) perform such other acts as may reasonably be
requested by SBB to ensure that such shareholder approval of the Merger
and the Merger Agreement is obtained; and
(e) Cause the Joint Proxy Statement/Prospectus to be mailed to
the shareholders of Pacific as soon as practicable.
SECTION 5.04 Information for Applications and Statements. Pacific will
promptly, but in no event later than ten (10) business days after receipt of a
request by SBB, furnish to SBB all information, data and documents concerning
Pacific, including, but not limited to, financial statements, required for
inclusion in any application or statement to be made by SBB to, or filed by SBB
with, any governmental body in connection with the transactions contemplated by
this Agreement (including the Registration Statement and the Joint Proxy
Statement/Prospectus), or in connection with any other transactions during the
pendency of this Agreement, and Pacific represents and warrants that all
information so furnished for such statements and applications shall be true and
correct in all material respects and shall not omit any material fact required
to be stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. Pacific shall
otherwise fully cooperate with SBB in the filing of any applications or other
documents necessary to consummate the transactions contemplated by this
Agreement.
SECTION 5.05 Required Acts of Pacific. Prior to the Closing, Pacific
shall, and, as applicable, shall cause the Pacific Subsidiaries to, unless
otherwise permitted in writing by SBB:
(a) Operate only in the ordinary course of business and
consistent with prudent banking practices;
(b) Except as required by prudent business practices, use all
reasonable efforts to preserve its business organization intact and to
retain its present customers, depositors and employees, and to maintain
all offices, machinery, equipment, materials, supplies, inventories,
vehicles and other properties owned, leased or used by it (whether
under its control or the control of others), in good operating
condition and repair, ordinary wear and tear excepted;
(c) Perform all of its obligations under contracts, leases and
documents relating to or affecting its assets, properties and business,
except such obligations as Pacific may in good faith reasonably
dispute;
(d) Maintain in full force and effect all insurance policies
now in effect or renewals thereof and, except as required by prudent
business practices that do not jeopardize insurance coverage, give all
notices and present all claims under all insurance policies in due and
timely fashion, and Pacific and the Pacific Subsidiaries shall have the
authority to purchase a rider to Pacific's existing policy of
directors' and officers' liability insurance providing for the
continuation of coverage provided by such policy for a period of 36
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months following the Effective Date with respect to actions occurring
prior to the Effective Date to the extent that such coverage is obtain-
able for an aggregate premium not to exceed $125,000;
(e) File all reports required to be filed with governmental
authorities and observe and conform, in all material respects, to all
applicable laws, rules, regulations, ordinances, codes, orders,
licenses and permits, except those being contested in good faith by
appropriate proceedings;
(f) Timely file all tax returns required to be filed by it and
promptly pay all taxes, assessments, governmental charges, duties,
penalties, interest and fines that become due and payable, except those
being contested in good faith by appropriate proceedings;
(g) Withhold from each payment made to each of its employees
the amount of all taxes (including, but not limited to, federal income
taxes, FICA taxes and state and local income and wage taxes) required
to be withheld therefrom and pay the same to the proper tax receiving
officers; and
(h) Account for all transactions and prepare all financial
statements of Pacific in accordance with GAAP (unless otherwise
instructed by RAP in which instance account for such transaction in
accordance with RAP).
SECTION 5.06 Prohibited Acts of Pacific. Prior to the Closing, Pacific
and, as applicable, the Pacific Subsidiaries shall not, without the prior
written consent of SBB:
(a) Take any action that would reasonably be anticipated to
result in a Material Adverse Change with respect to Pacific;
(b) Take or fail to take any action that would cause or permit
the representations and warranties made in Article III hereof to be
inaccurate at the time of the Closing or preclude Pacific from making
such representations and warranties at the time of the Closing;
(c) Change its Articles of Incorporation or Bylaws or its
authorized capital stock, or change the Articles of Association, Bylaws
or authorized capital stock of any Pacific Subsidiary;
(d) Except as explicitly permitted hereunder or in accordance
with applicable law, engage in any transaction with any affiliated
person or allow such persons to acquire any assets from Pacific or any
Pacific Subsidiary except in the form of wages, salaries, fees for
legal services and reimbursement of expenses and by loans secured by
liquid collateral having a fair market value at least equal to the
principal balance due on such loan to its officers, directors and
employees in the ordinary course of business;
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(e) Discharge or satisfy any lien, charge or encumbrance or
pay any obligation or liability, whether absolute or contingent, due or
to become due, except in the ordinary course of business consistent
with prudent banking practices and except for liabilities incurred in
connection with the transactions contemplated hereby;
(f) Except as provided in Section 5.21, declare or make any
payment of dividends or other distributions to its shareholder, or
purchase, retire or redeem, or obligate itself to purchase, retire or
redeem, any of its shares of capital stock or other securities;
(g) Issue, reserve for issuance, grant, sell or authorize the
issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any
kind relating to the issuance thereto (except for the issuance of
Pacific Common Stock pursuant to the valid exercise of Pacific Stock
Options, as defined in Section 6.17 hereof, which are outstanding on
the date of this Agreement);
(h) Grant any new stock options or accelerate the vesting of
any existing stock options, except as provided in this Agreement;
(i) Accelerate the vesting of pension or other benefits in
favor of employees of Pacific or any Pacific Subsidiary;
(j) Acquire any capital stock or other equity securities or
acquire any equity or ownership interest in any bank, corporation,
partnership or other entity (except (i) through settlement of
indebtedness, foreclosure, or the exercise of creditors' remedies or
(ii) in a fiduciary capacity, the ownership of which does not expose it
to any liability from the business, operations or liabilities of such
person);
(k) Mortgage, pledge or subject to lien or charge, or grant
any security interest or any other encumbrance or restriction any of
its property, business or assets, tangible or intangible except in the
ordinary course of business and consistent with prudent banking
practices;
(l) Sell, transfer, lease to others or otherwise dispose of
any of its assets or cancel or compromise any debt or claim, or waive
or release any right or claim of material value, except in the ordinary
course of business and consistent with past practices and safe and
sound banking principles;
(m) Make any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or pay or agree
or orally promise to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to or for the
benefit of any of its shareholders, directors, officers, employees or
agents, or enter into any employment or consulting contract (other than
as contemplated by this Agreement) or other agreement with any
director, officer or employee or adopt, amend in any material respect
or terminate any pension, employee welfare, retirement, stock purchase,
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stock option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including
trust agreements and insurance contracts embodying such plans), any
deferred compensation, or collective bargaining agreement, any group
insurance contract or any other incentive, welfare or employee benefit
plan or agreement maintained by it for the benefit of its directors,
employees or former employees, except (i) employee severance benefits
contemplated by Section 12.16 of this Agreement, and (ii) in the
ordinary course of business and consistent with past practices and safe
and sound banking principles;
(n) Except for improvements or betterments relating to Pacific
Properties, make any capital expenditures or capital additions or
betterments in excess of an aggregate of $1,000,000;
(o) Hire or employ any person as a replacement for an existing
position with an annual salary equal to or greater than $60,000 or hire
or employ any person for any newly created position;
(p) Sell or knowingly dispose of, or otherwise divest itself
of the ownership, possession, custody or control, of any corporate
books or records of any nature that, in accordance with sound business
practice, normally are retained for a period of time after their use,
creation or receipt, except at the end of the normal retention period;
(q) Make any, or acquiesce with any, change in any accounting
methods, principles or material practices, except as required by
changes in GAAP as concurred in by Pacific's independent auditors;
(r) Sell any investment securities in a transaction involving
a book gain or loss of more than $100,000 on such sale or purchase any
investment securities other than purchases of U.S. Treasury securities
with a maturity of two years or less (and only after giving notice to
SBB of any purchases in excess of $5,000,000);
(s) Make, renew, extend the maturity of, or alter any of the
material terms of any loan, other than classified loans (which are
addressed in Section 5.06(t), to any single borrower and his or her
related interests in excess of the principal amount of $2,000,000;
provided, however, that SBB shall be deemed to have given its consent
under this Section 5.06(s) unless SBB objects to such transaction no
later than 48 hours (weekends and bank holidays shall not count) after
actual receipt by SBB of all information relating to the making,
renewal or alteration of such loan;
(t) Make, renew, extend the maturity of, or alter any of the
material terms of any classified loan to any single borrower and his or
her related interests in excess of the principal amount of $250,000;
provided, however, that SBB shall be deemed to have given its consent
under this Section 5.06(t) unless SBB objects to such transaction no
later than 48 hours (weekends and bank holidays shall not count) after
actual receipt by SBB of all information relating to the making,
renewal or alteration of such loan; or
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(u) Create any new branches or enter into any acquisitions or
leases of real property, including both new leases and lease
extensions.
SECTION 5.07 Access; Pre-Closing Investigation. Subject to the
provisions of Article XI, Pacific shall afford the officers, directors,
employees, attorneys, accountants, investment bankers and authorized
representatives of SBB full access to the properties, books, contracts and
records of Pacific and the Pacific Subsidiaries, permit SBB to make such
inspections (including without limitation with regard to such properties
physical inspection of the surface and subsurface thereof and any structure
thereon pursuant to Section 5.15) as they may require and furnish to SBB during
such period all such information concerning Pacific and the Pacific Subsidiaries
and its affairs as SBB may reasonably request, in order that SBB may have full
opportunity to make such reasonable investigation as it shall desire to make of
the affairs of Pacific and the Pacific Subsidiaries, including, without
limitation, access sufficient to verify the absence of any Material Adverse
Change with respect to Pacific, the accuracy of the representations and
warranties made by Pacific in this Agreement, the value of the assets and the
liabilities of Pacific and the satisfaction of the conditions precedent to SBB's
obligations described in Article VIII of this Agreement. SBB shall use its best
efforts not to disrupt the normal business operations of the Pacific and the
Pacific Subsidiaries. Pacific agrees at any time, and from time to time, to
furnish to SBB as soon as practicable, any additional information that SBB may
reasonably request.
SECTION 5.08 Director and Committee Meetings. Pacific shall give notice
to two (2) designees of SBB and shall invite such persons to attend all regular
and special meetings of the Board of Directors of Pacific and all regular and
special meetings of any board or senior management committee of Pacific,
provided, however, that Pacific reserves the right to exclude such invitees from
any portion of any such meeting at any time. Such invitees shall be designated
by SBB subject to the consent of Pacific, which consent shall not be
unreasonably withheld. In addition, Pacific shall provide SBB with copies of the
minutes of all regular and special meetings of the Board of Directors of Pacific
and minutes of all regular and special meetings of any board or senior
management committee of Pacific (except portions of such minutes which are
devoted to the discussion of this Agreement or the Merger or which, upon the
advise of counsel, are otherwise privileged). Copies of such minutes shall be
provided to SBB within five (5) business days following the date of such
meeting.
SECTION 5.09 Additional Financial Statements. Pacific shall promptly
furnish SBB with true and complete copies of (i) Call Reports of each of the
Subsidiary Banks for the quarter ended June 30, 1998 and each quarter thereafter
until the Effective Date, (ii) monthly directors' reports of Pacific, and (iii)
unaudited month-end financial statements of Pacific.
SECTION 5.10 Untrue Representations. Pacific shall promptly notify SBB
in writing if Pacific becomes aware of any fact or condition that makes untrue,
or shows to have been untrue, in any material respect, any schedule or any other
information furnished to SBB or any representation or warranty made in or
pursuant to this Agreement or that results in Pacific's failure to comply with
any covenant, condition or agreement contained in this Agreement.
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SECTION 5.11 Litigation and Claims. Pacific shall promptly notify SBB
in writing of any litigation, or of any claim, controversy or contingent
liability that is expected to become the subject of litigation, against Pacific
or any Pacific Subsidiary or affecting any of their respective properties if
such litigation or potential litigation would, in the event of an unfavorable
outcome, result in a Material Adverse Change with respect to Pacific, and
Pacific shall promptly notify SBB of any legal action, suit or proceeding or
judicial, administrative or governmental investigation, pending or, to the
knowledge of Pacific, threatened against Pacific or any Pacific Subsidiary that
questions or is likely to question the validity of this Agreement or the
agreements contemplated hereby, including, but not limited to, the Merger
Agreement or any actions taken or to be taken by Pacific pursuant hereto or
thereto or seeks to enjoin or otherwise restrain the transactions contemplated
hereby or thereby.
SECTION 5.12 Adverse Changes. Pacific shall promptly notify SBB in
writing if any change or development shall have occurred or, to the knowledge of
Pacific, been threatened (or any development shall have occurred or been
threatened involving a prospective change) in the business, financial condition,
operations or prospects of Pacific or the Pacific Subsidiaries that has or may
reasonably be expected to have or lead to a Material Adverse Change with respect
to Pacific or that would adversely affect, prevent or delay the obtaining of any
regulatory approval for the consummation of the transactions contemplated by
this Agreement. Notwithstanding the disclosure to SBB of any such change,
Pacific shall not be relieved of any liability to SBB pursuant to this Agreement
for, nor shall the providing of such information by Pacific to SBB be deemed a
waiver by SBB of, the breach of any representation or warranty of Pacific
contained in this Agreement.
SECTION 5.13 No Negotiation with Others. Until the Effective Date or
the earlier termination of this Agreement, Pacific shall not, directly or
indirectly, nor shall it permit any of its officers, directors, employees,
representatives or agents to, directly or indirectly: (i) encourage, solicit or
initiate discussions or negotiations with, or (ii) except upon advice of counsel
to the extent required to fulfill the fiduciary duties owed to the shareholders
of Pacific, entertain, discuss or negotiate with, or provide any information to,
or cooperate with, any corporation, partnership, person or other entity or group
(other than SBB or its Affiliates or associates or officers, partners, employees
or other authorized representatives of SBB or such Affiliates or associates)
concerning any merger, tender offer or other takeover offer, sale of substantial
assets, sale of shares of capital stock or similar transaction involving
Pacific. As soon as practicable following receipt of any unsolicited written
offer, Pacific will communicate to SBB the terms of any proposal or request for
information.
SECTION 5.14 Consents and Approvals. Pacific shall use its best efforts
to obtain at the earliest practicable time all consents and approvals from third
parties necessary to consummate the transactions contemplated by this Agreement.
SECTION 5.15 Environmental Investigation; Right to Terminate Agreement.
(a) SBB and its consultants, agents and representatives shall have the
right, to the same extent that Pacific has such right, but not the obligation or
responsibility, to inspect any Pacific Property, including, without limitation,
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conducting asbestos surveys and sampling, environmental assessments and
investigation, and other environmental surveys and analyses including soil and
ground sampling ("Environmental Inspections") at any time on or prior to the
date which is forty-five (45) calendar days from the date of this Agreement. SBB
shall notify Pacific prior to any physical inspections of the Pacific Property,
and Pacific may place reasonable restrictions on the time of such inspections.
If, as a result of any such Environmental Inspection, further investigation
("secondary investigation") including, without limitation, test borings, soil,
water and other sampling is deemed desirable by SBB, SBB shall (i) notify
Pacific of any Pacific Property for which it intends to conduct such a secondary
investigation and the reasons for such secondary investigation, and (ii)
commence such secondary investigation, on or prior to the date which is sixty
(60) calendar days from the date of this Agreement. SBB shall give reasonable
notice to Pacific of such secondary investigations, and Pacific may place
reasonable time and place restrictions on such secondary investigations.
(b) SBB shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section 3.19 is
not true and accurate; (ii) the results of such Environmental Inspection,
secondary investigation or other environmental survey are disapproved by SBB
because the environmental inspection, secondary investigation or other
environmental survey identifies violations or potential violations of
Environmental Laws; (iii) Pacific has refused to allow SBB to conduct an
Environmental Inspection or secondary investigation in a manner that SBB
reasonably considers necessary; (iv) the Environmental Inspection, secondary
investigation or other environmental survey identifies any past or present
event, condition or circumstance that would or potentially would require
remedial or cleanup action by Pacific that would result in a Material Adverse
Change; (v) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any underground or above ground
storage tank in, on or under any Pacific Property that is not shown to be in
compliance with all Environmental Laws applicable to the tank either now or at a
future time certain, or that has had a release of petroleum or some other
Hazardous Material that has not been cleaned up to the satisfaction of the
relevant governmental authority or any other party with a legal right to compel
cleanup; or (vi) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in, on or under any Pacific Property, the removal of which would result in a
Material Adverse Change. On or prior to the date which is ninety (90) calendar
days from the date of this Agreement, SBB shall advise Pacific in writing as to
whether SBB intends to terminate this Agreement in accordance with Section 9.02
because SBB disapproves of the results of the Environmental Inspection,
secondary investigation or other environmental survey. Pacific shall have the
opportunity to correct any objected to violations or conditions to SBB's
reasonable satisfaction prior to the date which is one hundred and fifteen (115)
calendar days from the date of this Agreement. In the event that Pacific fails
to demonstrate its satisfactory correction of the violations or conditions to
SBB, SBB may terminate the Agreement on or before the date which is one hundred
and twenty-five (125) days from the date of this Agreement.
(c) Pacific agrees to make available to SBB and its consultants, agents
and representatives all documents and other material relating to environmental
conditions of any Pacific Property including, without limitation, the results of
other environmental inspections and surveys. Pacific also agrees that all
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engineers and consultants who prepared or furnished such reports may discuss
such reports and information with SBB and shall be entitled to certify the same
in favor of SBB and its consultants, agents and representatives and make all
other data available to SBB and its consultants, agents and representatives.
(d) For purposes of this Section, the term "Pacific Property" or
"Pacific Properties" shall have the same meaning given in Section 3.19(e).
SECTION 5.16 Restrictions on Resales. At least forty (40) days prior to
the Closing Date, Pacific shall deliver to SBB a list identifying each person
who may reasonably be deemed an "affiliate" of Pacific within the meaning of
such term as used in Rule 145 under the Securities Act. Pacific shall obtain and
deliver to SBB, not less than thirty-one (31) days prior to the Closing Date,
the signed agreement, in the form of Exhibit "F" hereto (the "Shareholder
Letter"), of each "affiliate" of Pacific, and of any person who may become an
"affiliate" of Pacific after the date of this Agreement, regarding (i)
compliance with the provisions of such Rule 145, and (ii) compliance with the
requirements of Accounting Principles Board Opinion No. 16 regarding the
disposition of shares of Pacific Common Stock or SBB Common Stock (or reduction
of risk with respect thereto) until such time as the financial results covering
at least thirty (30) days of post-Merger combined operations have been
published. Pacific shall notify all "affiliates" as far in advance as is
reasonably practicable of the date on which the thirty (30) day period prior to
the Closing Date is likely to begin.
SECTION 5.17 Shareholder Lists. After the date of this Agreement,
Pacific shall from time to time make available to SBB, upon request, a list of
its shareholders and their addresses, a list showing all transfers of the
Pacific Common Stock and such other information as SBB may reasonably request
regarding both the ownership and prior transfers of the Pacific Common Stock.
SECTION 5.18 Employee Pension Plans. Pacific agrees the employee
pension plans of Pacific, including the Pacific Capital 401(k) Plan and the
Pacific Employee Stock Ownership Plan (collectively, the "Pacific Pension
Plans") may be frozen, modified or merged into similar employee pension plans
maintained by SBB or SBB&T, including the Santa Barbara Bank & Trust Employee
Stock Ownership Plan and the Santa Barbara Bank & Trust 401(k) Plan, on or after
the Effective Date, as determined by the Surviving Corporation in its sole
discretion, subject to compliance with applicable law, so long as any such
action preserves the rights of the participants in such Pacific Pension Plans
(including, without limitation, vesting rights).
SECTION 5.19 Employee Welfare Benefit Plans. Pacific agrees that
Pacific's employee welfare benefit plans, as defined in Section 3(1) of ERISA,
may be terminated, modified or merged into SBB's welfare benefit plans on or
after the Effective Date, as determined by the Surviving Corporation in its sole
discretion, subject to compliance with applicable law so long as any such action
preserves the rights of participants in such plans.
SECTION 5.20 Director Voting. Pacific shall use its best efforts to
have each of its directors agree to vote, or cause to be voted, all shares of
Pacific Common Stock beneficially owned by them at the Pacific Shareholders'
Meeting in favor of the Merger. Subject to such directors' fiduciary duties,
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each such director shall execute such documents as are reasonably necessary to
evidence their determination to vote their shares of Pacific Common Stock in
favor of the Merger at the Pacific Shareholders' Meeting.
SECTION 5.21 Dividends. Pacific shall not declare, set aside or pay any
dividend in respect of the Pacific Common Stock or make any other distribution
to shareholders (including, without limitation, any stock dividend, dividends in
kind or other distribution), whether in cash, stock or other property, after the
date of this Agreement, except that Pacific may declare and pay its regular
quarterly dividend on the Pacific Common Stock not to exceed $0.25 per share at
approximately the same time during each quarter which it has historically
declared and paid such dividend; provided, however, that Pacific and SBB shall
cooperate with each other to coordinate the record and payment dates of their
respective dividends for the quarter in which the Effective Date occurs such
that the holders of Pacific Common Stock shall receive a quarterly dividend from
either Pacific or SBB, but not from both with respect to such quarter.
SECTION 5.22 Non-Compete Agreements. Prior to the Closing Date, Pacific
shall use its best efforts to cause each of the persons identified on Exhibit
"G" to enter into an agreement not to compete with the Surviving Corporation to
be dated as of the Closing Date and to become effective on the Effective Date
(each a "Non-Compete Agreement"). The form of the Non- Compete Agreement is
attached as Exhibit "G" hereto.
SECTION 5.23 Pooling of Interests Accounting Treatment. Pacific shall,
and shall use its best efforts to cause its directors and officers to, use all
commercially reasonable efforts not inconsistent with the terms of this
Agreement to structure and consummate the Merger and all actions related thereto
in a manner that will qualify the Merger for "pooling of interests" accounting
treatment as determined by SBB's independent accounting firm and by any
securities regulatory body which shall review the Registration Statement,
including without limitation, the S.E.C.
SECTION 5.24 Disclosure Schedules. Pacific agrees at or prior to the
Closing to provide SBB with supplemental Schedules to be delivered by Pacific
pursuant to this Agreement reflecting any material changes thereto between the
date of this Agreement and the Closing Date.
ARTICLE VI.
COVENANTS OF SBB
SBB hereby makes the covenants set forth in this Article VI to Pacific.
SECTION 6.01 Best Efforts. SBB will use its best efforts to perform and
fulfill all conditions and obligations on its part to be performed of fulfilled
under this Agreement and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions of this
Agreement.
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SECTION 6.02 Merger Agreement. SBB will, as soon as practicable after
the execution of this Agreement, enter into the Merger Agreement, the form of
which is attached hereto as Exhibit "A", and perform all of its obligations
thereunder.
SECTION 6.03 Regulatory Approvals and Registration Statement.
(a) SBB, with the cooperation of Pacific, shall promptly file or cause
to be filed applications for all regulatory approvals required to be obtained by
SBB in connection with this Agreement and the transactions contemplated hereby,
including but not limited to the necessary applications for the prior approval
of the Merger by the Federal Reserve under the BHCA. SBB shall use its best
efforts to obtain all such regulatory approvals and any other approvals from
third parties at the earliest practicable time.
(b) SBB shall reserve and make available for issuance in connection
with the Merger and in accordance with the terms of this Agreement, the SBB
Common Stock for the Merger Consideration and shall, with the cooperation of
Pacific, file with the S.E.C. the Registration Statement, which Registration
Statement will contain the Joint Proxy Statement/Prospectus, and SBB shall use
its best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
shall comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and shall 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 not false or
misleading, and at the time of mailing thereof to the shareholders of SBB and
Pacific, at the time of the SBB Shareholders's Meeting (as defined in Section
6.04) and the Pacific Shareholders' Meeting and on the Effective Date, the Joint
Proxy Statement/Prospectus included as part of the Registration Statement, as
amended or supplemented by any amendment or supplement, shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not false or misleading.
(c) SBB shall timely file all documents required to obtain all
necessary Blue Sky permits and approvals, if any, required to carry out the
transactions contemplated by this Agreement, shall pay all expenses incident
thereto and shall use its best efforts to obtain such permits and approvals on a
timely basis.
(d) SBB shall promptly and properly prepare and file (i) any
application required to list on Nasdaq the shares of SBB Common Stock to be
issued pursuant to the Merger, and (ii) any filings required under the Exchange
Act, relating to the Merger and the transactions contemplated herein.
(e) SBB shall keep Pacific reasonably informed as to the status of such
applications and filings, and SBB shall promptly furnish Pacific and its counsel
with copies of all such regulatory filings and all correspondence for which
confidential treatment has not been requested.
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(f) SBB shall not take any action at any time after the Effective Date
which would cause the Merger not to qualify as a reorganization within the
meaning of Section 368 of the Code.
SECTION 6.04 Submission of Merger and Related Matters to Shareholders.
SBB shall:
(a) Duly call, give notice of, convene and hold, on a date
mutually selected by SBB and Pacific, a meeting of its shareholders
(the "SBB Shareholders' Meeting") as soon as practicable for the
purpose of (i) approving and adopting the Merger and the Merger
Agreement and the transactions contemplated hereby and thereby as
required by the GCL, and (ii) approving and adopting an amendment to
the Bylaws of SBB to increase the number of authorized directors who
may serve on the Board of Directors of SBB to not more than fifteen
(15) persons (the "Bylaw Amendment");
(b) Not impose a requirement that the holders of more than the
minimum required percentage (as set forth in SBB's current Articles of
Incorporation, current Bylaws or pursuant to provisions of the GCL
requiring the lowest percentage vote) of the SBB Common Stock entitled
to vote on the Merger and the Merger Agreement and the Bylaw Amendment
approve the Merger and the Merger Agreement and the Bylaw Amendment;
(c) Subject to the fiduciary duties of the SBB Board of
Directors to the shareholders of SBB, (i) include in the Joint Proxy
Statement/Prospectus the recommendation of the SBB Board of Directors
that the shareholders of SBB vote in favor of the approval and adoption
of the Merger and the Merger Agreement and the transactions
contemplated hereby and thereby and the Bylaw Amendment, (ii) use its
best efforts to obtain such shareholder approval of the Merger and the
Merger Agreement and the Bylaw Amendment, and (iii) perform such other
acts as may reasonably be requested by Pacific to ensure that such
shareholder approval of the Merger and the Merger Agreement and the
Bylaw Amendment is obtained; and
(d) Cause the Joint Proxy Statement/Prospectus to be mailed to
the shareholders of SBB as soon as practicable.
SECTION 6.05 Information for Applications and Statements. SBB will
promptly, but in no event later than ten (10) business days after receipt of a
request by Pacific, furnish to Pacific all information, data and documents
concerning SBB, including, but not limited to, financial statements, required
for inclusion in any application or statement to be made by Pacific to, or filed
by Pacific with, any governmental body in connection with the transactions
contemplated by this Agreement, or in connection with any other transactions
during the pendency of this Agreement, and SBB represents and warrants that all
information so furnished for such statements and applications shall be true and
correct in all material respects and shall not omit any material fact required
to be stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. SBB shall otherwise
fully cooperate with Pacific in the filing of any applications or other
documents necessary to consummate the transactions contemplated by this
Agreement.
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SECTION 6.06 Required Acts of SBB. Prior to the Closing, SBB shall,
and, as applicable, shall cause the SBB Subsidiaries to, unless otherwise
permitted in writing by Pacific:
(a) Operate only in the ordinary course of business and con-
sistent with prudent banking practices;
(b) Except as required by prudent business practices, use all
reasonable efforts to preserve its business organization intact and to
retain its present customers, depositors and employees, and to maintain
all offices, machinery, equipment, materials, supplies, inventories,
vehicles and other properties owned, leased or used by it (whether
under its control or the control of others), in good operating
condition and repair, ordinary wear and tear excepted;
(c) Perform all of its obligations under contracts, leases and
documents relating to or affecting its assets, properties and business,
except such obligations as SBB may in good faith reasonably dispute;
(d) Maintain in full force and effect all insurance policies
now in effect or renewals thereof and, except as required by prudent
business practices that do not jeopardize insurance coverage, give all
notices and present all claims under all insurance policies in due and
timely fashion;
(e) File all reports required to be filed with governmental
authorities and observe and conform, in all material respects, to all
applicable laws, rules, regulations, ordinances, codes, orders,
licenses and permits, except those being contested in good faith by
appropriate proceedings;
(f) Timely file all tax returns required to be filed by it and
promptly pay all taxes, assessments, governmental charges, duties,
penalties, interest and fines that become due and payable, except those
being contested in good faith by appropriate proceedings;
(g) Withhold from each payment made to each of its employees
the amount of all taxes (including, but not limited to, federal income
taxes, FICA taxes and state and local income and wage taxes) required
to be withheld therefrom and pay the same to the proper tax receiving
officers; and
(h) Account for all transactions and prepare all financial
statements of SBB in accordance with GAAP (unless otherwise instructed
by RAP in which instance account for such transaction in accordance
with RAP).
SECTION 6.07 Prohibited Acts of SBB. Prior to the Closing, SBB and, as
applicable, the SBB Subsidiaries shall not, without the prior written consent of
Pacific:
(a) Take any action that would reasonably be anticipated to
result in a Material Adverse Change with respect to SBB;
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(b) Take or fail to take any action that would cause or permit
the representations and warranties made in Article IV hereof to be
inaccurate at the time of the Closing or preclude SBB from making such
representations and warranties at the time of the Closing;
(c) Except as contemplated by this Agreement, change its
Articles of Incorporation or Bylaws or its authorized capital stock, or
change the Articles of Incorporation, Bylaws or authorized capital
stock of any SBB Subsidiary;
(d) Except as explicitly permitted hereunder or in accordance
with applicable law, engage in any transaction with any affiliated
person or allow such persons to acquire any assets from SBB or any SBB
Subsidiary except in the form of wages, salaries, fees for legal
services and reimbursement of expenses and by loans secured by liquid
collateral having a fair market value at least equal to the principal
balance due on such loan to its officers, directors and employees in
the ordinary course of business;
(e) Discharge or satisfy any lien, charge or encumbrance or
pay any obligation or liability, whether absolute or contingent, due or
to become due, except in the ordinary course of business consistent
with prudent banking practices and except for liabilities incurred in
connection with the transactions contemplated hereby;
(f) Except as provided in Section 6.19, declare or make any
payment of dividends or other distributions to its shareholder, or
purchase, retire or redeem, or obligate itself to purchase, retire or
redeem, any of its shares of capital stock or other securities;
(g) Except as required pursuant to the terms of this
Agreement, and except for the issuance of SBB Common Stock pursuant to
the valid exercise of SBB Stock Options, as defined in Section 4.03
hereof, which are outstanding on the date of this Agreement, issue,
reserve for issuance, grant, sell or authorize the issuance of any
shares of its capital stock or other securities or subscriptions,
options, warrants, calls, rights or commitments of any kind relating to
the issuance thereto;
(h) Grant any new stock options or accelerate the vesting of
any existing stock options, except as provided in this Agreement;
(i) Accelerate the vesting of pension or other benefits in
favor of employees of SBB or any SBB Subsidiary;
(j) Acquire any capital stock or other equity securities or
acquire any equity or ownership interest in any bank, corporation,
partnership or other entity (except (i) through settlement of
indebtedness, foreclosure, or the exercise of creditors' remedies or
(ii) in a fiduciary capacity, the ownership of which does not expose it
to any liability from the business, operations or liabilities of such
person);
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(k) Mortgage, pledge or subject to lien or charge, or grant
any security interest or any other encumbrance or restriction any of
its property, business or assets, tangible or intangible except in the
ordinary course of business and consistent with prudent banking
practices;
(l) Sell, transfer, lease to others or otherwise dispose of
any of its assets or cancel or compromise any debt or claim, or waive
or release any right or claim of material value, except in the ordinary
course of business and consistent with past practices and safe and
sound banking principles;
(m) Make any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or pay or agree
or orally promise to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to or for the
benefit of any of its shareholders, directors, officers, employees or
agents, or enter into any employment or consulting contract (other than
as contemplated by this Agreement) or other agreement with any
director, officer or employee or adopt, amend in any material respect
or terminate any pension, employee welfare, retirement, stock purchase,
stock option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including
trust agreements and insurance contracts embodying such plans), any
deferred compensation, or collective bargaining agreement, any group
insurance contract or any other incentive, welfare or employee benefit
plan or agreement maintained by it for the benefit of its directors,
employees or former employees, except in the ordinary course of
business and consistent with past practices and safe and sound banking
principles;
(n) Except for improvements or betterments relating to SBB
Properties, make any capital expenditures or capital additions or
betterments in excess of an aggregate of $2,000,000;
(o) Hire or employ any person as a replacement for an existing
position with an annual salary equal to or greater than $120,000;
(p) Sell or knowingly dispose of, or otherwise divest itself
of the ownership, possession, custody or control, of any corporate
books or records of any nature that, in accordance with sound business
practice, normally are retained for a period of time after their use,
creation or receipt, except at the end of the normal retention period;
(q) Make any, or acquiesce with any, change in any accounting
methods, principles or material practices, except as required by
changes in GAAP as concurred in by SBB's independent auditors;
(r) Make, renew, extend the maturity of, or alter any of the
material terms of any loan, other than classified loans (which are
addressed in Section 6.07(s), to any single borrower and his or her
related interests in excess of the principal amount of $4,000,000;
provided, however, that Pacific shall be deemed to have given its
consent under this Section 6.07(r) unless Pacific objects to such
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transaction no later than 48 hours (weekends and bank holidays shall
not count) after actual receipt by Pacific of all information relating
to the making, renewal or alteration of such loan; or
(s) Make, renew, extend the maturity of, or alter any of the
material terms of any classified loan to any single borrower and his or
her related interests in excess of the principal amount of $500,000;
provided, however, that Pacific shall be deemed to have given its
consent under this Section 6.07(s) unless Pacific objects to such
transaction no later than 48 hours (weekends and bank holidays shall
not count) after actual receipt by Pacific of all information relating
to the making, renewal or alteration of such loan.
SECTION 6.08 Access; Pre-Closing Investigation. Subject to the
provisions of Article XI, SBB shall afford the officers, directors, employees,
attorneys, accountants, investment bankers and authorized representatives of
Pacific full access to the properties, books, contracts and records of SBB and
the SBB Subsidiaries, permit Pacific to make such inspections as they may
require and furnish to Pacific during such period all such information
concerning SBB and the SBB Subsidiaries and its affairs as Pacific may
reasonably request, in order that Pacific may have full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of SBB and
the SBB Subsidiaries, including, without limitation, access sufficient to verify
the absence of any Material Adverse Change with respect to SBB, the accuracy of
the representations and warranties made by SBB in this Agreement, the value of
the assets and the liabilities of SBB and the satisfaction of the conditions
precedent to Pacific's obligations described in Article VII of this Agreement.
Pacific shall use its best efforts not to disrupt the normal business operations
of the SBB and the SBB Subsidiaries. SBB agrees at any time, and from time to
time, to furnish to Pacific as soon as practicable, any additional information
that Pacific may reasonably request.
SECTION 6.09 Director and Committee Meeting. SBB shall give notice to
two (2) designees of Pacific and shall invite such persons to attend all regular
and special meetings of the Board of Directors of SBB and all regular and
special meetings of any board or senior management committee of SBB, provided,
however, that SBB reserves the right to exclude such invitees from any portion
of any such meeting at any time. Such invitees shall be designated by Pacific
subject to the consent of SBB, which consent shall not be unreasonably withheld.
In addition, SBB shall provide Pacific with copies of the minutes of all regular
and special meetings of the Board of Directors of SBB and minutes of all regular
and special meetings of all regular and special meetings of any board or senior
management committee of SBB (except portions of such minutes which are devoted
to the discussion of this Agreement or the Merger or which, upon the advise of
counsel, are otherwise privileged). Copies of such minutes shall be provided to
Pacific within five (5) business days following the date of such meeting.
SECTION 6.10 Additional Financial Statements. SBB shall promptly
furnish Pacific with true and complete copies of (i) Call Reports of SBB&T for
the quarter ended June 30, 1998 and each quarter thereafter until the Effective
Date, (ii) monthly directors' reports of SBB, and (iii) unaudited month-end
financial statements of SBB.
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SECTION 6.11 Untrue Representations. SBB shall promptly notify Pacific
in writing if SBB becomes aware of any fact or condition that makes untrue, or
shows to have been untrue, in any material respect, any schedule or any other
information furnished to Pacific or any representation or warranty made in or
pursuant to this Agreement or that results in SBB's failure to comply with any
covenant, condition or agreement contained in this Agreement.
SECTION 6.12 Litigation and Claims. SBB shall promptly notify Pacific
in writing of any litigation, or of any claim, controversy or contingent
liability that is expected to become the subject of litigation, against SBB or
any SBB Subsidiary or affecting any of their respective properties if such
litigation or potential litigation would, in the event of an unfavorable
outcome, result in a Material Adverse Change with respect to SBB, and SBB shall
promptly notify Pacific of any legal action, suit or proceeding or judicial,
administrative or governmental investigation, pending or, to the knowledge of
SBB, threatened against SBB or any SBB Subsidiary that questions or might
question the validity of this Agreement or the agreements contemplated hereby,
including, but not limited to, the Merger Agreement, or any actions taken or to
be taken by SBB pursuant hereto or thereto or seeks to enjoin or otherwise
restrain the transactions contemplated hereby or thereby.
SECTION 6.13 Adverse Change. SBB shall promptly notify Pacific in
writing if any change or development shall have occurred or, to the knowledge of
SBB, been threatened (or any development shall have occurred or been threatened
involving a prospective change) in the business, financial condition, operations
or prospects of SBB or the SBB Subsidiaries that has or may reasonably be
expected to have or lead to a Material Adverse Change with respect to SBB or
that would adversely affect, prevent or delay the obtaining of any regulatory
approval for the consummation of the transactions contemplated by this
Agreement. Notwithstanding the disclosure to Pacific of any such change, SBB
shall not be relieved of any liability to Pacific pursuant to this Agreement
for, nor shall the providing of such information by SBB to Pacific be deemed a
waiver by Pacific of, the breach of any representation or warranty of SBB
contained in this Agreement.
SECTION 6.14 No Negotiation with Others. Until the Effective Date or
the earlier termination of this Agreement, SBB shall not, directly or
indirectly, nor shall it permit any of its officers, directors, employees,
representatives or agents to, directly or indirectly: (i) encourage, solicit or
initiate discussions or negotiations with, or (ii) except upon advice of counsel
to the extent required to fulfill the fiduciary duties owed to the shareholders
of SBB, entertain, discuss or negotiate with, or provide any information to, or
cooperate with, any corporation, partnership, person or other entity or group
(other than Pacific or its Affiliates or associates or officers, partners,
employees or other authorized representatives of Pacific or such Affiliates or
associates) concerning any merger, tender offer or other takeover offer, sale of
substantial assets, sale of shares of capital stock or similar transaction
involving SBB (unless any such transaction is expressly conditioned upon the
performance by SBB of all of SBB's obligations under this Agreement). As soon as
practicable following receipt of any unsolicited written offer, SBB will
communicate to Pacific the terms of any proposal or request for information.
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SECTION 6.15 Consents and Approvals. SBB shall use its best efforts to
obtain all consents and approvals from third parties necessary to consummate the
transactions contemplated by this Agreement at the earliest practicable time.
SECTION 6.16 Environmental Investigation; Right to Terminate Agreement.
(a) Pacific and its consultants, agents and representatives shall have
the right, to the same extent that SBB has such right, but not the obligation or
responsibility, to inspect any SBB Property, including, without limitation,
conducting asbestos surveys and sampling, environmental assessments and
investigation, and other environmental surveys and analyses including soil and
ground sampling ("Environmental Inspections") at any time on or prior to the
date which is forty-five (45) calendar days from the date of this Agreement.
Pacific shall notify SBB prior to any physical inspections of the SBB Property,
and SBB may place reasonable restrictions on the time of such inspections. If,
as a result of any such Environmental Inspection, further investigation
("secondary investigation") including, without limitation, test borings, soil,
water and other sampling is deemed desirable by Pacific, Pacific shall (i)
notify SBB of any SBB Property for which it intends to conduct such a secondary
investigation and the reasons for such secondary investigation, and (ii)
commence such secondary investigation, on or prior to the date which is sixty
(60) calendar days from the date of this Agreement. Pacific shall give
reasonable notice to SBB of such secondary investigations, and SBB may place
reasonable time and place restrictions on such secondary investigations.
(b) Pacific shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section 4.19 is
not true and accurate; (ii) the results of such Environmental Inspection,
secondary investigation or other environmental survey are disapproved by Pacific
because the environmental inspection, secondary investigation or other
environmental survey identifies violations or potential violations of
Environmental Laws; (iii) SBB has refused to allow Pacific to conduct an
Environmental Inspection or secondary investigation in a manner that Pacific
reasonably considers necessary; (iv) the Environmental Inspection, secondary
investigation or other environmental survey identifies any past or present
event, condition or circumstance that would or potentially would require
remedial or cleanup action by SBB that would result in a Material Adverse
Change; (v) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any underground or above ground
storage tank in, on or under any SBB Property that is not shown to be in
compliance with all Environmental Laws applicable to the tank either now or at a
future time certain, or that has had a release of petroleum or some other
Hazardous Material that has not been cleaned up to the satisfaction of the
relevant governmental authority or any other party with a legal right to compel
cleanup; or (vi) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in, on or under any SBB Property, the removal of which would result in a
Material Adverse Change. On or prior to the date which is ninety (90) calendar
days from the date of this Agreement, Pacific shall advise SBB in writing as to
whether Pacific intends to terminate this Agreement in accordance with Section
9.02 because Pacific disapproves of the results of the Environmental Inspection,
secondary investigation or other environmental survey. SBB shall have the
opportunity to correct any objected to violations or conditions to Pacific's
reasonable satisfaction prior to the date which is one hundred and fifteen (115)
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calendar days from the date of this Agreement. In the event that SBB fails to
demonstrate its satisfactory correction of the violations or conditions to
Pacific, Pacific may terminate the Agreement on or before the date which is one
hundred and twenty-five (125) days from the date of this Agreement.
(c) SBB agrees to make available to Pacific and its consultants, agents
and representatives all documents and other material relating to environmental
conditions of any SBB Property including, without limitation, the results of
other environmental inspections and surveys. SBB also agrees that all engineers
and consultants who prepared or furnished such reports may discuss such reports
and information with Pacific and shall be entitled to certify the same in favor
of Pacific and its consultants, agents and representatives and make all other
data available to Pacific and its consultants, agents and representatives.
(d) For purposes of this Section, the term "SBB Property" or "SBB
Properties" shall have the same meaning given in Section 4.19(e).
SECTION 6.17 Stock Options.
(a) On the Effective Date, each outstanding option to purchase shares
of Pacific Common Stock (a "Pacific Stock Option") issued pursuant to the
Pacific Capital Bancorp 1984 Stock Option Plan, the Pacific Capital Bancorp 1994
Stock Option Plan and the Pacific Capital Bancorp 1991 Directors Stock Option
Plan (together, the "Pacific Stock Option Plans"), whether or not exercisable or
vested, shall be assumed by SBB as hereinafter provided. Each Pacific Stock
Option shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Pacific Stock Option, the number of
full shares of SBB Common Stock calculated in accordance with the provision of
Section 1.06(b). In no event shall SBB be required to issue fractional shares of
SBB Common Stock upon the exercise of a converted option.
(b) SBB shall reserve and make available for issuance in connection
with the Merger and in accordance with the terms of this Agreement the number of
full shares of SBB Common Stock calculated in accordance with Section 1.06(b).
As soon as practicable after the Effective Date, SBB shall deliver to each
holder of Pacific Stock Options appropriate notices setting forth such holders'
rights pursuant to the Pacific Stock Option Plans, and the agreements evidencing
the grants of such Pacific Stock Options shall continue in effect on the same
terms and conditions (subject to the conversion required by Section 1.06(b)
after giving effect to the Merger and the assumption by SBB as set forth above).
To the extent necessary to effectuate the provisions of this Section 6.17, SBB
may deliver new or amended agreements reflecting the terms of each Pacific Stock
Option assumed by SBB and amend the Pacific Stock Option Plans to reflect the
terms hereof.
(c) As soon as practicable after the Effective Date, SBB shall file
with the S.E.C. a registration statement on an appropriate form with respect to
the shares of SBB Common Stock subject to such converted options, and shall use
its best efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the status of the prospectus or
prospectuses with respect thereto) for so long as such options remain
outstanding.
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SECTION 6.18 Director and Officer Liability Insurance. Upon the
Effective Date, any executive officer or director of Pacific who becomes and
officer or director of SBB (including any subsidiaries thereof) shall be
included in SBB's director and officer insurance policy.
SECTION 6.19 Dividends. SBB shall not declare, set aside or pay any
dividend in respect of the SBB Common Stock or make any other distribution to
shareholders (including, without limitation, any stock dividend, dividends in
kind or other distribution), whether in cash, stock or other property, after the
date of this Agreement, except that SBB may declare and pay its regular
quarterly dividend on the SBB Common Stock not to exceed $0.18 per share at
approximately the same time during each quarter which it has historically
declared and paid such dividend; provided, however, that SBB and Pacific shall
cooperate with each other to coordinate the record and payment dates of their
respective dividends for the quarter in which the Effective Date occurs such
that the holders of Pacific Common Stock shall receive a quarterly dividend from
either Pacific or SBB, but not from both with respect to such quarter.
SECTION 6.20 Conduct of Business in the Ordinary Course. Except as
specifically provided for in this Agreement, SBB shall conduct its business in
the ordinary course as heretofore conducted. For purposes of this Section 6.20,
the ordinary course of business shall consist of the banking and related
business as presently conducted by SBB and the SBB Subsidiaries.
SECTION 6.21 Additions to SBB Board of Directors. SBB shall, prior to
the Effective Date, take all action necessary to effect the Bylaw Amendment so
as to permit the number of directors of the Surviving Corporation identified on
Schedule One to Exhibit "A" hereto to be designated.
SECTION 6.22 Director Voting. SBB shall use its best efforts to have
each of its directors agree to vote, or cause to be voted, all shares of SBB
Common Stock beneficially owned by them at the SBB Shareholders' Meeting in
favor of the Merger. Subject to such directors' fiduciary duties, each such
director shall execute such documents as are reasonably necessary to evidence
their determination to vote their shares of SBB Common Stock in favor of the
Merger at the SBB Shareholders' Meeting.
SECTION 6.23 Pooling of Interests Accounting Treatment. SBB shall, and
shall use its best efforts to cause its directors and officers to, use all
commercially reasonable efforts not inconsistent with the terms of this
Agreement to structure and consummate the Merger and all actions related thereto
in a manner that will qualify the Merger for "pooling of interests" accounting
treatment as determined by SBB's independent accounting firm and by any
securities regulatory body which shall review the Registration Statement,
including without limitation, the S.E.C.
SECTION 6.24 Disclosure Schedules. SBB agrees at or prior to the
Closing to provide Pacific with supplemental Schedules to be delivered by SBB
pursuant to this Agreement reflecting any material changes thereto between the
date of this Agreement and the Closing Date.
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ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC
All obligations of Pacific under this Agreement are subject to the
fulfillment (or, if legally permissible, waiver by Pacific), prior to or at the
Closing, of each of the following conditions:
SECTION 7.01 Compliance with Representations, Warranties and
Agreements.
(a) All representations and warranties made by SBB in this Agreement or
in any document or schedule delivered to Pacific pursuant hereto shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects as of the Closing Date with the same force and
effect as if such representations and warranties were made at and as of the
Closing Date, except with respect to those representations and warranties
specifically made as of an earlier date (in which case such representations and
warranties shall be true as of such earlier date).
(b) SBB shall have performed or complied in all material respects with
all agreements, terms, covenants and conditions required by this Agreement to be
performed or complied with by SBB prior to or at the Closing.
SECTION 7.02 Shareholder Approvals. The holders of at least the minimum
required percentage of SBB Common Stock and Pacific Common Stock entitled to
vote on the Agreement, the Merger Agreement and the Merger shall have approved
the Agreement, the Merger Agreement and the Merger, and the holders of at least
the minimum required percentage of SBB Common Stock entitled to vote on the
Bylaw Amendment shall have approved the Bylaw Amendment.
SECTION 7.03 Government and Other Approvals. SBB and Pacific shall have
received approvals, acquiescence or consents, all on terms and conditions
mutually acceptable to SBB and Pacific, of the transactions contemplated by this
Agreement, and the Merger Agreement, from all necessary governmental agencies
and authorities and other third parties, including but not limited to the
S.E.C., and the Federal Reserve, and all applicable waiting periods shall have
expired, and SBB and Pacific shall have received the approvals and consents of
all third parties required to consummate this Agreement and the other agreements
contemplated hereby, including, but not limited to, the Merger Agreement and the
transactions contemplated hereby and thereby. Such approvals and the
transactions contemplated hereby shall not have been contested or threatened to
be contested by any Federal or state governmental authority or by any other
third party (except shareholders asserting statutory dissenters' appraisal
rights) by formal proceedings.
SECTION 7.04 No Litigation. No action shall have been taken, and no
statute, rule, regulation or order shall have been promulgated, enacted,
entered, enforced or deemed applicable to this Agreement, the Merger, or the
transactions contemplated hereby or thereby by any Federal, state or foreign
government or governmental authority or by any court, domestic or foreign,
including the entry of a preliminary or permanent injunction, that would: (a)
make this Agreement or any other agreement contemplated hereby, including, but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby illegal, invalid or unenforceable, (b) require the divestitute of a
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material portion of the assets of SBB, (c) impose material limits in the ability
of any party to this Agreement to consummate the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby, (d) otherwise
result in a Material Adverse Change, or (e) if the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby are consummated,
subject Pacific or subject any officer, director, shareholder or employee of
Pacific to criminal or civil liability. No action or proceeding before any court
or governmental authority, domestic or foreign, by any government or
governmental authority or by any other person, domestic or foreign, shall be
threatened, instituted or pending that would reasonably be expected to result in
any of the consequences referred to in clauses (a) through (e) above.
SECTION 7.05 Delivery of Closing Documents. Pacific shall have received
all documents required to be received from SBB on or prior to the Closing Date
as set forth in Section 2.03 hereof, all in form and substance reasonably
satisfactory to Pacific.
SECTION 7.06 Receipt of Fairness Opinion. The Board of Directors of
Pacific shall have received, on or before the date of the mailing of the Joint
Proxy Statement/Prospectus, from its investment advisor, Van Kasper & Company,
an unqualified written opinion to the effect that the Merger is fair to the
shareholders of Pacific from a financial point of view.
SECTION 7.07 Receipt of Pooling Opinions. Pacific shall have received
an opinion letter, dated as of the Closing Date, from KPMG Peat Marwick LLP,
independent public accountants for Pacific, to the effect that Pacific qualifies
as an entity that may be a party to a business combination for which the
"pooling of interests" method of accounting would be available under Accounting
Principles Board Opinion No. 16 ("APB 16"). Pacific shall have also received an
opinion letter, dated as of the Closing Date, from Arthur Andersen, LLP,
independent public accountants for SBB, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment under APB 16 if closed
and consummated in accordance with this Agreement. In addition, there shall have
been no determination by any court, tribunal, regulatory agency or other
governmental entity, that the Merger fails or will fail to qualify for "pooling
of interests" accounting treatment.
SECTION 7.08 Registration Statement. The Registration Statement,
including any amendments or supplements thereto, shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for purpose pending
before or threatened by the S.E.C. All state securities permits or approvals
required by applicable state securities laws to consummate the transactions
contemplated by this Agreement and the Merger Agreement shall have been received
and remain in effect.
SECTION 7.09 Federal Tax Opinion. Pacific shall have received a copy of
the opinion of Jenkens & Gilchrist, P.C., counsel to SBB, to the effect that if
the Merger is consummated in accordance with the terms set forth in this
Agreement (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) no gain or loss will be recognized for federal
income tax purposes by the holders of shares of Pacific Common Stock upon
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receipt of the Merger Consideration (except for cash received in lieu of
fractional shares), (iii) the basis of shares of SBB Common Stock received by
the shareholders of Pacific will be the same as the basis of shares of Pacific
Common Stock exchanged therefor, and (iv) the holding period of the shares of
SBB Common Stock received by such shareholders will include the holding period
of the shares of Pacific Common Stock exchanged therefor, provided such shares
were held as capital assets as of the Effective Date. In rendering such opinion,
such counsel may require and rely upon representations and covenants including
those contained in certificates of officers of SBB, Pacific and others.
SECTION 7.10 Dissenting Shareholders. Holders of not more than a
certain percentage (not to exceed 9.9%) of the issued and outstanding shares of
Pacific Common Stock shall have demanded or be entitled to demand payment of the
fair value of their shares as dissenting shareholders under applicable
provisions of the GCL such that their receipt of cash pursuant to the exercise
of their appraisal rights, when combined with all other cash transactions
required to be considered under GAAP, would result in the Merger not qualifying
for "pooling of interests" accounting treatment under GAAP.
SECTION 7.11 Accounting Treatment. All accounting and tax treatment,
entries and adjustments in connection with the transactions contemplated by this
Agreement and the other agreements contemplated hereby shall be reasonably
satisfactory to Pacific, Pacific shall not have received notification from any
proper regulatory authority that Pacific's accounting and tax treatment, entries
and adjustments used in connection with the Merger are improper, and Pacific
shall not have been required by any such regulatory authority to make any
accounting or tax adjustments that would constitute a Material Adverse Change.
SECTION 7.12 Bylaw Amendment. SBB shall have taken all actions
necessary to effect the Bylaw Amendment.
SECTION 7.13 No Material Adverse Change. There shall have been no
Material Adverse Change with respect to SBB since December 31, 1997.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBB
All obligations of SBB under this Agreement are subject to the
fulfillment (or, if legally permissible, waiver by SBB), prior to or at the
Closing, of each of the following conditions:
SECTION 8.01 Compliance with Representations, Warranties and
Agreements.
(a) All representations and warranties made by Pacific in this
Agreement or in any document or schedule delivered to SBB pursuant hereto shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the Closing Date with the same force
and effect as if such representations and warranties were made at and as of the
Closing Date, except with respect to those representations and warranties
specifically made as of an earlier date (in which case such representations and
warranties shall be true as of such earlier date).
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(b) Pacific shall have performed or complied in all material respects
with all agreements, terms, covenants and conditions required by this Agreement
to be performed or complied with by Pacific prior to or at the Closing.
SECTION 8.02 Shareholder Approvals. The holders of at least the minimum
required percentage of Pacific Common Stock and SBB Common Stock entitled to
vote on the Agreement, the Merger Agreement and the Merger shall have approved
the Agreement, the Merger Agreement and the Merger; and the holding of at least
the minimum percentage of SBB Common Stock entitled to vote on the Bylaw
Amendment shall have approved the Bylaw Amendment.
SECTION 8.03 Government and Other Approvals. SBB and Pacific shall have
received approvals, acquiescence or consents, all on terms and conditions
mutually acceptable to SBB and Pacific, of the transactions contemplated by this
Agreement and the Merger Agreement, from all necessary governmental agencies and
authorities and other third parties, including but not limited to the S.E.C. and
the Federal Reserve, and all applicable waiting periods shall have expired, and
SBB and Pacific shall have received the approvals and consents of all third
parties required to consummate this Agreement and the other agreements
contemplated hereby, including, but not limited to, the Merger Agreement and the
transactions contemplated hereby and thereby. Such approvals and the
transactions contemplated hereby shall not have been contested or threatened to
be contested by any Federal or state governmental authority or by any other
third party (except shareholders asserting statutory dissenters' appraisal
rights) by formal proceedings. It is understood that, if such contest is brought
by formal proceedings, SBB may, but shall not be obligated to, answer and defend
such contest or otherwise pursue this transaction over such objection.
SECTION 8.04 No Litigation. No action shall have been taken, and no
statute, rule, regulation or order shall have been promulgated, enacted,
entered, enforced or deemed applicable to this Agreement, the Merger, or the
transactions contemplated hereby or thereby by any Federal, state or foreign
government or governmental authority or by any court, domestic or foreign,
including the entry of a preliminary or permanent injunction, that would (a)
make this Agreement or any other agreement contemplated hereby, including, but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby illegal, invalid or unenforceable, (b) require the divestiture of a
material portion of the assets of Pacific, (c) impose material limits in the
ability of any party to this Agreement to consummate the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby, (d) otherwise
result in a Material Adverse Change, or (e) if the Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby are consummated,
subject SBB or subject any officer, director, shareholder or employee of SBB to
criminal or civil liability. No action or proceeding before any court or
governmental authority, domestic or foreign, by any government or governmental
authority or by any other person, domestic or foreign, shall be threatened,
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instituted or pending that would reasonably be expected to result in any of the
consequences referred to in clauses (a) through (e) above.
SECTION 8.05 Delivery of Closing Documents. SBB shall have received all
documents required to be received from Pacific on or prior to the Closing Date
as set forth in Section 2.02 hereof, all in form and substance reasonably
satisfactory to SBB.
SECTION 8.06 Receipt of Shareholder Letters. SBB shall have received
from Pacific, at least 31 days prior to the Closing Date, the signed Shareholder
Letters, in the form attached hereto as Exhibit "F" hereof, of each person who
may reasonably be deemed an "affiliate" of Pacific within the meaning of such
term as used in Rule 145 under the Securities Act.
SECTION 8.07 Receipt of Fairness Opinion. The Board of Directors of SBB
shall have received, on or before the date of the mailing of the Joint Proxy
Statement/Prospectus, from its investment advisor, The Bank Advisory Group,
Inc., an unqualified written opinion to the effect that the Merger is fair to
the shareholders of SBB from a financial point of view.
SECTION 8.08 Dissenting Shareholders. Holders of not more than a
certain percentage (not to exceed 9.9%) of the issued and outstanding shares of
Pacific Common Stock shall have demanded or be entitled to demand payment of the
fair value of their shares as dissenting shareholders under applicable
provisions of the GCL such that their receipt of cash pursuant to the exercise
of their appraisal rights, when combined with all other cash transactions
required to be considered under GAAP, would result in the Merger not qualifying
for "pooling of interests" accounting treatment under GAAP.
SECTION 8.09 Receipt of Pooling Opinions. SBB shall have received an
opinion letter, dated as of the Closing Date, from KPMG Peat Marwick LLP,
independent public accountants for Pacific, to the effect that Pacific qualifies
as an entity that may be a party to a business combination for which the
"pooling of interests" method of accounting would be available under APB 16. SBB
shall have also received an opinion letter, dated as of the Closing Date, from
Arthur Andersen, LLP, its independent public accountants, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment under APB 16
if closed and consummated in accordance with this Agreement. In addition, there
shall have been no determination by any court, tribunal, regulatory agency or
other governmental entity, that the Merger fails or will fail to qualify for
"pooling of interests" accounting treatment.
SECTION 8.10 Registration Statement. The Registration Statement,
including any amendments or supplements thereto, shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for purpose pending
before or threatened by the S.E.C. All state securities permits or approvals
required by applicable state securities laws to consummate the transactions
contemplated by this Agreement and the Merger Agreement shall have been received
and remain in effect.
SECTION 8.11 Federal Tax Opinion. SBB shall have received an opinion
of its counsel, Jenkens & Gilchrist, P.C., to the effect that if the Merger is
consummated in accordance with the terms set forth in this Agreement (i) the
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Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, (ii) no gain or loss will be recognized for federal income tax
purposes by the holders of shares of Pacific Common Stock upon receipt of the
Merger Consideration (except for cash received in lieu of fractional shares),
(iii) the basis of shares of SBB Common Stock received by the shareholders of
Pacific will be the same as the basis of shares of Pacific Common Stock
exchanged therefor, and (iv) the holding period of the shares of SBB Common
Stock received by such shareholders will include the holding period of the
shares of Pacific Common Stock exchanged therefor, provided such shares were
held as capital assets as of the Effective Date. In rendering such opinion, such
counsel may require and rely upon representations and covenants including those
contained in certificates of officers of SBB, Pacific and others.
SECTION 8.12 Accounting Treatment. All accounting and tax treatment,
entries and adjustments in connection with the transactions contemplated by this
Agreement and the other agreements contemplated hereby shall be reasonably
satisfactory to SBB, SBB shall not have received notification from any proper
regulatory authority that SBB's accounting and tax treatment, entries and
adjustments used in connection with the Merger are improper, and SBB shall not
have been required by any such regulatory authority to make any accounting or
tax adjustments that would constitute a Material Adverse Change.
SECTION 8.13 No Material Adverse Change. There shall have been no
Material Adverse Change with respect to Pacific since December 31, 1997.
ARTICLE IX.
EXPENSES, TERMINATION AND ABANDONMENT
SECTION 9.01 Expenses. Each of the parties hereto shall bear its
respective costs and expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement; provided, however, in the event
that:
(a) this Agreement is terminated by SBB because (i) the Merger
Agreement is not approved by the required vote of shareholders at the
Pacific Shareholders' Meeting, and (ii) the Board of Directors of
Pacific (subject to compliance with its fiduciary duties as advised by
counsel) shall have failed to have used its best efforts to obtain
shareholder approval, Pacific shall pay to SBB within ten (10) business
days after such termination (y) a termination fee of $7,650,000, and
(z) all documented fees and expenses of SBB related to this Agreement
and the transactions contemplated hereby (which fees and expenses, as
communicated to Pacific by SBB within five (5) business days after
termination, shall not exceed $250,000); and
(b) this Agreement is terminated by Pacific because (i) the
Merger Agreement is not approved by the required vote of shareholders
at the SBB Shareholders' Meeting, and (ii) the Board of Directors of
SBB (subject to compliance with its fiduciary duties as advised by
counsel) shall have failed to have used its best efforts to obtain
shareholder approval, SBB shall pay to Pacific within ten (10) business
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days after such termination (y) a termination fee of $7,650,000, and
(z) all documented fees and expenses of Pacific related to this Agree-
ment and the transactions contemplated hereby (which fees and expenses,
as communicated to SBB by Pacific within five (5) business after
termination, shall not exceed $250,000); and
(c) this Agreement is terminated by Pacific because of a Third
Party Transaction (as defined in Section 9.02, Pacific shall pay to SBB
within ten (10) business days after such termination (y) a termination
fee of $7,650,000, and (z) all documented fees and expenses of SBB
related to this Agreement and the transactions contemplated hereby
(which fees and expenses, as communication to Pacific by SBB within
five (5) business days after termination, shall not exceed $250,000).
The parties hereto acknowledge that the agreements contained in this Section
9.01 are an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, SBB and Pacific would not enter into this
Agreement.
SECTION 9.02 Termination. Subject to any payments as provided in
Section 9.01, this Agreement may be terminated, and the Merger may be abandoned,
at any time prior to the Effective Date:
(a) by mutual written agreement between SBB and Pacific, if
the Board of Directors of each party so determines by vote of a
majority of the members of its entire Board;
(b) by either SBB or Pacific, if the Effective Date has not
occurred by January 31, 1999, or such later date as may be mutually
agreed to by SBB and Pacific;
(c) by SBB, if there has been a Material Adverse Change with
respect to Pacific;
(d) by Pacific, if there has been a Material Adverse Change
with respect to SBB.
(e) by either SBB or Pacific, by written notice to the other,
if the other has breached any of its covenants in Article V or Article
VI of this Agreement, as the case may be, in any material respect and
has failed to correct or cure any such breach within twenty (20)
business days after notice thereof is given by the nonbreaching party;
(f) by either SBB or Pacific, by written notice to the other,
if any representation or warranty given or made by such other party in
this Agreement or in any schedule or other document delivered by such
other party in accordance with the terms of this Agreement, is or
becomes untrue or incorrect in any material respect and is not
corrected within twenty (20) business days after written notice thereof
is given by the party terminating this Agreement to the party giving or
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making such representation or warranty, provided that any such notice
shall be delivered promptly upon discovery of the breach;
(g) by either SBB or Pacific, if (i) any of the transactions
contemplated by this Agreement or the Merger Agreement are disapproved
by any regulatory authority whose approval is required to consummate
such transactions, (ii) any court of competent jurisdiction in the
United States or other United States (federal or state) governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining, invalidating or otherwise prohibiting
the Agreement or the transactions contemplated hereby and such order,
decree, ruling or other action shall have been final and nonappealable,
or (iii) either Pacific or SBB reasonably determines, in good faith and
after consulting with counsel, there is substantial likelihood that any
necessary regulatory approval will not be obtained or will be obtained
only upon a condition or conditions that make it inadvisable to proceed
with the transactions contemplated by this Agreement;
(h) by SBB or Pacific, if the Merger Agreement is not approved
by the required vote of shareholders of Pacific or SBB;
(i) by Pacific, by written notice to SBB, if (i) a proposal
for a Third Party Transaction (as defined below) involving Pacific has
been made or received and the Board of Directors of Pacific determines,
in the exercise of its good faith judgment (based on written advice of
independent legal counsel) that such termination is required in order
for Pacific's Board of Directors to comply with its fiduciary duties to
Pacific's shareholders, or (ii) following receipt by Pacific of a
proposal for a Third Party Transaction, the Board of Directors of
Pacific shall have altered its determination to recommend that the
shareholders of Pacific approve this Agreement or shall have failed to
proceed to hold the special Pacific Shareholders' Meeting to approve
this Agreement, in either case of which Pacific shall give SBB prompt
written notice of its election to terminate this Agreement pursuant to
this Section 9.02(i).
For purposes of this Section 9.02(i), a "Third Party
Transaction" shall include (i) any successful tender offer for more
than 50% of the outstanding shares of Pacific, (ii) any merger or
consolidation of Pacific with or into any entity other than SBB or an
affiliate of SBB, (iii) any sale of all or substantially all of the
assets of Pacific, (iv) any reorganization of Pacific or other
transaction that results or when completed would result in a
disposition of substantially all of the assets of Pacific, or (v) the
issuance, sale or disposition of securities representing 50% or more of
the common stock of Pacific;
(j) by SBB pursuant to the terms of Section 5.15(b) hereof;
(k) by Pacific pursuant to the terms of Section 6.16(b)
hereof;
(l) by Pacific, if the average of the average closing bid and
asked price of a share of SBB Common Stock as reported on Nasdaq for
the twenty (20) business day period immediately preceding the fifth
(5th) business day prior to the Closing Date (the "SBB Average Price")
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shall be less than $22.95 (which number shall be appropriately adjusted
to give effect to any Share Adjustment relative to shares of SBB Common
Stock); provided, however, that if the SBB Average Price shall be less
than $22.95, Pacific and SBB shall attempt in good faith to renegotiate
the Exchange Ratio, subject to existing market conditions. Should the
parties fail to so renegotiate the Exchange Ratio within three (3)
business days after determination of the SBB Average Price, Pacific may
terminate this Agreement pursuant to this Section 9.02(l);
(m) by Pacific, if Pacific shall not have received an
unqualified written opinion from its investment advisor, dated as of
the mailing of the Proxy Statement/Prospectus, to the effect that the
Merger is fair to the shareholders of Pacific from a financial point of
view; or
(n) by SBB, if SBB shall not have received an unqualified
written opinion from its investment advisor, dated as of the mailing of
the Proxy Statement/Prospectus, to the effect that the Merger is fair
to the shareholders of SBB from a financial point of view.
SECTION 9.03 Notice of Termination. The power of termination provided
for by Section 9.02 hereof may be exercised only by a notice given in writing,
as provided in Section 12.05 of this Agreement.
SECTION 9.04 Effect of Termination. Without limiting any other relief
to which either party hereto may be entitled for breach of this Agreement, in
the event of the termination and abandonment of this Agreement pursuant to the
provisions of Section 9.02 hereof, no party to this Agreement shall have any
further liability or obligation in respect of this Agreement, except for (a)
liability of a party pursuant to Section 9.01 hereof, and (b) the provisions of
Article XI hereof shall remain applicable.
ARTICLE X.
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 10.01 Nonsurvival of Representations and Warranties. The
parties hereto agree that all of their respective representations and warranties
contained in this Agreement shall not survive Closing.
ARTICLE XI.
CONFIDENTIAL INFORMATION
SECTION 11.01 Definition of "Recipient," "Disclosing Party,"
"Representative" and "Person". For purposes of this Article XI, the term
"Recipient" shall mean the party receiving the Subject Information (as defined
in Section 11.02) and the term "Disclosing Party" shall mean the party
furnishing the Subject Information. The terms "Recipient" or "Disclosing Party",
as used herein, include: (1) all persons and entities related to or affiliated
in any way with the Recipient or the Disclosing Party, as the case may be, and
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(2) any person or entity controlling, controlled by or under common control with
the Recipient or the Disclosing Party, as the case may be. The term
"Representative" as used herein, shall include all directors, officers,
shareholders, employees, representatives, advisors, attorneys, accountants and
agents of any of the foregoing. The term "person" as used in this Article XI
shall be broadly interpreted to include, without limitation, any corporation,
company, group, partnership, governmental agency or individual.
SECTION 11.02 Definition of "Subject Information". For purposes of this
Article XI, the term "Subject Information" shall mean all information furnished
to the Recipient or its Representatives (whether prepared by the Disclosing
Party, its Representatives or otherwise and whether or not identified as being
nonpublic, confidential or proprietary) by or on behalf of the Disclosing Party
or its Representatives relating to or involving the business, operations or
affairs of the Disclosing Party or otherwise in possession of the Disclosing
Party. The term "Subject Information" shall not include information that (i) was
already in the Recipient's possession at the time it was first furnished to
Recipient by or on behalf of Disclosing Party, provided that such information is
not known by the Recipient to be subject to another confidentiality agreement
with or other obligation of secrecy to the Disclosing Party, its Subsidiaries or
another party, or (ii) becomes generally available to the public other than as a
result of a disclosure by the Recipient or its Representatives, or (iii) becomes
available to the Recipient on a non-confidential basis from a source other than
the Disclosing Party, its Representative or otherwise, provided that such source
is not known by the Recipient to be bound by a confidentiality agreement with or
other obligation of secrecy to the Disclosing Party, its Representative or
another party.
SECTION 11.03 Confidentiality. Each Recipient hereby agrees that the
Subject Information will be used solely for the purpose of reviewing and
evaluating the transactions contemplated by this Agreement and the other
agreements contemplated hereby, including the Merger Agreement, and that the
Subject Information will be kept confidential by the Recipient and the
Recipient's Representatives; provided, however, that (i) any of such Subject
Information may be disclosed to the Recipient's Representatives (including, but
not limited to, the Recipient's accountants and attorneys) who need to know such
information for the purpose of evaluating any such possible transaction between
the Disclosing Party and the Recipient (it being understood that such
Representatives shall be informed by the Recipient of the confidential nature of
such information and that the Recipient shall direct and cause such persons to
treat such information confidentially); and (ii) any disclosure of such Subject
Information may be made to which the Disclosing Party consents in writing prior
to any such disclosure by Recipient.
SECTION 11.04 Securities Law Concerns. Each Recipient hereby
acknowledges that the Recipient is aware, and the Recipient will advise the
Recipient's Representatives who are informed as to the matters that are the
subject of this Agreement, that the United States securities laws prohibit any
person who has received material, non-public information from an issuer of
securities from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
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SECTION 11.05 Return of Subject Information. In the event of
termination of this Agreement or the Merger Agreement, for any reason, the
Recipient shall promptly return to the Disclosing Party all material containing
or reflecting any of the Subject Information other than information contained in
any application, notice or other document filed with any governmental agency and
not returned to the Recipient by such governmental agency. In making any such
filing, the Recipient will request confidential treatment of such Subject
Information included in any application, notice or other document filed with any
governmental agency.
SECTION 11.06 Specific Performance/Injunctive Relief. Each Recipient
acknowledges that the Subject Information constitutes valuable, special and
unique property of the Disclosing Party critical to its business and that any
breach of Article XI of this Agreement by it will give rise to irreparable
injury to the Disclosing Party that is not compensable in damages. Accordingly,
each Recipient agrees that the Disclosing Party shall be entitled to obtain
specific performance and/or injunctive relief against the breach or threatened
breach of Article XI of this Agreement by the Recipient or its Representatives.
Each Recipient further agrees to waive, and use its reasonable efforts to cause
its Representatives to waive, any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of Article XI of this Agreement, but shall be in
addition to all other remedies available at law or in equity to the Disclosing
Party.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.01 Brokerage Fees and Commissions.
(a) SBB hereby represents to Pacific that, except as set forth on
Schedule 12.01(a), no agent, representative or broker has represented SBB or any
or all of the shareholders in connection with the transactions described in this
Agreement. Pacific shall have no responsibility or liability for any fees,
expenses or commissions payable to any agent, representative or broker of SBB or
any shareholder of SBB, and SBB hereby agrees to indemnify and hold Pacific
harmless for any amounts owed to any agent, representative or broker of SBB or
any shareholder of SBB.
(b) Pacific hereby represents to SBB that, except as set forth on
Schedule 12.01(b), no agent, representative or broker has represented Pacific or
any or all of the shareholders in connection with the transactions described in
this Agreement. SBB shall have no responsibility or liability for any fees,
expenses or commissions payable to any agent, representative or broker of
Pacific or any shareholder of Pacific, and Pacific hereby agrees to indemnify
and hold SBB harmless for any amounts owed to any agent, representative or
broker of Pacific or any shareholder of Pacific.
SECTION 12.02 Entire Agreement. This Agreement and the other
agreements, documents, schedules, exhibits and instruments executed and
delivered by the parties to each other at the Closing constitute the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
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relating to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement, no
conditions, usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter or
contemporaneously herewith made in writing and signed by the party to be bound,
and no modification shall be effected by the acknowledgment or acceptance of
documents containing terms or conditions at variance with or in addition to
those set forth in this Agreement.
SECTION 12.03 Further Cooperation. The parties agree that they will, at
any time and from time to time after the Closing, upon request by the other and
without further consideration, do, perform, execute, acknowledge and deliver all
such further acts, deeds, assignments, assumptions, transfers, conveyances,
powers of attorney, certificates and assurances as may be reasonably required in
order to fully consummate the transactions contemplated hereby in accordance
with this Agreement or to carry out and perform any undertaking made by the
parties hereunder.
SECTION 12.04 Severability. In the event that any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws, then (a) such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision were not a part hereof; (b) the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance from this Agreement; and
(c) there shall be added automatically as a part of this Agreement a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and still be legal, valid and enforceable.
SECTION 12.05 Notices. Any and all payments (other than payments at the
Closing), notices, requests, instructions and other communications required or
permitted to be given under this Agreement after the date hereof by any party
hereto to any other party may be delivered personally or by nationally
recognized overnight courier service or sent by mail or (except in the case of
payments) by telex or facsimile transmission, at the respective addresses or
transmission numbers set forth below and shall be effective (a) in the case of
personal delivery, telex or facsimile transmission, when received; (b) in the
case of mail, upon the earlier of actual receipt or five (5) business days after
deposit in the United States Postal Service, first class certified or registered
mail, postage prepaid, return receipt requested; and (c) in the case of
nationally-recognized overnight courier service, one (1) business day after
delivery to such courier service together with all appropriate fees or charges
and instructions for such overnight delivery. The parties may change their
respective addresses and transmission numbers by written notice to all other
parties, sent as provided in this Section 12.05. All communications must be in
writing and addressed as follows:
IF TO PACIFIC:
Pacific Capital Bancorp
307 Main Street
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Salinas, California 93901
Telecopy: (408) 646-9748
Attention: Mr. Clayton C. Larson,
President and Chief Administrative
Officer
WITH A COPY TO:
Mr. James E. Topinka
Preston Gates & Ellis LLP
One Maritime Plaza
Suite 2400
San Francisco, California 94111
Telecopy: (415) 788-8819
IF TO SBB:
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101-2036
Telecopy: (804) 564-6293
Attention: Mr. David W. Spainhour,
President and Chief Executive Officer
WITH A COPY TO:
Mr. Charles E. Greef
Mr. Peter G. Weinstock
Jenkens & Gilchrist,
a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Telecopy: (214) 855-4300
SECTION 12.06 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA (INCLUDING
THOSE LAWS RELATING TO CHOICE OF LAW) APPLYING TO CONTRACTS ENTERED INTO AND TO
BE PERFORMED WITHIN THE STATE OF CALIFORNIA, WITHOUT REGARD FOR THE PROVISIONS
THEREOF REGARDING CHOICE OF LAW. VENUE FOR ANY CAUSE OF ACTION ARISING FROM THIS
AGREEMENT SHALL LIE IN SANTA BARBARA, CALIFORNIA.
SECTION 12.07 Multiple Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all counterparts hereof so executed by the
parties hereto, whether or not such counterpart shall bear the execution of each
of the parties hereto, shall be deemed to be, and shall be construed as, one and
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the same Agreement. A telecopy or facsimile transmission of a signed counterpart
of this Agreement shall be sufficient to bind the party or parties whose
signature(s) appear thereon.
SECTION 12.08 Certain Definitions.
A. "Affiliate" means, with respect to any person or entity,
any person or entity that, directly or indirectly, controls, is
controlled by, or is under common control with, such person or entity
in question. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common
control with") as used with respect to any person or entity, shall mean
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person or entity,
whether through the ownership of voting securities or by contract or
otherwise.
B. "Subsidiary" means, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of
which are owned directly or indirectly by such entity or any
partnership, joint venture or other enterprise in which any entity has,
directly or indirectly, any equity interest.
C. "Material Adverse Change" means any material adverse change
(excluding the occurrence of expenses in connection with the Merger)
since December 31, 1997 in the business, results of operations,
condition (financial or otherwise), assets, properties, liabilities
(absolute, accrued, contingent or otherwise), reserves of Pacific or
SBB, as the case may be, and their respective Subsidiaries taken as a
whole, and specifically includes, without limitation, with respect to
Pacific, any change that reduces the tangible shareholders' equity of
Pacific below $70,000,000, or, with respect to SBB, any change that
reduces the tangible shareholders' equity of SBB below $118,000,000.
D. "Environmental Laws" mean all federal, state and local
laws, regulations, statutes, ordinances, codes, rules, decisions,
orders or decrees relating or pertaining to the public health and
safety or the environment, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery,
recycling, removal, discharge or disposal of Hazardous Materials,
including, without limitation, the Solid Waste Disposal Act, 42 U.S.C.
6901 et seq., as amended ("SWDA," also known as "RCRA" for a subsequent
amending act), (b) the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., as amended
("CERCLA"), (c) the Clean Water Act, 33 U.S.C. ss.1251 et seq., as
amended ("CWA"), (d) the Clean Air Act, 42 U.S.C. ss.7401 et seq., as
amended ("CAA"), (e) the Toxic Substances Control Act, 15 U.S.C.
ss.2601 et seq., as amended ("TSCA"), (f) the Emergency Planning and
Community Right to Know Act, 15 U.S.C. ss.2601 et seq., as amended
("EPCRKA"), and (g) the Occupational Safety and Health Act, 29 U.S.C.
ss. 651 et seq., as amended.
E. "Hazardous Material" means, without limitation, (a) any
"hazardous wastes" as defined under RCRA, (b) any "hazardous
substances" as defined under CERCLA, (c) any toxic pollutants as
defined under CWA, (d) any hazardous air pollutants as defined under
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CAA, (e) any hazardous chemicals as defined under TSCA, (f) any
hazardous substances or extremely hazardous substances as defined under
EPCRKA, (g) asbestos, (h) polychlorinated biphenyls, (i) underground
storage tanks, whether empty, filled or partially filled with any
substance, (j) any substance the presence of which on the property in
question is prohibited under any Environmental Law, and (k) any other
substance which under any Environmental Law requires special handling
or notification of or reporting to any federal, state or local
governmental entity in its generation, use, handling, collection,
treatment, storage, re-cycling, treatment, transportation, recovery,
removal, discharge or disposal. Notwithstanding the foregoing,
"Hazardous Material" shall not include materials employed in normal
consumer or office uses, such as gasoline, lubricants, printing
materials, cleaners, disinfectants, pesticides, building materials,
fluorescent lights and ballasts, batteries and refrigerants, as long as
such materials are used and stored only in quantities typical of
consumer and office uses.
SECTION 12.09 Specific Performance. Each of the parties hereto
acknowledges that the other parties would be irreparably damaged and would not
have an adequate remedy at law for money damages in the event that any of the
covenants contained in this Agreement were not performed in accordance with its
terms or otherwise were materially breached. Each of the parties hereto
therefore agrees that, without the necessity of proving actual damages or
posting bond or other security, the other party shall be entitled to temporary
and/or permanent injunction or injunctions to prevent breaches of such
performance and to specific enforcement of such covenants in addition to any
other remedy to which they may be entitled, at law or in equity.
SECTION 12.10 Attorneys' Fees and Costs. In the event attorneys' fees
or other costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.
SECTION 12.11 Rules of Construction. Each use herein of the masculine,
neuter or feminine gender shall be deemed to include the other genders. Each use
herein of the plural shall include the singular and vice versa, in each case as
the context requires or as it is otherwise appropriate. The word "or" is used in
the inclusive sense. All articles and sections referred to herein are articles
and sections, respectively, of this Agreement and all exhibits and schedules
referred to herein are exhibits and schedules, respectively, attached to this
Agreement. Descriptive headings as to the contents of particular sections are
for convenience only and shall not control or affect the meaning, construction
or interpretation of any provision of this Agreement. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are and shall be incorporated
herein by reference hereto as though fully set forth herein verbatim.
SECTION 12.12 Binding Effect; Assignment. All of the terms, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors, representatives and permitted assigns. Nothing
expressed or referred to herein is intended or shall be construed to give any
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person other than the parties hereto any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provision herein contained,
it being the intention of the parties hereto that this Agreement, the assumption
of obligations and statements of responsibilities hereunder, and all other
conditions and provisions hereof are for the sole benefit of the parties to this
Agreement and for the benefit of no other person. Nothing in this Agreement
shall act to relieve or discharge the obligation or liability of any third party
to any party to this Agreement, nor shall any provision give any third party any
right of subrogation or action over or against any party to this Agreement. No
party to this Agreement shall assign this Agreement, by operation of law or
otherwise, in whole or in part, without the prior written consent of the other
parties. Any assignment made or attempted in violation of this Section 12.12
shall be void and of no effect.
SECTION 12.13 Public Disclosure. Neither SBB nor Pacific will make,
issue or release any announcement, statement, press release, acknowledgment or
other public disclosure of the existence of, or reveal the terms, conditions or
the status of, this Agreement or the transactions contemplated hereby without
the prior written consent of the other parties to this Agreement; provided,
however, that notwithstanding the foregoing, SBB and Pacific will be permitted
to make any public disclosures or governmental filings as legal counsel may deem
necessary to maintain compliance with or to prevent violations of applicable
federal or state laws or regulations or which may be necessary to obtain
regulatory approval for the transactions contemplated hereby.
SECTION 12.14 Extension; Waiver. At any time prior to the Closing Date,
the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance with any of the agreements or conditions contained herein. Such
action shall be evidenced by a signed written notice given in the manner
provided in Section 12.05 hereof. No party to this Agreement shall by any act
(except by a written instrument given pursuant to Section 12.05 hereof) be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising any right, power or privilege hereunder by any party
hereto shall operate as a waiver thereof. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver of any
party of any right or remedy on any one occasion shall not be construed as a bar
to any right or remedy that such party would otherwise have on any future
occasion or to any right or remedy that any other party may have hereunder.
A-82
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SECTION 12.15 Amendments. To the extent permitted by applicable law,
this Agreement may be amended by action taken by or on behalf of the Board of
Directors of SBB and Pacific at any time before or after adoption of this
Agreement by the shareholders of SBB and Pacific but, after any submission of
this Agreement to such shareholders for approval, no amendment shall be made
that (i) decreases the Merger Consideration to be paid for the Pacific Common
Stock as set forth in Section 1.04 or (ii) materially and adversely affects the
rights of the shareholders of either SBB or Pacific hereunder without the
requisite approval of such shareholders. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by the party against
which enforcement of the amendment, modification or supplement is sought.
SECTION 12.16 Access; Due Diligence.
(a) Subject to the confidentiality provisions of Article XI, Pacific
shall, for a period of forty-five (45) calendar days following the date of this
Agreement, afford the officers, directors, employees, attorneys, accountants,
investment bankers and authorized representatives of SBB full access to the
properties, books, contracts and records of Pacific in order to conduct due
diligence of Pacific to assess the condition and results of operations of
Pacific.
(b) Subject to the confidentiality provisions of Article XI, SBB shall,
for a period of forty-five (45) calendar days following the date of this
Agreement, afford the officers, directors, employees, attorneys, accountants,
investment bankers and authorized representatives of Pacific full access to the
properties, books, contracts and records of SBB in order to conduct due
diligence of SBB to assess the condition and results of operations of SBB.
[Signatures Follow]
A-83
<PAGE>
IN WITNESS WHEREOF, SBB and Pacific have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SANTA BARBARA BANCORP
By: /s/ William S. Thomas, Jr.
------------------------------------------
William S. Thomas, Jr., Vice Chairman and
Chief Operating Officer
and
By: /s/ Kent M. Vining
------------------------------------------
Kent M. Vining, Senior Vice President
PACIFIC CAPITAL BANCORP
By: /s/ D. Vernon Horton
------------------------------------------
D. Vernon Horton, Chairman of the Board
and Chief Executive Officer
and
By: /s/ Clayton C. Larson
------------------------------------------
Clayton C. Larson, President and
Chief Administrative Officer
A-84
<PAGE>
APPENDIX B
----------
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), is made
and entered into as of the 29th day of July, 1998, by and between Santa Barbara
Bancorp, a California corporation and registered bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA") with its principal
offices at 1021 Anacapa Street, Santa Barbara, California 93101 ("SBB") and
Pacific Capital Bancorp, a California corporation and registered bank holding
company under the BHCA with its principal offices at 307 South Main Street,
Salinas, California ("Pacific").
W I T N E S S E T H:
WHEREAS, Pacific is a California corporation duly organized and exist-
ing under the laws of the State of California; and
WHEREAS, SBB is a California corporation duly organized and existing
under the laws of the State of California; and
WHEREAS, SBB and Pacific desire to combine their respective businesses;
and
WHEREAS, in furtherance of the combination of their respective
businesses, SBB and Pacific desire that Pacific shall be merged with and into
SBB, under the articles of incorporation of SBB and with the resulting name
"Pacific Capital Bancorp" (SBB as it will exist from and after the Effective
Date (defined herein) being referred to herein as the "Surviving Corporation"),
and that (i) all of the issued and outstanding shares of common stock of Pacific
(other than shares held by dissenting shareholders, fractional share interests
and as otherwise set forth herein) shall be converted into and exchanged for
shares of common stock of the Surviving Corporation, (ii) all outstanding
options to acquire common stock of Pacific shall be converted into options to
acquire common stock of the Surviving Corporation, and (iii) all of the issued
and outstanding shares of capital stock of SBB shall continue to be issued and
outstanding shares of capital stock of the Surviving Corporation, all pursuant
this Merger Agreement; and
WHEREAS, pursuant to the authority given by and in accordance with the
provisions of the California General Corporate Law, as amended (the "GCL"), a
majority of the members of the respective Boards of Directors of SBB and Pacific
have approved this Merger Agreement and the proposed transactions on the terms
and conditions set forth in this Merger Agreement and the schedules hereto and
have authorized the execution hereof; and
B-1
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WHEREAS, SBB and Pacific desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement and certain additional agreements
related to the transactions contemplated hereby.
NOW, THEREFORE, for and in consideration of the foregoing premises, and
subject to the following terms and conditions, the parties hereto undertake,
promise, covenant and agree with each other as follows:
1. Merger of Pacific and SBB. On the Effective Date (as defined in
Section 15), Pacific shall be merged with and into SBB pursuant to the
provisions of Section 1107 of the GCL (the "Merger"). SBB shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of California. Upon consummation
of the Merger, the separate corporate existence of Pacific shall terminate.
2. Effects of the Merger. The Merger shall have the effects as set
forth in Section 1107 of the GCL. The Surviving Corporation shall be deemed to
be the successor to each of SBB and Pacific; shall be subject to all the
liabilities, obligations, duties and relations of each merging corporation; and
shall without the necessity of any conveyance, assignment or transfer, become
the owner of all of the assets of every kind and character formerly belonging to
SBB and Pacific. Except as provided in Section 3 herein, on the Effective Date
the Articles of Incorporation and Bylaws of SBB shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation until the same shall be
amended in accordance with applicable law.
3. Amendment to Articles of Incorporation of Surviving Corporation. On
the Effective Date, Article One to the Articles of Incorporation of the
Surviving Corporation as specified in Section 2 hereof shall be amended to
provide that the name of the Surviving Corporation shall be "Pacific Capital
Bancorp".
4. Directors and Officers. The directors and officers of the Surviving
Corporation at the Effective Date shall be as set forth on Schedule One to this
Agreement and each of such persons shall hold office from the Effective Date
until their respective successors are duly elected or appointed and qualified in
the manner provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation or as otherwise provided by law.
5. Conversion of the Pacific Common Stock.
(a) On the Effective Date, by virtue of the Merger and without any
action on the part of the holders of the following-described security, each
share of the common stock, no par value per share, of Pacific (the "Pacific
Common Stock") issued and outstanding immediately prior to the Effective Date
(other than shares of Pacific Common Stock (i) as to which dissenters' rights
have been perfected, or (ii) held directly or indirectly by Pacific or SBB
(except for Trust Account Shares or DPC Shares as defined in Section 5(d)) shall
be converted into the right to receive 1.935 shares (the "Exchange Ratio") of
the fully-paid, nonassessable and registered common stock, no par value per
share, of SBB (the "SBB Common Stock") (together with any cash payment in lieu
of fractional shares, as provided below, the "Merger Consideration").
B-2
<PAGE>
(b) No fractional shares of SBB Common Stock shall be issued and, in
lieu thereof, holders of shares of Pacific Common Stock who would otherwise be
entitled to a fractional share interest (after taking into account all shares of
Pacific Common Stock held by such holder) shall be paid an amount in cash equal
to the product of such fractional share interest and the average of the closing
bid and asked price of a share of SBB Common Stock on the Nasdaq National Market
on the business day immediately preceding the Effective Date.
(c) All of the shares of Pacific Common Stock converted into SBB Common
Stock pursuant to this Section 5 shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist as of the
Effective Date, and each certificate (each a "Certificate") previously
representing any such shares of Pacific Common Stock shall thereafter represent
the right to receive (i) a certificate representing the number of whole shares
of SBB Common Stock and (ii) cash in lieu of fractional shares into which the
shares of Pacific Common Stock represented by such Certificate have been
converted pursuant to this Section 5. Certificates previously representing
shares of Pacific Common Stock shall be exchanged for certificates representing
whole shares of SBB Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates to the Exchange
Agent, without any interest thereon. Such certificates representing whole shares
of SBB Common Stock exchanged for certificates previously representing shares of
Pacific Common Stock shall bear the name of the Surviving Corporation.
(d) On the Effective Date, all shares of Pacific Common Stock that are
owned, directly or indirectly, by Pacific or SBB or any of their respective
subsidiaries (other than (i) shares of Pacific Common Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Pacific Common Stock which are similarly held, whether
held directly or indirectly by Pacific or SBB, as the case may be, being
referred to herein as "Trust Account Shares") and (ii) shares of Pacific Common
Stock held by Pacific or any of its subsidiaries in respect of a debt previously
contracted (any such shares being referred to herein as "DPC Shares")) shall be
canceled and shall cease to exist and no stock of SBB or other consideration
shall be delivered in exchange therefor. All shares of SBB Common Stock that are
owned by Pacific or any of its subsidiaries (other than Trust Account Shares and
DPC Shares with respect to SBB Common Stock) shall be retired.
(e) If, between the date hereof and the Effective Date, the outstanding
shares of SBB Common Stock or Pacific Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar change in
capitalization (a "Share Adjustment"), then the number of shares of SBB Common
Stock into which a share of Pacific Common Stock shall be converted pursuant to
subsection (a) above shall be appropriately and proportionately adjusted so that
each shareholder of Pacific shall be entitled to receive such number of shares
of SBB Common Stock as such shareholder would have received pursuant to such
Share Adjustment had the record date therefor been immediately following the
Effective Date.
B-3
<PAGE>
(f) If any of the shares of Pacific Common Stock are "dissenting
shares" as defined under applicable provisions of Chapter 13 of the GCL, any
Certificate representing such shares shall not be converted as described in this
Section 5, but from and after the Effective Date shall represent only the right
to receive such value as may be determined pursuant to Chapter 13 of the GCL;
provided, however, that each dissenting share of Pacific Common Stock which
shall cease to be a dissenting share shall have only such rights as are provided
under the GCL.
6. SBB Common Stock. On and after the Effective Date, each share of SBB
Common Stock issued and outstanding immediately prior to the Closing Date shall
remain an issued and outstanding share of common stock of the Surviving
Corporation and shall not be affected by the Merger. References to SBB Common
Stock in this Merger Agreement as of and after the Effective Date shall be
deemed to mean the common stock of the Surviving Corporation.
7. Stock Options.
(a) On the Effective Date, each non-statutory option to purchase shares
of Pacific Common Stock granted pursuant to a stock option plan maintained by
Pacific and which is outstanding and unexercised immediately prior thereto shall
cease to represent a right to acquire shares of Pacific Common Stock and shall
be assumed by the Surviving Corporation and converted automatically into an
option to purchase shares of SBB Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of the
stock option plans of Pacific and the agreements evidencing grants thereunder):
(i) The number of shares of SBB Common Stock to be subject to
the converted option shall be equal to the product of the number of
shares of Pacific Common Stock subject to the original option and the
Exchange Ratio (provided that such number of shares shall be rounded to
the nearest one one-hundredth of a share); and
(ii) The exercise price per share of SBB Common Stock under
the converted option shall be equal to the exercise price per share of
Pacific Common Stock under the original option divided by the Exchange
Ratio (provided that such exercise price shall be rounded to the
nearest one one-hundredth of a dollar).
(b) On the Effective Date, each option to purchase shares of Pacific
Common Stock granted pursuant to a stock option plan maintained by Pacific and
which is an "incentive stock option" (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) and which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Pacific Common Stock and shall be assumed by the Surviving
Corporation and converted automatically into an option to purchase shares of SBB
Common Stock in an amount and at an exercise price determined in a manner which
is consistent with Section 424(a) of the Code. The duration and other terms of
the converted option shall be the same as the original option, except that all
references to Pacific shall be deemed to be references to the Surviving
Corporation.
B-4
<PAGE>
8. Stock Transfer Books. On the Effective Date, the stock transfer
books of Pacific shall be closed, and no transfer of Pacific Common Stock
theretofore outstanding shall thereafter be made.
9. The Shareholders' Meetings. The Merger shall be submitted to the
shareholders of the each of SBB and Pacific at meetings to be called and held as
promptly as practicable. Upon approval of the Merger by the requisite vote of
the shareholders of each of SBB and Pacific, this Merger Agreement shall be made
effective as soon as practicable thereafter in the manner provided in Section 15
hereof.
10. Dissenters' Rights. Any shareholder of Pacific who perfects his or
her dissenter's rights in accordance with the provisions of Chapter 13 of the
GCL shall be governed by such provisions of law.
11. Conditions to Consummation of the Merger. Consummation of the
Merger as provided herein shall be conditioned upon: (i) consummation of the
Agreement and Plan of Reorganization by and between SBB and Pacific, (ii) the
receipt of all consents, orders and approvals and satisfaction of all other
requirements prescribed by law which are necessary for the consummation of the
Merger, including without limitation, the approval of the Board of Governors of
the Federal Reserve System.
12. Termination. This Merger Agreement may be terminated and abandoned
at any time prior to or on the Closing Date, whether before or after action
thereon by the shareholders of SBB and Pacific, by mutual consent of the Boards
of Directors of both SBB and Pacific.
13. Effect of Termination. In the event of the termination and
abandonment of this Merger Agreement pursuant to the provisions of Section 12
hereof, the same shall be of no further force or effect and there shall be no
liability by reason of this Merger Agreement or the termination thereof on the
part of either SBB, Pacific or the directors, officers, employees, agents or
stockholders of either of them.
14. Waiver and Amendment. Any of the terms or conditions of this
Merger Agreement may be waived at any time, whether before or after action
thereon by the shareholders of SBB and Pacific, by the party that is entitled to
the benefits thereof. This Merger Agreement may be amended by action taken by or
on behalf of the board of directors of SBB and Pacific at any time before or
after adoption of this Merger Agreement by the shareholders of SBB and Pacific
but, after any submission of this Agreement to such shareholders for approval,
no amendment shall be made that (i) decreases the Merger Consideration to be
paid for the Pacific Common Stock as set forth in Section 5, or (ii) materially
and adversely affects the rights of the shareholders of either SBB or Pacific
hereunder without the requisite approval of such shareholders. Any waiver,
modification or amendment of this Merger Agreement shall be in writing.
15. Effective Date. Subject to the terms, and upon satisfaction on or
before the Closing Date of all requirements of law, and the conditions specified
in this Merger Agreement, the Merger shall become effective on the date speci-
fied in the Certificate of Merger to be issued by the Secretary of State of the
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<PAGE>
date specified in the Certificate of Merger to be issued by the Secretary of
State of the State of California under the seal of his office, such date being
herein called the "Effective Date."
16. Multiple Counterparts. For the convenience of the parties hereto,
this Merger Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all counterparts hereof so executed by the
parties hereto, whether or not such counterpart shall bear the execution of each
of the parties hereto, shall be deemed to be, and shall be construed as, one and
the same Merger Agreement. A telecopy or facsimile transmission of a signed
counterpart of this Merger Agreement shall be sufficient to bind the party or
parties whose signature(s) appear thereon.
17. Governing Law. THIS MERGER AGREEMENT SHALL BE CONSTRUED IN ACCORD-
ANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
18. Further Assurances. Each party hereto agrees from time to time, as
and when requested by the other party hereto, or by its successors or assigns,
to execute and deliver, or cause to be executed and delivered, all such deeds
and instruments and to take or cause to be taken such further or other acts,
either before or after the Effective Date, as may be deemed necessary or
desirable in order to vest in and confirm to the Surviving Corporation title to
and possession of any assets of SBB or Pacific acquired or to be acquired by
reason of or as a result of the Merger and otherwise to carry out the intent and
purposes hereof, and the officers and directors of the parties hereto are fully
authorized in the name of their respective corporate names to take any and all
such actions.
19. Assignment. This Merger Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, but no party to this Merger Agreement shall assign this Merger
Agreement, by operation of law or otherwise, in whole or in part, without the
prior written consent of the other parties. Any assignment made or attempted in
violation of this Section 19 shall be void and of no effect.
20. Severability. In the event that any provision of this Merger
Agreement is held to be illegal, invalid or unenforceable under present or
future laws, then (a) such provision shall be fully severable and this Merger
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were not a part hereof; (b) the remaining provisions of
this Merger Agreement shall remain in full force and effect and shall not be
affected by such illegal, invalid or unenforceable provision or by its severance
from this Merger Agreement; and (c) there shall be added automatically as a part
of this Merger Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and still be legal, valid
and enforceable.
21. Specific Performance. Each of the parties hereto acknowledges that
the other parties would be irreparably damaged and would not have an adequate
remedy at law for money damages in the event that any of the covenants contained
in this Merger Agreement were not performed in accordance with its terms or
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<PAGE>
otherwise were materially breached. Each of the parties hereto therefore agrees
that, without the necessity of proving actual damages or posting bond or other
security, the other party shall be entitled to temporary and/or permanent
injunction or injunctions to prevent breaches of such performance and to
specific enforcement of such covenants in addition to any other remedy to which
they may be entitled, at law or in equity.
22. Rules of Construction. Descriptive headings as to the contents of
particular sections are for convenience only and shall not control or affect the
meaning, construction or interpretation of any provision of this Merger
Agreement. Each use herein of the masculine, neuter or feminine gender shall be
deemed to include the other genders. Each use herein of the plural shall include
the singular and vice versa, in each case as the context requires or as it is
otherwise appropriate.
The word "or" is used in the inclusive sense.
23. Articles, Sections, Exhibits and Schedules. Unless otherwise
indicated, all articles and sections referred to herein are articles and
sections, respectively, of this Merger Agreement, and all exhibits referred to
herein are exhibits attached to this Merger Agreement. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments referred to herein or attached hereto are and shall be incorporated
herein by reference hereto as though fully set forth herein verbatim.
24. Binding Effect. All of the terms, covenants, representations,
warranties and conditions of this Merger Agreement shall be binding upon, and
inure to the benefit of and be enforceable by, the parties hereto and their
respective successors, representatives and permitted assigns. Nothing expressed
or referred to herein is intended or shall be construed to give any person other
than the parties hereto any legal or equitable right, remedy or claim under or
in respect of this Merger Agreement, or any provision herein contained, it being
the intention of the parties hereto that this Merger Agreement, the assumption
of obligations and statements of responsibilities hereunder, and all other
conditions and provisions hereof are for the sole benefit of the parties to this
Merger Agreement and for the benefit of no other person. Nothing in this Merger
Agreement shall act to relieve or discharge the obligation or liability of any
third party to any party to this Merger Agreement, nor shall any provision give
any third party any right of subrogation or action over or against any party to
this Merger Agreement.
[Signatures Follow]
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<PAGE>
IN WITNESS WHEREOF, SBB and Pacific have caused this Merger Agreement
to be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed as of the date first above written, and
the directors constituting a majority of the Board of Directors of such
corporations have hereunto subscribed their names.
PACIFIC CAPITAL BANCORP
/s/ D. Vernon Horton
-------------------------------------------
D. Vernon Horton, Chairman of the Board and
Chief Executive Officer
and
/s/ Dennis A. CeCius
-------------------------------------------
Dennis A. DeCius, Assistant Secretary
The Directors of
PACIFIC CAPITAL BANCORP
Salinas, California
/s/ Charles E. Bancroft /s/ Gene Dicicco
- ------------------------ ---------------------------
Charles E. Bancroft Gene Dicicco
/s/ Lewis L. Fenton /s/ Gerald T. Fry
- ------------------------ ---------------------------
Lewis L. Fenton Gerald T. Fry
/s/ Eugene R. Guglielmo
- ------------------------ ---------------------------
Eugene R. Guglielmo James L. Gattis
/s/ Stanley R. Haynes /s/ Hubert W. Hudson
- ------------------------ ---------------------------
Stanley R. Haynes Hubert W. Hudson
/s/ William J. Keller /s/ Roger C. Knopf
- ------------------------ ---------------------------
William J. Keller Roger C. Knopf
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<PAGE>
/s/ William S. McAfee /s/ William H. Pope
- ------------------------ ---------------------------
William S. McAfee William H. Pope
/s/ Mary Lou Rawitser /s/ William K. Sambrailo
- ------------------------ ---------------------------
Mary Lou Rawitser William K. Sambrailo
/s/ Robert B. Sheppard
- ------------------------
Robert B. Sheppard
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<PAGE>
SANTA BARBARA BANCORP
/s/ Donald M. Anderson
-----------------------------------------
Donald M. Anderson, Chairman of the Board
and
/s/ Jay D. Smith
-----------------------------------------
Jay D. Smith, Corporate Secretary
The Directors of
SANTA BARBARA BANCORP
Santa Barbara, California
/s/ Donald M. Anderson /s/ David W. Spainhour
- --------------------------- ---------------------------
Donald M. Anderson David W. Spainhour
/s/ William S. Thomas, Jr. /s/ Frank Barranco, M.D.
- --------------------------- ---------------------------
William S. Thomas, Jr. Frank Barranco, M.D.
/s/ Edward E. Birch
- --------------------------- ---------------------------
Edward E. Birch, Ph.D. Terrill F. Cox
/s/ Richard M. Davis
- --------------------------- ---------------------------
Richard M. Davis Anthony Guntermann
/s/ Dale E. Hanst /s/ Harry B. Powell
- --------------------------- ---------------------------
Dale E. Hanst Harry B. Powell
/s/ Susan Trescher
- ---------------------------
Susan Trescher
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<PAGE>
SCHEDULE ONE
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
DIRECTORS
Donald M. Anderson - Chairman
Frank Barranco, M.D.
Edward E. Birch, Ph.D
Terrill F. Cox
Richard M. Davis
Anthony Guntermann
Dale E. Hanst
D. Vernon Horton
Roger C. Knopf
Clayton C. Larson
William H. Pope
Harry Powell
David W. Spainhour
William S. Thomas, Jr.
Susan Trescher
OFFICERS
Donald M. Anderson - Chairman
David W. Spainhour - President
William S. Thomas, Jr. - Vice Chairman and Chief Operating Officer
D. Vernon Horton - Vice Chairman
Clayton C. Larson - Vice Chairman
David A. Abts - Executive Vice President
Donald E. Barry - Executive Vice President
Donald Lafler - Senior Vice President and Chief Financial
Officer
John J. McGrath - Senior Vice President
Jay D. Smith - Senior Vice President, General Counsel
and Corporate Secretary
Catherine R. Steinke - Senior Vice President
Kent M. Vining - Senior Vice President and Strategic
Planning Officer
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<PAGE>
APPENDIX C
----------
SANTA BARBARA STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of July 20, 1998 (the
"Agreement"), is by and between Santa Barbara Bancorp, a California corporation
("Issuer"), and Pacific Capital Bancorp, a California corporation ("Grantee").
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Reorganization dated as of July 20, 1998 (the "Merger Agreement") providing for,
among other things, the merger of Grantee with and into Issuer, with Issuer as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant 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 Merger 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 Merger Agreement.
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
3,002,505 shares (the "Option Shares") of common stock of Issuer, no par value
("Issuer Common Stock"), at a purchase price per Option Share (the "Purchase
Price") equal to $30.00; provided, however, that in no event shall the number of
shares of Issuer Common Stock for which this Option is exercisable exceed 19.5%
of the Issuer's issued and outstanding shares of Common Stock. The number of
shares of Issuer Common Stock that may be received upon the exercise of the
Option and the Purchase Price are subject to adjustment as herein set forth.
3. Exercise of Option.
(a) Provided that (i) Grantee shall not be in material breach of the
agreements or covenants contained in this Agreement or the Merger Agreement, and
(ii) no preliminary or permanent injunction or other order against the delivery
of the Option Shares issued by any court of competent jurisdiction in the United
States shall be in effect, Grantee 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 or effect upon the earlier to occur of (A) the Effective
Time of the Merger, (B) the termination of the Merger Agreement in accordance
with the terms thereof before the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a termination of the Merger Agreement by
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Grantee pursuant to Section 9.02(e), 9.02(f) or 9.02(m) of the Merger Agreement
(an "Issuer Termination")); (C) the close of business on the 365th day after the
occurrence of an Issuer Termination; and (D) the close of business on the 365th
day after termination of the Merger Agreement (other than an Issuer Termination)
following the occurrence of a Purchase Event or a Preliminary Purchase Event
(hereinafter sometimes referred to as the "Termination Date"); provided that any
purchase of Option Shares upon the exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956 (the "BHCA"), and any other required consent of any
regulatory authority. The rights set forth in Section 8 of this Agreement shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) without Grantee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed or publicly announced
an intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term "Acquisition Transaction" shall mean (A) any
tender offer for more than 50% of the outstanding shares of Issuer,
(B) any merger or consolidation of Issuer with or into any entity
other than Grantee or a subsidiary of Grantee, (C) any sale of all or
substantially all of the assets of Issuer, (D) any reorganization of
Issuer or other transaction that results or when completed would
result in a disposition of substantially all of the assets of Issuer,
or (E) the issuance, sale or other disposition of shares representing
more than 50% of the shares of Issuer.
(ii) 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 Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of, or the right to acquire
beneficial ownership of, or any "group" (as such term is defined
under the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of more than
50% of the shares of Issuer.
(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 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 of 1933, as amended (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 more than 50% 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
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement in accordance with all applicable law,
the Articles of Incorporation or Bylaws of the Issuer or any other
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agreement or, contract or law to which such holders of Issuer Common
Stock are subject, including, if applicable, but not limited to, at
the meeting of such shareholders held for the purpose of voting on
the Merger Agreement, such meeting shall not have been held or shall
have been canceled prior to termination of the Merger 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 Merger 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 dis-
closed an intention to make, a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer
or (C) filed an application (or given a notice), whether in draft or
final form, under applicable banking or corporate law or any other
applicable law, including, without limitation, the BHCA, seeking
approval to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Grantee to exercise the Option.
(e) In the event Grantee wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) subject to the next sentence, a
place and date not earlier than three (3) business days nor later than fifteen
(15) business days after the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or consent of any
regulatory authority is required in connection with such purchase, then,
notwithstanding the prior occurrence of the Termination Date, the Closing Date
shall be extended for such period as shall be necessary to enable such prior
notification or consent to occur or to be obtained (and the expiration of any
mandatory waiting period). Issuer shall co-operate with Grantee in the filing of
any applications or documents necessary to obtain any required consent or in
connection with any required prior notification and the Closing shall occur
immediately following receipt of such consent (or the filing of any such prior
notification and the expiration of any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Grantee 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 herein.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a)
above, (i) Issuer shall deliver to Grantee (A) a certificate or certificates
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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 subject to no pre-emptive rights, and (B) if the Option
is exercised in part only, a new Stock Option Agreement, executed by Issuer,
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)
Grantee shall deliver to Issuer a letter agreeing that Grantee shall not offer
to sell or otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JULY 20, 1998. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificates without such legend if Grantee shall have delivered
to Issuer 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.
(d) Upon the giving by Grantee to Issuer of the written notice of
exercise of the Option provided for under Section 3(e) of this Agreement, the
tender of the applicable Purchase Price in immediately available funds and the
tender of this Agreement to Issuer, Grantee shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Grantee. Issuer shall pay all expenses, and any and all
United States federal, state, and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section in the name of Grantee or its assignee,
transferee, or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
pre-emptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by amendment to its Articles of Incorporation or
Bylaws 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, (iii) promptly to take all action as may from
time to time be required (including (A) complying (if applicable) with all pre
merger notification, reporting and waiting period requirements specified in 15
U.S.C. ss. 18a and regulations promulgated thereunder and (B) in the event,
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under any federal or state law, prior notice to or consent of any regulatory
authority is necessary before the Option may be exercised co-operating fully
with Grantee in preparing any required application or notice and providing such
information to such regulatory authority as such regulatory authority may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto, and (iv)
promptly to take all action provided herein to protect the rights of Grantee
against dilution.
5. Representations and Warranties 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.
(b) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee 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 of this Agreement 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 of this Agreement, 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 pre-emptive right of any shareholder of Issuer.
(c) No Violation. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation pursuant to any provisions of the
Articles of Incorporation or By-laws of Issuer or, subject to obtaining any
approvals or consents contemplated hereby, result in any violation of any loan
or credit agreement, note, mortgage, indenture, lease, plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Issuer or its
properties or assets which violation would have a Material Adverse Effect on the
Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
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(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter to this Agreement and, subject to any approvals or consents
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 Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) Purchase Not for Distribution. 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.
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 agreements governing
such transaction so that Grantee shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Grantee 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 (other than 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, the Option, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equals
19.5% 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.
(b) In the event that, prior to the Termination Date, Issuer shall
enter in 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 where 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 assets 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, upon the consummation
of any such transaction and upon the terms and conditions set forth
herein, the Option, notwithstanding the fact that as of the date of
consummation of such transaction the Termination Date shall have
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occurred, shall be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls
the Acquiring Corporation, or (z) in the case of a merger described in
clause (ii), the Issuer (in each case, such entity being referred to as
the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, because of the
applicability of any law or regulation, have the exact terms as the Option, such
terms shall be as similar as possible and in no event less advantageous to
Grantee. The 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, 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 hereinafter defined) as is equal to
the Assigned Value (as 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 hereinafter defined). The exercise price of
each share of Substitute Common Stock subject to the Substitute Option (the
"Substitute Purchase Price") shall 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 for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with respect to
which Issuer is one of the parties (if other than Issuer), (y) the
Issuer in a consolidation or merger or in which the Issuer is the
continuing or surviving corporation, and (z) the transferee of all or
any substantial part of the Issuer's assets.
(ii) "Assigned Value" shall mean the highest of (x) 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), (y) the price per share of the Issuer Common Stock to be
paid by any person (other than the Grantee) pursuant to an agreement
with Issuer, or (z) the highest last sales price per share of Issuer
Common Stock quoted on any national securities exchange (including
the NASDAQ - National Market System) (or if Issuer Common Stock is
not quoted on any such national securities exchange, 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) within the six-month period
immediately preceding the agreement described in Section 7(b) above;
provided, however, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee, divided by the number of
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shares of the Issuer Common Stock outstanding at the time of such
sale. In the event a Tender Offer or 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 re-
cognized investment banking firm mutually selected by Grantee and
Issuer (or if applicable, Acquiring Corporation), provided that if a
mutual selection cannot be made as to such investment banking firm,
it shall be selected by Grantee.
(iii) "Average Price" shall mean the average last sales price
of a share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, as quoted on
any national securities exchange (including the NASDAQ - National
Market System), and if the Substitute Common Stock is not quoted on any
such national securities exchange, the average of the bid price for the
one year period described above, as quoted on the principal trading
market or securities exchange on which such Substitute Common Stock is
traded, as reported by a recognized source, as chosen by Grantee, but
in no event higher than the last sales price or closing price or the
bid 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 person, as Grantee may elect.
(iv) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon the exercise of the
Substitute Option.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.5% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.5% 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 amount of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (f) in excess of (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee.
(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 assumes in writing all of the obligations of
Issuer hereunder and takes 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 distinguished from or have lesser economic value
(other than any diminution resulting from the fact that the Substitute Common
Stock is "restricted securities" within the meaning of Rule 144 under the
Securities Act) than other shares of common stock issued by the Substitute
Option Issuer).
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(h) The provisions of Sections 8, 9 and 10 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," and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option, " "Substitute Purchase Price, " and "Substitute Common Stock, "
respectively.
8. Repurchase at the Option of Grantee.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at
the request of Grantee at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending at the close of
business 365 days thereafter, Issuer shall repurchase from Grantee the Option
and all shares of Issuer Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 8 is referred to as the "Request
Date". Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any
shares of Issuer Common Stock acquired pursuant to complete or partial
exercise of the Option with respect to which Grantee then has
beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock 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) 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 Grantee
for each share of Issuer Common Stock with respect to which the Option
has been exercised and with respect to which Grantee then has
beneficial ownership, multiplied by the number of such shares.
(b) If Grantee exercises its rights under this Section 8, Issuer shall,
within ten (10) business days after the Request Date, pay the Section 8
Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Grantee then has beneficial ownership, and
Grantee 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. Notwithstanding the foregoing, to the
extent that prior notification to or consent of any regulatory authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, or Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify
Grantee and thereafter deliver from time to time, and as permitted by applicable
law or regulation, that portion of the Section 8 Repurchase Consideration that
it is not then so prohibited from paying within five business days after the
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the date on which Issuer is no longer prohibited; provided, however, that if
Issuer at any time is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Grantee the Section
8 Repurchase Consideration, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required consents of regulatory authorities and to
file any required notices as promptly as practicable in order to accomplish such
repurchase), the Grantee may, at its option, revoke its request that Issuer re-
purchase the Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to
the Grantee that portion of the Section 8 Repurchase Consideration that Issuer
is not prohibited from delivering; and (ii) deliver, to the Grantee either (A) a
new Stock Option Agreement evidencing the right of Issuer to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Stock Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Section 8 Repurchase Consideration less the portion thereof
theretofore delivered to the Grantee and the denominator of which is the Section
8 Repurchase Consideration, or (B) a certificate for the Option Shares it is
then prohibited from repurchasing.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the Termination Date of this
Option pursuant to Section 3(a) of this Agreement.
(c) 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(d)(i) below; (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) above; or (iii) the highest
last sales price per share of Issuer Common Stock quoted on any national
securities exchange (including the NASDAQ - National Market System) (or if
Issuer Common Stock is not quoted on any such national securities exchange, the
highest bid price per share 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) during the sixty (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 and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment banking firm selected
by Grantee, 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 Grantee and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) 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 l3d-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) shall have been formed which
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beneficially owns or has the right to acquire beneficial ownership of, more than
50% 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) of this Agree-
ment shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of subparagraph (c) below, if requested by Grantee, as expeditiously as possible
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 Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee 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.
(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 Grantee
(and any permitted transferee) of its intention to do so and, upon the written
request of Grantee (or any such permitted transferee of Grantee) 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 Grantee (or such permitted transferee)), Issuer will cause
all such shares, the holders of which shall have requested participation in such
registration, to be so registered and included in such underwritten public
offering; provided, that the Issuer may elect not to cause all of the shares for
which the Grantee has requested participation in such registration to be
registered and included in such underwritten public offering if the
underwriters, for good business reasons and in good faith, object to such
inclusion.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in
subparagraph (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, Issuer shall not be required to register
Option Shares under the Securities Act pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement, and (b) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year; and
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which
the holder or holders of the Option Shares concerned were afforded
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the opportunity to register such shares under the Securities Act and
such shares were registered as requested.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of 180 days
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.
(d) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all of its expenses (including, without limitation,
registration fees, qualification fees, blue sky fees and expenses, legal
expenses, printing expenses and the costs of special audits or "cold comfort"
letters, expenses of underwriters, excluding discounts and commissions but
including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to subparagraph (a)
or (b) above; provided, however, that fees and expenses of counsel to the
Grantee and any other expenses incurred by the Grantee in connection with such
registration shall be borne by the Grantee.
(e) Indemnification. In connection with any registration under
subparagraph (a) or (b) above Issuer hereby indemnifies the holder of the Option
Shares, 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 expressly
for use therein, and Issuer and each officer, director and controlling person of
Issuer shall be indemnified by such holder of the Option Shares, 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 subparagraph
(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
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indemnifying party under this subparagraph (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
subparagraph (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 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 indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. 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 subparagraph (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 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 the holders of the
Option Shares 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 subparagraph (a) or (b)
above, Issuer and each holder of any Option Shares (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (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 holder thereof in
accordance with and to the extent permitted by any rule or regulation
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or regulation promulgated by the SEC from time to time. Issuer shall at its
expense provide the holder of any Option Shares 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.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Grantee harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation or
trading or listing on any national securities exchange (including the NASDAQ -
National Market System) or any securities exchange, Issuer, upon the request of
Grantee, will promptly file an application, if required, to authorize for
quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on any such national
securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for 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 "Agreement" and "Option" as used herein
include 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.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 of this
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including 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 if
such waiver is in writing. 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; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
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understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, 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.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to 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 Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) 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.
(e) Descriptive Heading. 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.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or a such other address
for a party as shall be specified by like notice):
IF TO ISSUER TO:
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101-2036
Telecopy: (804) 564-6293
Attention: Mr. David W. Spainhour,
President and Chief Executive Officer
WITH A COPY TO:
Mr. Charles E. Greef
Mr. Peter G. Weinstock
Jenkens & Gilchrist,
a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Telecopy: (214) 855-4300
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IF TO GRANTEE TO:
Pacific Capital Bancorp
307 Main Street
Salinas, California 93901
Telecopy: (408) 646-9748
Attention: Mr. Clayton C. Larson,
President and Chief Administrative
Officer
WITH A COPY TO:
Mr. James E. Topinka
Preston Gates & Ellis LLP
One Maritime Plaza
Suite 2400
San Francisco, California 94111
Telecopy: (415) 788-8819
(g) Counterparts. This Agreement and any amendments hereto may be
executed in multiple 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.
(h) 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 (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
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 assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee 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.
(j) 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.
[Signatures Follow]
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first written above.
PACIFIC CAPITAL BANCORP
By: /s/ D. Vernon Horton
----------------------------------------
D. Vernon Horton, Chairman of the Board
and Chief Executive Officer
and
By: /s/ Clayton L. Larson
----------------------------------------
Clayton C. Larson, President and
Chief Administrative Officer
SANTA BARBARA BANCORP
By: /s/ William S. Thomas, Jr.
----------------------------------------
William S. Thomas, Jr., Vice Chairman
and Chief Operating Officer
and
By: /s/ Kent M. Vining
----------------------------------------
Kent M. Vining, Senior Vice President
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APPENDIX D
----------
PACIFIC STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of July 20, 1998
(the "Agreement"), is by and between Pacific Capital Bancorp, a California
corporation ("Issuer"), and Santa Barbara Bancorp, a California corporation
("Grantee").
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Reorganization dated as of July 20, 1998 (the "Merger Agreement") providing for,
among other things, the merger of Issuer with and into Grantee, with Grantee as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant 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 Merger 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 Merger Agreement.
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
878,269 shares (the "Option Shares") of common stock of Issuer, no par value
("Issuer Common Stock"), at a purchase price per Option Share (the "Purchase
Price") equal to $58.00; provided, however, that in no event shall the number of
shares of Issuer Common Stock for which this Option is exercisable exceed 19.5%
of the Issuer's issued and outstanding shares of Common Stock. The number of
shares of Issuer Common Stock that may be received upon the exercise of the
Option and the Purchase Price are subject to adjustment as herein set forth.
3. Exercise of Option.
(a) Provided that (i) Grantee shall not be in material breach of the
agreements or covenants contained in this Agreement or the Merger Agreement, and
(ii) no preliminary or permanent injunction or other order against the delivery
of the Option Shares issued by any court of competent jurisdiction in the United
States shall be in effect, Grantee 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 or effect upon the earlier to occur of (A) the Effective
Time of the Merger, (B) the termination of the Merger Agreement in accordance
with the terms thereof before the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a termination of the Merger Agreement by
Grantee pursuant to Section 9.02(e), 9.02(f) or 9.02(n) of the Merger Agreement
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(an "Issuer Termination")); (C) the close of business on the 365th day after the
occurrence of an Issuer Termination; and (D) the close of business on the 365th
day after termination of the Merger Agreement (other than an Issuer Termination)
following the occurrence of a Purchase Event or a Preliminary Purchase Event
(hereinafter sometimes referred to as the "Termination Date"); provided that any
purchase of Option Shares upon the exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956 (the "BHCA"), and any other required consent of any
regulatory authority. The rights set forth in Section 8 of this Agreement shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) without Grantee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed or publicly announced
an intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term "Acquisition Transaction" shall mean (A) any
tender offer for more than 50% of the outstanding shares of Issuer,
(B) any merger or consolidation of Issuer with or into any entity
other than Grantee or a subsidiary of Grantee, (C) any sale of all or
substantially all of the assets of Issuer, (D) any reorganization of
Issuer or other transaction that results or when completed would
result in a disposition of substantially all of the assets of Issuer,
or (E) the issuance, sale or other disposition of shares representing
more than 50% of the shares of Issuer.
(ii) 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 Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of, or the right to acquire
beneficial ownership of, or any "group" (as such term is defined
under the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of more than
50% of the shares of Issuer.
(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 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 of 1933, as amended (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 more than 50% 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
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement in accordance with all applicable law,
the Articles of Incorporation or Bylaws of the Issuer or any other
agreement or, contract or law to which such holders of Issuer Common
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Stock are subject, including, if applicable, but not limited to, at
the meeting of such shareholders held for the purpose of voting on
the Merger Agreement, such meeting shall not have been held
or shall have been canceled prior to termination of the Merger
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 Merger 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, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer or (C) filed an application (or given a notice),
whether in draft or final form, under applicable banking or corporate
law or any other applicable law, including, without limitation, the
BHCA, seeking approval to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Grantee to exercise the Option.
(e) In the event Grantee wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) subject to the next sentence, a
place and date not earlier than three (3) business days nor later than fifteen
(15) business days after the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or consent of any
regulatory authority is required in connection with such purchase, then,
notwithstanding the prior occurrence of the Termination Date, the Closing Date
shall be extended for such period as shall be necessary to enable such prior
notification or consent to occur or to be obtained (and the expiration of any
mandatory waiting period). Issuer shall co-operate with Grantee in the filing of
any applications or documents necessary to obtain any required consent or in
connection with any required prior notification and the Closing shall occur
immediately following receipt of such consent (or the filing of any such prior
notification and the expiration of any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Grantee 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 herein.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a)
above, (i) Issuer shall deliver to Grantee (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
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<PAGE>
Shares shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever and subject to no pre-emptive rights, and (B) if the Option
is exercised in part only, a new Stock Option Agreement, executed by Issuer,
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)
Grantee shall deliver to Issuer a letter agreeing that Grantee shall not offer
to sell or otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JULY 20, 1998. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificates without such legend if Grantee shall have delivered
to Issuer 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.
(d) Upon the giving by Grantee to Issuer of the written notice of
exercise of the Option provided for under Section 3(e) of this Agreement, the
tender of the applicable Purchase Price in immediately available funds and the
tender of this Agreement to Issuer, Grantee shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Grantee. Issuer shall pay all expenses, and any and all
United States federal, state, and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section in the name of Grantee or its assignee,
transferee, or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
pre-emptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by amendment to its Articles of Incorporation or
Bylaws 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, (iii) promptly to take all action as may from
time to time be required (including (A) complying (if applicable) with all pre
merger notification, reporting and waiting period requirements specified in 15
U.S.C. ss. 18a and regulations promulgated thereunder and (B) in the event,
under any federal or state law, prior notice to or consent of any regulatory
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<PAGE>
authority is necessary before the Option may be exercised co-operating fully
with Grantee in preparing any required application or notice and providing such
information to such regulatory authority as such regulatory authority may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto, and (iv)
promptly to take all action provided herein to protect the rights of Grantee
against dilution.
5. Representations and Warranties 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.
(b) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee 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 of this Agreement 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 of this Agreement, 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 pre-emptive right of any shareholder of Issuer.
(c) No Violation. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation pursuant to any provisions of the
Articles of Incorporation or By-laws of Issuer or, subject to obtaining any
approvals or consents contemplated hereby, result in any violation of any loan
or credit agreement, note, mortgage, indenture, lease, plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Issuer or its
properties or assets which violation would have a Material Adverse Effect on the
Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter to this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
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execution and delivery of this Agreement and the consummation of the trans-
actions contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) Purchase Not for Distribution. 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.
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 agreements governing
such transaction so that Grantee shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Grantee 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 (other than 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, the Option, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equals
19.5% 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.
(b) In the event that, prior to the Termination Date, Issuer shall
enter in 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 where 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 assets 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, upon the consummation
of any such transaction and upon the terms and conditions set forth
herein, the Option, notwithstanding the fact that as of the date of
consummation of such transaction the Termination Date shall have
occurred, shall be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls
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the Acquiring Corporation, or (z) in the case of a merger described in
clause (ii), the Issuer (in each case, such entity being referred to as
the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, because of the
applicability of any law or regulation, have the exact terms as the Option, such
terms shall be as similar as possible and in no event less advantageous to
Grantee. The 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, 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 hereinafter defined) as is equal to
the Assigned Value (as 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 hereinafter defined). The exercise price of
each share of Substitute Common Stock subject to the Substitute Option (the
"Substitute Purchase Price") shall 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 for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with respect to
which Issuer is one of the parties (if other than Issuer), (y) the
Issuer in a consolidation or merger or in which the Issuer is the
continuing or surviving corporation, and (z) the transferee of all or
any substantial part of the Issuer's assets.
(ii) "Assigned Value" shall mean the highest of (x) 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), (y) the price per share of the Issuer Common Stock to be
paid by any person (other than the Grantee) pursuant to an agreement
with Issuer, or (z) the highest last sales price per share of Issuer
Common Stock quoted on any national securities exchange (including
the NASDAQ - National Market System) (or if Issuer Common Stock is
not quoted on any such national securities exchange, 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) within the six-month period
immediately preceding the agreement described in Section 7(b) above;
provided, however, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee, divided by the number of
shares of the Issuer Common Stock outstanding at the time of such
sale. In the event a Tender Offer or Exchange Offer is made for the
Issuer Common Stock or an agreement is entered into for a merger or
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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 mutually selected by Grantee
and Issuer (or if applicable, Acquiring Corporation), provided that
if a mutual selection cannot be made as to such investment banking
firm, it shall be selected by Grantee.
(iii) "Average Price" shall mean the average last sales price
of a share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, as quoted on
any national securities exchange (including the NASDAQ - National
Market System), and if the Substitute Common Stock is not quoted on any
such national securities exchange, the average of the bid price for the
one year period described above, as quoted on the principal trading
market or securities exchange on which such Substitute Common Stock is
traded, as reported by a recognized source, as chosen by Grantee, but
in no event higher than the last sales price or closing price or the
bid 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 person, as Grantee may elect.
(iv) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon the exercise of the
Substitute Option.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.5% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.5% 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 amount of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (f) in excess of (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee.
(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 assumes in writing all of the obligations of
Issuer hereunder and takes 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 distinguished from or have lesser economic value
(other than any diminution resulting from the fact that the Substitute Common
Stock is "restricted securities" within the meaning of Rule 144 under the
Securities Act) than other shares of common stock issued by the Substitute
Option Issuer).
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(h) The provisions of Sections 8, 9 and 10 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," and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option, " "Substitute Purchase Price, " and "Substitute Common Stock, "
respectively.
8. Repurchase at the Option of Grantee.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at
the request of Grantee at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending at the close of
business 365 days thereafter, Issuer shall repurchase from Grantee the Option
and all shares of Issuer Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 8 is referred to as the "Request
Date". Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any
shares of Issuer Common Stock acquired pursuant to complete or partial
exercise of the Option with respect to which Grantee then has
beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock 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) 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 Grantee
for each share of Issuer Common Stock with respect to which the Option
has been exercised and with respect to which Grantee then has
beneficial ownership, multiplied by the number of such shares.
(b) If Grantee exercises its rights under this Section 8, Issuer shall,
within ten (10) business days after the Request Date, pay the Section 8
Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Grantee then has beneficial ownership, and
Grantee 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. Notwithstanding the foregoing, to the
extent that prior notification to or consent of any regulatory authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, or Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify
Grantee and thereafter deliver from time to time, and as permitted by applicable
law or regulation, that portion of the Section 8 Repurchase Consideration that
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it is not then so prohibited from paying within five business days after the
date on which Issuer is no longer prohibited; provided, however, that if Issuer
at any time is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Grantee the Section
8 Repurchase Consideration, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required consents of regulatory authorities and to
file any required notices as promptly as practicable in order to accomplish such
repurchase), the Grantee may, at its option, revoke its request that Issuer
repurchase the Option or the Option Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Grantee that portion of the Section 8 Repurchase Consideration
that Issuer is not prohibited from delivering; and (ii) deliver, to the Grantee
either (A) a new Stock Option Agreement evidencing the right of Issuer to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Section 8 Repurchase Consideration
less the portion thereof theretofore delivered to the Grantee and the
denominator of which is the Section 8 Repurchase Consideration, or (B) a
certificate for the Option Shares it is then prohibited from repurchasing.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the Termination Date of this
Option pursuant to Section 3(a) of this Agreement.
(c) 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(d)(i) below; (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) above; or (iii) the highest
last sales price per share of Issuer Common Stock quoted on any national
securities exchange (including the NASDAQ - National Market System) (or if
Issuer Common Stock is not quoted on any such national securities exchange, the
highest bid price per share 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) during the sixty (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 and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment banking firm selected
by Grantee, 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 Grantee and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) 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 l3d-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) shall have been formed which
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beneficially owns or has the right to acquire beneficial ownership of, more than
50% 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) of this
Agreement shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of subparagraph (c) below, if requested by Grantee, as expeditiously as possible
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 Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee 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.
(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 Grantee
(and any permitted transferee) of its intention to do so and, upon the written
request of Grantee (or any such permitted transferee of Grantee) 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 Grantee (or such permitted transferee)), Issuer will cause
all such shares, the holders of which shall have requested participation in such
registration, to be so registered and included in such underwritten public
offering; provided, that the Issuer may elect not to cause all of the shares for
which the Grantee has requested participation in such registration to be
registered and included in such underwritten public offering if the
underwriters, for good business reasons and in good faith, object to such
inclusion.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in
subparagraph (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, Issuer shall not be required to register
Option Shares under the Securities Act pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement, and (b) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year; and
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which
the holder or holders of the Option Shares concerned were afforded
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the opportunity to register such shares under the Securities Act and
such shares were registered as requested.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of 180 days
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.
(d) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all of its expenses (including, without limitation,
registration fees, qualification fees, blue sky fees and expenses, legal
expenses, printing expenses and the costs of special audits or "cold comfort"
letters, expenses of underwriters, excluding discounts and commissions but
including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to subparagraph (a)
or (b) above; provided, however, that fees and expenses of counsel to the
Grantee and any other expenses incurred by the Grantee in connection with such
registration shall be borne by the Grantee.
(e) Indemnification. In connection with any registration under
subparagraph (a) or (b) above Issuer hereby indemnifies the holder of the Option
Shares, 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 expressly
for use therein, and Issuer and each officer, director and controlling person of
Issuer shall be indemnified by such holder of the Option Shares, 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 subparagraph
(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
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indemnifying party under this subparagraph (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
subparagraph (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 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 indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. 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 subparagraph (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 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 the holders of the
Option Shares 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 subparagraph (a) or (b)
above, Issuer and each holder of any Option Shares (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (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 holder thereof in
accordance with and to the extent permitted by any rule or regulation promul-
gated by the SEC from time to time. Issuer shall at its expense provide the
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holder of any Option Shares 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.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Grantee harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation or
trading or listing on any national securities exchange (including the NASDAQ -
National Market System) or any securities exchange, Issuer, upon the request of
Grantee, will promptly file an application, if required, to authorize for
quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on any such national
securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for 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 "Agreement" and "Option" as used herein
include 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.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 of this
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including 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 if
such waiver is in writing. 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; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
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understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, 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.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to 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 Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) 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.
(e) Descriptive Heading. 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.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or a such other address
for a party as shall be specified by like notice):
IF TO ISSUER TO:
Pacific Capital Bancorp
307 Main Street
Salinas, California 93901
Telecopy: (408) 646-9748
Attention: Mr. Clayton C. Larson,
President and Chief Administrative
Officer
WITH A COPY TO:
Mr. James E. Topinka
Preston Gates & Ellis LLP
One Maritime Plaza
Suite 2400
San Francisco, California 94111
Telecopy: (415) 788-8819
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IF TO GRANTEE:
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101-2036
Telecopy: (804) 564-6293
Attention: Mr. David W. Spainhour,
President and Chief Executive Officer
WITH A COPY TO:
Mr. Charles E. Greef
Mr. Peter G. Weinstock
Jenkens & Gilchrist,
a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Telecopy: (214) 855-4300
(g) Counterparts. This Agreement and any amendments hereto may be
executed in multiple 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.
(h) 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 (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
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 assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee 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.
(j) 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.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first written above.
SANTA BARBARA BANCORP
By: /s/ William S. Thomas, Jr.
-----------------------------------------
William S. Thomas, Jr., Vice Chairman and
Chief Operating Officer
and
By: /s/ Kent M. Vining
-----------------------------------------
Kent M. Vining, Senior Vice President
PACIFIC CAPITAL BANCORP
By: /s/ D. Vernon Horton
-----------------------------------------
D. Vernon Horton, Chairman of the Board
and Chief Executive Officer
and
By: /s/ Clayton C. Larson
-----------------------------------------
Clayton C. Larson, President and
Chief Administrative Officer
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APPENDIX E
----------
[Letterhead of Van Kasper & Company]
____________, 1998
Members of the Board of Directors
Pacific Capital Bancorp
307 Main Street
Salinas, CA 93901
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the shareholders of Pacific Capital
Bancorp ("Pacific Capital") of the Exchange Ratio as defined in Section 1.04 of
the Agreement and Plan of Reorganization dated as of July 20, 1998 (the
"Agreement"), in the proposed merger (the "Merger") of Santa Barbara Bancorp
("Santa Barbara") and Pacific Capital. On the Effective Date (as such term is
defined in the Agreement), each share of Pacific Capital Common Stock will be
converted into the right to receive 1.935 shares of Santa Barbara Common Stock.
In arriving at our opinion, we have reviewed and analyzed, among other things,
the following: (i) the Agreement; (ii) certain publicly available financial and
other data with respect to Santa Barbara and Pacific Capital, including
consolidated financial statements for recent years and interim periods to June
30, 1998; (iii) certain other publicly available financial and other information
concerning Santa Barbara and Pacific Capital and the trading markets for the
publicly traded securities of Santa Barbara and Pacific Capital; (iv) publicly
available information concerning other banks and bank holding companies, the
trading markets for their securities and the nature and terms of certain other
merger transactions we believed relevant to our inquiry; and (v) evaluations and
analyses prepared and presented to the Board of Directors of Pacific Capital or
a committee thereof in connection with the Merger. We have held discussions with
senior management of Pacific Capital concerning the companies' past and current
operations, financial condition and prospects.
We have reviewed with the senior management of Pacific Capital earnings
projections for Pacific Capital as a stand-alone entity, assuming the Merger
does not occur. We have also reviewed earnings projections for Santa Barbara as
a stand-alone entity, assuming the Merger does not occur as well as securities
industry consensus estimates of projected earnings per share from published
sources for Santa Barbara as a stand-alone entity. Certain financial projections
for the combined companies and for Pacific Capital and Santa Barbara as
stand-alone entities were derived by us based partially upon the projections and
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Pacific Capital Bancorp
________________, 1998
Page 2
information described above, as well as our own assessment of general economic,
market and financial conditions.
In conducting our review and in arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of the financial and other
information provided to us or publicly available, and we have not assumed any
responsibility for independent verification of the same. Van Kasper relied on
advice of counsel and independent accountants as to all legal and financial
reporting matters with respect to the Santa Barbara, Pacific Capital, the Merger
and the Agreement. We have relied upon the managements of Pacific Capital and
Santa Barbara as to the reasonableness of the financial and operating forecasts,
projections and projected operating cost savings (and the assumptions and bases
therefor) provided to us, and we have assumed that such forecasts, projections
and projected operating cost savings reflect the best currently available
estimates and judgments of the applicable managements. We have also assumed,
without assuming any responsibility for the independent verification of same,
that the aggregate allowances for loan losses for Pacific Capital and Santa
Barbara are adequate to cover such losses. We have not made or obtained any
evaluations or appraisals of the property of Pacific Capital or Santa Barbara,
nor have we examined any individual loan credit files. For purposes of this
opinion, we have assumed that the Merger will have the tax, accounting and legal
effects (including, without limitation, that the Merger will be accounted for as
a pooling of interests) described in the Merger Agreement and assumed the
accuracy of the disclosures set forth in the Form S-4 Registration Statement for
the Merger. Our opinion as expressed herein is limited to the fairness, from a
financial point of view, to the holders of the Common Stock of Pacific Capital
of the Exchange Ratio in the Merger and does not address Pacific Capital's
underlying business decision to proceed with the Merger.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Pacific Capital and Santa Barbara, including interest income, interest expense,
net interest income, net interest margin, provision for loan losses,
non-interest income, non-interest expense, earnings, dividends, internal capital
generation, book value, intangible assets, return on assets, return on
shareholders' equity, capitalization, the amount and type of non-performing
assets, loan losses and the reserve for loan losses, all as set forth in the
financial statements for Pacific Capital and for Santa Barbara; (ii) the assets
and liabilities of Pacific Capital and Santa Barbara, including the loan,
investment and mortgage portfolios, deposits, other liabilities, historical and
current liability sources and costs and liquidity; and (iii) the nature and
terms of certain other merger transactions involving banks and bank holding
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our experience in securities valuation and our knowledge of the banking
industry generally. Our opinion is necessarily based upon conditions as they
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Pacific Capital Bancorp
________________, 1998
Page 3
exist and can be evaluated on the date hereof and the information made available
to us through the date hereof.
It is understood that this letter is for the information of the Board
of Directors of Pacific Capital. This letter does not constitute a
recommendation to the Board of Directors or to any shareholder of Pacific
Capital with respect to any approval of the Merger.
Based upon and subject to the foregoing, we are of the opinion as
investment bankers that, as of the date hereof, the Exchange Ratio in the Merger
is fair, from a financial point of view, to the holders of the Common Stock of
Pacific Capital.
Very truly yours,
Van Kasper & Company
E-3
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APPENDIX F
[Letterhead of The Bank Advisory Group, Inc.]
_____________, 1998
Board of Directors
Santa Barbara Bancorp
Santa Barbara, California
Ladies and Gentlemen:
You have requested that The Bank Advisory Group, Inc. act as an
independent financial analyst and advisor to Santa Barbara Bancorp, a California
corporation ("SBB"). Specifically, we have been asked to render advice and
analysis in connection with the proposed merger (the "Merger") of Pacific
Capital Bancorp, Salinas, California, a California corporation ("Pacific"), with
and into SBB, under the articles of incorporation of SBB and with the resulting
name "Pacific Capital Bancorp" [SBB as it will exist from and after the
Effective Date of the Merger (the "Effective Date") being referred to herein as
the "Surviving Corporation"]. In our role as an independent financial advisor,
you have requested our opinion with regard to the fairness -- from the
perspective of the common shareholders of SBB -- of the financial terms of the
Merger pursuant to the provisions of the Agreement and Plan of Reorganization
dated July 20, 1998 (the "Reorganization Agreement"), by and between SBB and
Pacific.
In conjunction with our review of the Reorganization Agreement, our
understanding is that SBB and Pacific propose to consummate the Merger pursuant
to the following financial terms:
o Holders of Pacific's, no par value per share, common stock
("Pacific Common Stock") at the Effective Date, other than the
shares held by any holders who have duly exercised and
perfected their dissenters' rights, shall receive for each
share of Pacific Common Stock 1.935 shares (the "Exchange
Ratio") of SBB's, no par value per share, common stock ("SBB
Common Stock").
o No fractional shares of SBB Common Stock will be issued in the
Merger and, in lieu thereof, holders of shares of Pacific
Common Stock who would otherwise be entitled to a fractional
share interest will be paid an amount in cash equal to the
product of such fractional share interest and the average of
the closing bid and asked price of a share of SBB Common Stock
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<PAGE>
Board of Directors
Santa Barbara Bancorp
______________, 1998
Page 2
as reported on the Nasdaq National Market on the business day
immediately preceding the Effective Date.
o All outstanding options to acquire common stock of Pacific
shall be converted into options to acquire common stock of the
Surviving Corporation, with the number of shares and exercise
price subject to adjustment for the Exchange Ratio.
o On and after the Effective Date, each share of SBB Common
Stock issued and outstanding immediately prior to the closing
date of the Merger shall remain an issued and outstanding
share of common stock of the Surviving Corporation and shall
not be affected by the Merger.
The Bank Advisory Group, Inc., as part of its line of professional
services, specializes in rendering valuation opinions of banks and bank holding
companies in connection with mergers and acquisitions nationwide. Since August
1990, and prior to our retention for this assignment, we have served as a
financial advisor to SBB under the terms of a retainer agreement (the "Retainer
Agreement"). Professional fees paid by SBB under the Retainer Agreement,
together with supplemental billings for specific financial advisory services we
provided that exceeded the scope of the Retainer Agreement ("Supplemental
Billings"), totaled $38,250 for the period August 1, 1997 through July 31, 1998,
and approximated $74,700 for the period August 1, 1996 through July 31, 1997.
SBB also reimbursed us for miscellaneous out-of-pocket expenses. The
professional fees received from SBB under the Retainer Agreement and from
Supplemental Billings were insignificant as compared to annual revenues of The
Bank Advisory Group.
For our services as an independent financial analyst and advisor to SBB
in connection with the Merger, SBB has agreed to pay The Bank Advisory Group a
professional fee totaling $295,000. SBB also has agreed to provide reimbursement
for reasonable out-of-pocket expenses. SBB has agreed to indemnify The Bank
Advisory Group, the officers, directors, employees, and shareholders of The Bank
Advisory Group and assigns, heirs, beneficiaries and legal representatives of
each indemnified entity and person.
No portion of the professional fee is contingent upon the conclusion
reached herein. And, no limitations were imposed by the SBB Board of Directors
with respect to the investigations made or procedures followed in rendering this
opinion.
We have not provided any services to Pacific and, thus, have received
no professional fees from Pacific.
F-2
<PAGE>
Board of Directors
Santa Barbara Bancorp
______________, 1998
Page 3
The Bank Advisory Group does not, and its officers directors and
shareholders do not, own any shares of SBB Common Stock or Pacific Common Stock;
nor does The Bank Advisory Group make a market in the stock of SBB, Pacific, or
any other publicly-traded security, financial or otherwise.
In connection with this opinion and with respect to SBB, we have
reviewed, among other things:
1. Audited consolidated financial statements, on Form 10-K, for
the years ended December 31, 1997, 1996, and 1995;
2. Quarterly financial statements, on Form 10-Q, for the 1997 and
1996 calendar quarters, and for the first two calendar
quarters of 1998;
3. Consolidated financial statements, on form F.R. Y-9C, for the
years ended December 31, 1997, 1996, and 1995, and for the
six-month period ended June 30, 1998, as filed with the
Federal Reserve System;
4. Internally-generated financial statements for the eight-month
period ending August 31, 1998;
5. Selected equity research reports regarding SBB prepared by
various analysts who cover the financial institutions sector
for market makers of SBB Common Stock;
6. Certain internal financial analyses and forecasts for SBB
prepared by the management of SBB, including projections of
future performance;
7. Certain other summary materials and analyses with respect to
SBB's loan portfolio, securities portfolio, deposit base,
fixed assets, and operations including, but not limited to:
(i) schedules of loans and other assets identified by manage-
ment as deserving special attention or monitoring given the
characteristics of the loan/asset and the local economy, (ii)
analyses concerning the adequacy of the loan loss reserve,
(iii) schedules of "other real estate owned," including
current carrying values and recent appraisals, and (iv)
schedules of securities, detailing book values, market values,
and lengths to maturity;
F-3
<PAGE>
Board of Directors
Santa Barbara Bancorp
______________, 1998
Page 4
8. Certain publicly-available information concerning the trading
of, and the trading market for, SBB Common Stock;
9. The condition of the commercial banking industry, as indicated
in financial reports filed with various Federal bank
regulatory authorities by all federally-insured commercial
banks; and
10. Such other information -- including financial studies,
analyses, investigations, and economic and market criteria --
that we deem relevant to this assignment.
In connection with this opinion and with respect to Pacific, we have
reviewed, among other things:
1. Audited consolidated financial statements, on Form 10-K, for
the years ended December 31, 1997, 1996, and 1995;
2. Quarterly financial statements, on Form 10-Q, for the 1997 and
1996 calendar quarters, and for the first two calendar
quarters of 1998;
3. Consolidated financial statements, on form F.R. Y-9C, for the
years ended December 31, 1997, 1996, and 1995, and for the
six-month period ended June 30, 1998, as filed with the
Federal Reserve System;
4. Internally-generated financial statements for the eight-month
period ending August 31, 1998;
5. Selected equity research reports regarding Pacific prepared by
various analysts who cover the financial institutions sector
for market makers of Pacific Common Stock;
6. Certain internal financial analyses and forecasts for Pacific
prepared individually and collectively by the management of
SBB and Pacific, including projections of future performance;
7. Certain other summary materials and analyses with respect to
Pacific's loan portfolio, securities portfolio, deposit base,
fixed assets, and operations including, but not limited to:
(i) schedules of loans and other assets identified by
management as deserving special attention or monitoring given
the characteristics of the loan/asset and the local economy,
F-4
<PAGE>
Board of Directors
Santa Barbara Bancorp
______________, 1998
Page 5
(ii) analyses concerning the adequacy of the loan loss
reserve, (iii) schedules of "other real estate owned,"
including current carrying values and recent appraisals, and
(iv) schedules of securities, detailing book values, market
values, and lengths to maturity;
8. Certain publicly-available information concerning the trading
of, and the trading market for, Pacific Common Stock;
9. The condition of the commercial banking industry, as indicated
in financial reports filed with various Federal bank
regulatory authorities by all federally-insured commercial
banks; and
10. Such other information -- including financial studies,
analyses, investigations, and economic and market criteria --
that we deem relevant to this assignment.
In connection with this opinion and with respect to the proposed
Merger, we have reviewed, among other things:
1. The Reorganization Agreement, and any amendments thereto, that
sets forth, among other items, the terms, conditions to
closing, pending litigation against both SBB and Pacific, and
representations and warranties of SBB and Pacific with respect
to the proposed Merger;
2. The Joint Proxy Statement/Prospectus, in draft form dated
September 22, 1998, to which, in final form, this opinion will
be appended, and that will be furnished to the shareholders of
both SBB and Pacific in connection with the proposed Merger;
3. The financial terms and price levels, to the extent
publicly-available, of selected recent business combinations
of companies in the banking industry that we deem comparable,
either in whole or in part, to the Merger -- together with the
financial performance and condition of such banking
organizations;
4. The price-to-equity multiples, price-to-earnings multiples and
trading volumes of banking organizations based in the United
States -- and specifically in California -- that have
publicly-traded common stock, together with the financial
performance and condition of such banking organizations,
compared with the price-to-equity multiples, price-to-
F-5
<PAGE>
Board of Directors
Santa Barbara Bancorp
______________, 1998
Page 6
earnings multiples and trading volumes for both SBB Common
Stock and Pacific Common Stock; and
5. Such other information -- including financial studies,
analyses, investigations, and economic and market criteria --
that we deem relevant to this assignment.
Based on our experience, we believe our review of, among other things,
the aforementioned items provides a reasonable basis for our opinion,
recognizing that we are expressing an informed professional opinion -- not a
certification of value.
We have relied upon the information provided by the management of both
SBB and Pacific, or otherwise reviewed by us, as being complete and accurate in
all material respects. Furthermore, we have not verified through independent
inspection or examination the specific assets or liabilities of SBB and Pacific
or their subsidiary banks. We have also assumed that there has been no material
change in the assets, financial condition, results of operations, or business
prospects of SBB and Pacific since the date of the last financial statements
made available to us. We have met with the management of both SBB and Pacific
for the purpose of discussing the relevant information that has been provided to
us.
Our opinion is limited to the fairness of the financial terms of the
Merger, from a financial point of view, to the shareholders of SBB Common Stock.
The financial terms include, but are not limited to, the Exchange Ratio and the
consequential pro forma ownership in the Surviving Company of the shareholders
of SBB Common Stock. We were not asked to consider and our opinion does not
address the relative merits of the proposed Merger as compared to alternative
business strategies that might exist for SBB or the effect of any other
transaction in which SBB might engage. Our opinion is directed to the Board of
Directors of SBB, and it does not constitute a recommendation to any shareholder
of SBB Common Stock as to how such shareholder should vote with respect to the
Merger.
Based on all factors that we deem relevant and assuming the accuracy
and completeness of the information and data provided to us, it is our opinion
that the terms of the proposed Merger, including, without limitation, the
Exchange Ratio and the consequential pro forma ownership in the Surviving
Company of the shareholders of SBB Common Stock, are fair, from a financial
point of view, to the shareholders of SBB Common Stock.
F-6
<PAGE>
Board of Directors
Santa Barbara Bancorp
______________, 1998
Page 7
This opinion is available for disclosure to the shareholders of SBB.
Accordingly, we hereby consent to the inclusion of our opinion as an appendix to
the Joint Proxy Statement/Prospectus relating to the proposed Merger, and to the
reference of our firm in the Joint Proxy Statement/Prospectus.
Respectfully submitted
THE BANK ADVISORY GROUP, INC.
By:
--------------------
F-7
<PAGE>
APPENDIX G
----------
DISSENTERS' RIGHTS UNDER THE
CALIFORNIA GENERAL CORPORATION LAW
ss. 1300. SHORT-FORM MERGER; PURCHASE OF SHARES AT FAIR MARKET VALUE;
"DISSENTING SHARES" AND DISSENTING SHAREHOLDER
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and Sections
1301, 1302, 1303 and 1304; provided, however, that this provision does not apply
to any shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided, further,
that this provision does not apply to any class of shares described in
subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination
of shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with Section
1301.
(4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
ss. 1301. DISSENTER'S RIGHTS; DEMAND ON CORPORATION FOR PURCHASE OF SHARES
G-1
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(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1301, 1302, 1303, 1304 and this section, a statement of
the price determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be followed
if the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision (b)
of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
ss.1302. DISSENTING SHARES, STAMPING OR ENDORSING
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
ss. 1303. DISSENTING SHAREHOLDER ENTITLED TO AGREED PRICE WITH INTEREST; TIME OF
PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
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(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later; and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
ss. 1304. DISSENTERS ACTIONS; JOINDER; CONSIDERATION; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
ss. 1305. APPRAISERS DUTY AND REPORT; COURT JUDGEMENT; PAYMENT; APPEAL; COSTS
OF ACTION
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
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<PAGE>
1301 and 1302 if the value awarded by the court for the shares is more, than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
ss. 1306. DISSENTING SHAREHOLDERS; EFFECT OF PREVENTION OF PAYMENT OF FAIR
MARKET VALUE
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to an
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
ss. 1307. DISSENTING SHARES; DISPOSITION OF DIVIDENDS
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
ss. 1308. DISSENTING SHARES; RIGHTS AND PRIVILEGES
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
ss. 1309. DISSENTING SHARES; LOSS OF STATUS
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
ss. 1310. SUSPENSION OF CERTAIN PROCEEDINGS WHILE LITIGATION IS PENDING
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
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<PAGE>
ss. 1311. CHAPTER INAPPLICABLE TO CERTAIN CLASSES OF SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
ss. 1312. VALIDITY OF REORGANIZATION OR SHORT FORM MERGER, ATTACK ON;
SHAREHOLDERS' RIGHTS; BURDEN OF PROOF
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
G-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officer
Section 317 of the California General Corporation Law authorizes a
court to award, or a corporation's Board of Directors to grant indemnity to
directors, officers, employees and other agents of the corporation ("Agents") in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended.
The Board of Directors of Registrant has resolved to indemnify the
officers and directors of Registrant to the full extent permitted by Section 317
of the California General Corporation Law, and Article VI of Registrant's Bylaws
provides for indemnification of officers and directors to the same extent. On
January 27, 1988, Registrant's Board of Directors approved amendments to
Registrant's Articles of Incorporation providing for the indemnification of
directors and officers of Registrant to the fullest extent permitted under
California law. These amendments limit the personal monetary liability of
directors in performing their duties on behalf of Registrant, to the extent
permitted by the California General Corporation Law, and permit Registrant to
indemnify its directors and officers against certain liabilities and expenses,
to the extent permitted by the California General Corporation Law. These
amendments and the entering into of indemnification agreements were approved by
Registrant's shareholders at the annual meeting of shareholders held on March
30, 1988. In addition, Registrant maintains a directors' and officers' liability
insurance policy that insures its directors and officers against certain
liabilities, including certain liabilities under the Securities Act of 1933.
Item 21. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
<S> <C>
Exhibit Number Description
- --------------------------------------------------------------------------------------------------
(2)(a)* Agreement and Plan of Reorganization, dated July 20, 1998, by
and between Santa Barbara Bancorp and Pacific Capital Bancorp
(Included as Appendix A to Joint Proxy Statement/Prospectus
without certain exhibits).
(2)(b)* Agreement and Plan of Merger, dated July 29, 1998, by and
between Santa Barbara Bancorp and Pacific Capital Bancorp
(Included as Appendix B to Joint Proxy Statement/Prospectus).
(3)(a)** Certificate of Restated and Amended Articles of Incorporation of
Santa Barbara Bancorp.
(3)(b)** Certificate of Amendment of Restated Articles of Incorporation
of Santa Barbara Bancorp as filed with the California Secretary
of State on December 30, 1986.
(3)(c)** Certificate of Amendment of Restated Articles of Incorporation
of Santa Barbara Bancorp as filed with the California Secretary
of State on April 10, 1989.
(3)(d)** Certificate of Amendment of Restated Articles of Incorporation
of Santa Barbara Bancorp as filed with the California Secretary
of State on January 24, 1996.
(3)(e)** Amended and Restated Bylaws of Santa Barbara Bancorp dated
September 25, 1991.
<PAGE>
Exhibit Number Description
- --------------------------------------------------------------------------------------------------
(3)(f)** Amendment No. One to Amended and Restated Bylaws of Santa
Barbara Bancorp as adopted by the Board of Directors on
October 24, 1995.
(3)(g)** Amendment No. Two to Amended and Restated Bylaws of Santa
Barbara Bancorp as adopted by the Board of Directors on
December 19, 1995.
(3)(h)** Amendment No. Three to Amended and Restated Bylaws of
Santa Barbara Bancorp as adopted by the Board of Directors on
May 20, 1997.
(4)(a)* Santa Barbara Bancorp Stock Option Agreement (Included as
Appendix C to Joint Proxy Statement/Prospectus).
(4)(b)* Pacific Capital Bancorp Stock Option Agreement (Included as
Appendix D to Joint Proxy Statement/Prospectus).
(5)* Opinion of Jenkens & Gilchrist, a Professional Corporation,
regarding legality.
(8)*** Form of Opinion of Jenkens & Gilchrist, a Professional
Corporation, regarding certain federal income tax
considerations.
(23)(a)* Consent of Arthur Andersen LLP.
(23)(b)* Consent of KPMG Peat Marwick LLP.
(23)(c)* Consent of Jenkens & Gilchrist, a Professional Corporation
(Included in opinion regarding legality).
(23)(d)*** Consent of Jenkens & Gilchrist, a Professional Corporation
(Included in opinion regarding certain federal income tax
considerations).
(23)(e)* Consent of Van Kasper & Company.
(23)(f)*** Consent of The Bank Advisory Group, Inc. (Included in Fairness
Opinion attached as Appendix F to Joint Proxy
Statement/Prospectus).
(24)* Power of Attorney (The manually signed power of attorney is set
forth in the signature page of the Registration Statement).
(99)(a)* Form of Proxy Card for Santa Barbara Bancorp Special
Meeting.
(99)(b)* Form of Proxy Card for Pacific Capital Bancorp Special
Meeting.
(99)(c)*** Form of Fairness Opinion of Van Kasper & Company (Included
as Appendix E to Joint Proxy Statement/Prospectus).
(99)(d)*** Form of Fairness Opinion of The Bank Advisory Group, Inc.
(Included as Appendix F to Joint Proxy Statement/Prospectus).
<PAGE>
Exhibit Number Description
- --------------------------------------------------------------------------------------------------
(99)(e)* Excerpts from the California General Corporation Law
(dissenters rights) (Included as Appendix G to Joint Proxy
Statement/Prospectus).
<FN>
- -----------------
* Filed herewith.
** Incorporated by reference.
*** To be filed by Amendment.
Note: The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission
upon request.
Note: No long-term debt instrument issued by Santa Barbara Bancorp
exceeds 10% of the consolidated total assets of Santa Barbara
Bancorp and its subsidiaries. In accordance with paragraph
4(iii) of Item 601 of Regulation S-K, Santa Barbara Bancorp
will furnish to the Commissioner upon request copies of
long-term debt instruments and related agreements.
(b) No financial statement schedules are required to be filed herewith pursuant to Item 21(b) or (c) of this
Form.
</FN>
</TABLE>
Item 22. Undertakings
(1) The undersigned Registrant hereby undertakes: (a) To file, during
any period in which offers or sales are being made, a post-effective amendment
to this registration statement: (i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (ss. 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; (iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement; (b) That, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be in the initial bona fide offering thereof;
(c) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulations S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
<PAGE>
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(4) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(5) The Registrant undertakes that every prospectus (a) that is filed
pursuant to paragraph (4) immediately preceding, or (b) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(7) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(8) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and not
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Santa Barbara,
California, on September 22, 1998.
SANTA BARBARA BANCORP
By: /s/ David W. Spainhour
-------------------------------------
David W. Spainhour
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated. Each person whose signature appears below
in so signing also makes, constitutes and appoints Donald Lafler and Jay D.
Smith, jointly and severally, his true and lawful attorneys-in-fact, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to execute and cause to be filed
with the Securities and Exchange Commission any and all amendments and
post-effective amendments to this Registration Statement, with exhibits thereto
and other documents in connection therewith, granting unto said
attorneys-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratifies and
confirms all that said attorneys-in-fact or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ Donald M. Anderson Chairman of the Board and Director September 22, 1998
- --------------------------------------
Donald M. Anderson
/s/ David W. Spainhour President, Chief Executive Officer and September 22, 1998
- -------------------------------------- Director (Principal Executive Officer)
David W. Spainhour
/s/ William S. Thomas, Jr. Vice Chairman, Chief Operating Officer September 22, 1998
- -------------------------------------- and Director
William S. Thomas, Jr.
/s/ Donald Lafler Senior Vice President and Chief Financial September 22, 1998
- -------------------------------------- Officer (Principal Financial Officer)
Donald Lafler
/s/ Edward J. Czajka Vice President (Principal Accounting September 22, 1998
- -------------------------------------- Officer)
Edward J. Czajka
/s/ Frank Barranco, M.D. Director September 22, 1998
- --------------------------------------
Frank Barranco, M.D.
/s/ Edward E. Birch Director September 22, 1998
- --------------------------------------
Edward E. Birch
<PAGE>
/s/ Richard M. Davis Director September 22, 1998
- ---------------------------------------
Richard M. Davis
/s/ Anthony Guntermann Director September 22, 1998
- ---------------------------------------
Anthony Guntermann
/s/ Dale E. Hanst Director September 22, 1998
- ---------------------------------------
Dale E. Hanst
/s/ Harry B. Powell Director September 22, 1998
- ---------------------------------------
Harry B. Powell
/s/ Terrill F. Cox Director September 22, 1998
- ---------------------------------------
Terrill F. Cox
/s/ Susan Trescher Director September 22, 1998
- ---------------------------------------
Susan Trescher
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INDEX TO EXHIBITS
Number Exhibit
- ------ -------
(2)(a) Agreement and Plan of Reorganization, dated July 20, 1998, by and between Santa Barbara Bancorp
and Pacific Capital Bancorp (Included as Appendix A to the Joint Proxy Statement/ Prospectus without
certain exhibits).
(2)(b) Agreement and Plan of Merger, dated July 29, 1998, by and between Santa Barbara Bancorp and
Pacific Capital Bancorp (Included as Appendix B to the Joint Proxy Statement/Prospectus).
(3)(a) Certificate of Restated and Amended Articles of Incorporation of Santa Barbara Bancorp is
incorporated by reference from the Santa Barbara Bancorp Registration Statement on Form S-4
(Registration No. 33-19181), dated December 16, 1987.
(3)(b) Certificate of Amendment of Restated Articles of Incorporation of Santa Barbara Bancorp, as filed with
the California Secretary of State on December 30, 1986, is incorporated by reference from the Santa
Barbara Bancorp Registration Statement on Form S-4 (Registration No. 33-19181), dated December 16,
1987.
(3)(c) Certificate of Amendment of Restated Articles of Incorporation of Santa Barbara Bancorp, as filed with
the California Secretary of State on April 10, 1989, is incorporated by reference from the Santa
Barbara Bancorp Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
(3)(d) Certificate of Amendment of Restated Articles of Incorporation of Santa Barbara Bancorp, as filed with
the California Secretary of State on January 24, 1996, is incorporated by reference from the Santa
Barbara Bancorp Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
(3)(e) Amended and Restated Bylaws of Santa Barbara Bancorp, dated September 25, 1991, is incorporated
by reference from the Santa Barbara Bancorp Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991.
(3)(f) Amendment No. One to Amended and Restated Bylaws of Santa Barbara Bancorp, as adopted by the
Board of Directors of Santa Barbara Bancorp on October 24, 1995, is incorporated by reference from
the Santa Barbara Bancorp Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
(3)(g) Amendment No. Two to Amended and Restated Bylaws of Santa Barbara Bancorp, as adopted by the
Board of Directors of Santa Barbara Bancorp on December 19, 1995, is incorporated by reference from
the Santa Barbara Bancorp Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
(3)(h) Amendment No. Three to Amended and Restated Bylaws of Santa Barbara Bancorp, as adopted by the
Board of Directors of Santa Barbara Bancorp on May 20, 1997, is incorporated by reference from the
Santa Barbara Bancorp Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
(4)(a) Santa Barbara Bancorp Stock Option Agreement (Included as Appendix C to Joint Proxy Statement/
Prospectus).
(4)(b) Pacific Capital Bancorp Stock Option Agreement (Included as Appendix D to Joint Proxy Statement/
Prospectus).
(5) Opinion of Jenkens & Gilchrist, a Professional Corporation.
(8) Form of Opinion of Jenkens & Gilchrist, a Professional Corporation, regarding certain federal income
tax considerations.
<PAGE>
(23)(a) Consent of Arthur Andersen LLP.
(23)(b) Consent of KPMG Peat Marwick LLP.
(23)(c) Consent of Jenkens & Gilchrist, a Professional Corporation (Included in opinion regarding legality).
(23)(d) Consent of Jenkens & Gilchrist, a Professional Corporation (Included in opinion regarding certain
federal income tax considerations).
(23)(e) Consent of Van Kasper & Company.
(23)(f) Consent of The Bank Advisory Group, Inc. (Included in Fairness Opinion attached as Appendix F to
Joint Proxy Statement/Prospectus).
(24) Power of Attorney (The manually signed power of attorney is set forth in the signature page of the
Registration Statement).
(99)(a) Form of Proxy Card for Santa Barbara Bancorp Special Meeting.
(99)(b) Form of Proxy Card for Pacific Capital Bancorp Special Meeting.
(99)(c) Form of Fairness Opinion of Van Kasper & Company (Included in Appendix E to Joint Proxy
Statement/ Prospectus).
(99)(d) Form of Fairness Opinion of The Bank Advisory Group, Inc. (Included in Appendix F to Joint Proxy
Statement/Prospectus).
(99)(e) Excerpts from the California General Corporation Law (dissenters rights) (Included in Appendix G to
Joint Proxy Statement/Prospectus).
</TABLE>
Exhibit (5)
<PAGE>
[Letterhead of Jenkens & Gilchrist, a Professional Corporation]
September 23, 1998
Board of Directors
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101
Re: Santa Barbara Bancorp - Registration Statement on Form S-4:
Ladies and Gentlemen:
We are acting as special counsel to Santa Barbara Bancorp, a California
corporation (the "Corporation"), in connection with preparation of the
Corporation's Registration Statement on Form S-4, and any amendments thereto
(the "Registration Statement"), to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
to register up to 9,345,000 shares of Common Stock, no par value (the "Common
Stock"), of the Corporation to be issued in connection with the Corporation's
acquisition of Pacific Capital Bancorp, a California corporation, through the
merger of Pacific Capital Bancorp with and into the Corporation (the "Merger").
You have requested the opinion of this firm with respect to certain
legal aspects of the proposed issuance of Common Stock pursuant to the Merger.
For the purpose of rendering the opinion set forth herein, we have examined and
relied upon the original, or copies identified to our satisfaction, of (1) the
Articles of Incorporation and the Bylaws of the Corporation, as amended and
presently in effect; (2) minutes and records of the corporate proceedings of the
Corporation with respect to the issuance of the Common Stock pursuant to the
Merger, and related matters; (3) the Registration Statement and exhibits
thereto; and (4) such other documents, instruments and records as we have deemed
necessary for the expression of the opinions herein contained.
In making the foregoing examinations, we have assumed, without
independent investigation, the genuineness of all signatures and the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies. As to various questions of fact material to this opinion,
and as to the content and form of the Articles of Incorporation, the Bylaws,
minutes, records, resolutions and other documents or writings of the
Corporation, we have relied, to the extent we deem reasonably appropriate, upon
<PAGE>
representations or certificates of officers or directors of the Corporation and
upon documents, records and instruments furnished to us by the Corporation,
without independent check or verification of their accuracy.
Based upon the foregoing, we are of the opinion that the shares of
Common Stock to be issued in the Merger by the Corporation have been duly
authorized and, when issued and delivered in the manner and on the terms
described in the Registration Statement (after and while the Registration
Statement is declared effective under the Securities Act), will be duly and
validly issued, fully paid and nonassessable.
Our opinion expressed herein is limited to those matters expressly set
forth herein, and no opinion may be implied or inferred beyond the matters
expressly stated herein. We hereby disclaim any obligation to notify any person
or entity after the date hereof if any change in fact or law should change our
opinion with respect to any matter set forth in this letter.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to references to our firm under the caption "Legal
Matters" in the Joint Proxy Statement Prospectus included in or made a part of
the Registration Statement. In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
JENKENS & GILCHRIST,
a Professional Corporation
By: /s/ Charles E. Greef
----------------------
Charles E. Greef
Authorized Signatory
Exhibit (8)
<PAGE>
[Letterhead of Jenkens & Gilchrist, a Professional Corporation]
September ___, 1998
Santa Barbara Bancorp
1021 Anacapa Street
Santa Barbara, California 93101-2036
Ladies and Gentlemen:
We have acted as counsel to Santa Barbara Bancorp, a California
corporation ("SBB"), in connection with the proposed merger (the "Merger") of
Pacific Capital Bancorp, a California corporation ("Pacific"), with and into SBB
and the registration of 9,345,000 shares of the common stock of SBB ("SBB Common
Stock") that may be issued pursuant to the Agreement and Plan of Reorganization
(the "Reorganization Agreement") dated July 20, 1998, all as described in the
Form S-4 registration statement filed with the Securities and Exchange
Commission (the "Commission") on September 23, 1998 (as thereafter amended from
time to time and together with all exhibits thereto, the "Registration
Statement"). Except as otherwise indicated, capitalized terms used herein shall
have the meanings assigned to them in the Registration Statement.
Set forth below are our opinions and the assumptions and documents upon
which we have relied in rendering our opinions.
A. Documents Reviewed
In connection with the opinions rendered below, we have reviewed and
relied upon the following documents:
1. the Registration Statement,
2. the Reorganization Agreement,
3. the Agreement and Plan of Merger by and between SBB and
Pacific dated as of July 29, 1998 )(the "Merger Agreement"),
4. the Certificates of Pacific and SBB attached hereto as
Exhibit "A" and Exhibit "B," respectively (collectively, the "Certificates"),
and
<PAGE>
5. such other documents as we have deemed necessary or
appropriate for purposes of this opinion.
B. Assumptions
In connection with the opinions rendered below, we have assumed:
1. that all signatures on all documents submitted to us are
genuine, that all documents submitted to us as originals are authentic, that all
documents submitted to us as copies are accurate, that all information submitted
to us is accurate and complete, and that all persons executing and delivering
originals or copies of documents examined by us are competent to execute and
deliver such documents.
2. that the Merger will be consummated as contemplated in the
Registration Statement and without waiver of any material provision thereof.
C. Opinions
Based solely upon the documents and assumptions set forth above, and
conditioned upon the initial and continuing accuracy of the factual
representations set forth in the Certificates as of the date hereof and as of
the date of the Effective Time of the Merger, it is our opinion that the Merger
will be a reorganization within the meaning of section 368(a)(1)(A) of the Code
and the following federal income tax consequences will result:
(a) no gain or loss will be recognized for federal income tax
purposes by the holders of Pacific Common Stock upon the receipt of SBB Common
Stock solely in exchange for such Pacific Common Stock (except to the extent, if
any, that cash is received in lieu of fractional shares);
(b) the aggregate tax basis of the SBB Common Stock received
by Pacific stockholders in the Merger (including any fractional shares of SBB
Common Stock) will be the same as the aggregate tax basis of the Pacific Common
Stock surrendered in exchange therefor;
(c) the holding period of the SBB Common Stock received by
each Pacific stockholder in the Merger will include the holding period of the
shares of Pacific Common Stock surrendered in exchange therefor;
(d) cash payments received by the holders of Pacific Common
Stock in lieu of fractional shares of SBB Common Stock will be treated as if
such fractional shares had been issued in the Merger and then redeemed by SBB. A
Pacific stockholder receiving such cash will recognize gain or loss upon such
payment, measured by the difference (if any) between the amount of cash received
and the basis allocated to such fractional share. The gain or loss should be
capital gain or loss, provided that each such fractional share of SBB Common
Stock was held as a capital asset at the Effective Time of the Merger;
<PAGE>
(e) a holder of Pacific Common Stock who exercises dissenters'
rights with respect to a share of Pacific Common Stock and receives a cash
payment for such share generally should recognize capital gain or loss (if each
such share was held as a capital asset at the Effective Time of the Merger)
measured by the difference between the stockholder's basis in such shares and
the amount of cash received, provided that such payment is not "essentially
equivalent to a dividend" within the meaning of Section 302 of the Code after
giving effect to the constructive ownership rules of the Code (collectively, a
"Dividend Equivalent Transaction"). A sale of shares pursuant to an exercise of
dissenters' rights generally will not be a Dividend Equivalent Transaction if,
as a result of such exercise, the stockholder exercising the dissenters' rights
owns no shares of capital stock of SBB (either actually or constructively within
the meaning of Section 318 of the Code) immediately after the Merger.
(f) the descriptions of the law and the legal conclusions
contained in the Registration Statement under the caption "Certain Federal
Income Tax Considerations" are correct in all material respects and that the
discussion thereunder represents an accurate summary of the United States
federal income tax consequences of the Merger that are material to SBB and the
shareholders of SBB.
D. Limitations
1. Except as otherwise indicated, the opinions contained in
this letter are based upon the Code and its legislative
history, the Treasury regulations promulgated thereunder (the
"Regulations"), judicial decisions, and current administrative
rulings and practices of the Internal Revenue Service, all as
in effect on the date of this letter. These authorities may be
amended or revoked at any time. Any such changes may or may
not be retroactive with respect to transactions entered into
or contemplated prior to the effective date thereof and could
significantly alter the conclusions reached in this letter.
There is no assurance that legislative, judicial, or
administrative changes will not occur in the future. We assume
no obligation to update or modify this letter to reflect any
developments that may occur after the date of this letter.
2. The opinions expressed herein represent counsel's best
legal judgment and are not binding upon the Internal Revenue
Service or the courts and are dependent upon the accuracy and
completeness of the documents we have reviewed under the
circumstances, the assumptions made and the factual
representations contained in the Certificates. To the extent
that any of the factual representations provided to us in the
Certificates is with respect to matters set forth in the Code
or the Regulations, we have reviewed with the individuals
making such factual representations the relevant portions of
the Code and the applicable Regulations and are reasonably
satisfied that such individuals understand such provisions and
are capable of making such factual representations. We have
made no independent investigation of the facts contained in
the documents and assumptions set forth above, the factual
representations set forth in the Certificates or the
Registration Statement. No facts have come to our attention,
however, that would cause us to question the accuracy and
<PAGE>
completeness of such facts or documents in a material way. Any
material inaccuracy or incompleteness in these documents,
assumptions or factual representations (whether made by any or
all of Pacific or SBB) could adversely affect the opinions
stated herein.
3. We are expressing opinions only as to those matters
expressly set forth in Section C above. No opinion should be
inferred as to any other matters. This opinion does not
address the various state, local or foreign tax consequences
that may result from the Merger or the other transactions
contemplated by the Merger Agreement. In addition, no opinion
is expressed as to any federal income tax consequence of the
Merger or the other transactions contemplated by the Merger
Agreement except as specifically set forth herein, and this
opinion may not be relied upon except with respect to the
consequences specifically discussed herein.
4. This opinion letter is issued for your benefit and the
shareholders of SBB and no other person or entity may rely
hereon without our express written consent. This opinion
letter may be filed as an exhibit to the Registration
Statement. Furthermore, we consent to the reference to Jenkens
& Gilchrist, a Professional Corporation, under the captions
"Legal Matters" and "Certain Federal Income Tax
Considerations." In giving this consent, we do not thereby
admit that we are within the category of persons whose consent
is required under section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission
promulgated thereunder.
Very truly yours,
JENKENS & GILCHRIST,
a Professional Corporation
By:
--------------------
Exhibit (23)(a)
<PAGE>
[Letterhead of Arthur Anderson LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
January 30, 1998, included in Santa Barbara Bancorp's Form 10-K for the year
ended December 31, 1997, and to all references to our Firm included in this
registration statement.
/s/ Arthur Anderson LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
September 21, 1998
Exhibit (23)(b)
<PAGE>
[Letterhead of KPMG Peat Marwick LLP]
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Pacific Capital Bancorp:
We consent to incorporation by reference in the registration statement
on Form S-4 of Santa Barbara Bancorp of our report dated January 23, 1998,
relating to the consolidated balance sheets of Pacific Capital Bancorp and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1997.
In addition, we consent to the reference to our firm under the heading
"Experts" in the Joint Proxy Statement/Prospectus which is included in the
registration statement on Form S-4.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
Mountain View, California
September 21, 1998
Exhibit (23)(e)
<PAGE>
[Letterhead of Van Kasper & Company]
CONSENT OF VAN KASPER & COMPANY
We hereby consent to the inclusion of our form of opinion letter to the
Board of Directors of Pacific Capital Bancorp ("Pacific Capital") as Appendix E
to the Registration Statement on Form S-4 ("Registration Statement") of Santa
Barbara Bancorp ("Santa Barbara") and to all references to our firm and such
opinion in the Joint Proxy Statement/Prospectus included in such Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, and we do not admit and we
disclaim that we are "experts" for purposes of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
/s/ Van Kasper & Company
---------------------------
VAN KASPER & COMPANY
San Francisco, California
September 22, 1998
Exhibit (99)(a)
<PAGE>
PROXY
SANTA BARBARA BANCORP
SPECIAL MEETING OF SHAREHOLDERS
to be held December 15, 1998
THIS REVOCABLE PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF SANTA BARBARA BANCORP
The undersigned shareholder of Santa Barbara Bancorp, a California
corporation ("SBB"), hereby appoints David W. Spainhour, William S. Thomas, Jr.
and Jay D. Smith (the "Proxies"), and any of them, with full power to act alone
and with full power of substitution and revocation, as proxies of the
undersigned to attend the Special Meeting of Shareholders of SBB to be held at
the Lobero Theater, 33 East Canon Perdido, Santa Barbara, California, on
Tuesday, December 15, 1998 at 2:00 p.m. local time, and any adjournment or
postponement thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present upon the following items and to vote
according to their discretion on any other matter which may properly be
presented for action at said meeting or any adjournment or postponement thereof:
1. Merger. To adopt and approve the Agreement and Plan of Reorganization,
dated July 20, 1998, by and between SBB and Pacific Capital Bancorp
("Pacific"), and an Agreement and Plan of Merger between SBB and
Pacific and the transactions contemplated thereby, including the Merger
of Pacific with and into SBB.
[ ] For [ ] Against [ ] Abstain
2. Amendment to Bylaws. To approve an amendment to the Bylaws of SBB to
increase the range of the authorized number of directors of SBB from
(i) a minimum of seven (7) persons and a maximum of thirteen (13)
person to (ii) a minimum of nine (9) persons to a maximum of seventeen
(17) persons, with the exact number of directors within the foregoing
range to be determined by the Board of Directors.
[ ] For [ ] Against [ ] Abstain
3. Amendment to Articles of Incorporation. To approve an amendment to the
Articles of Incorporation of SBB to eliminate cumulative voting in the
election of directors.
[ ] For [ ] Against [ ] Abstain
4. Other Business. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the Special
Meeting and at any and all adjournments thereof, including matters
incidental to the conduct of the Special Meeting. The Board of
Directors at present knows of no other business to be presented by or
on behalf of SBB or the Board of Directors at the Special Meeting.
<PAGE>
The undersigned hereby ratifies and confirms all that said Proxies, or
any of them or their substitutes, may lawfully do or cause to be done by virtue
hereof, and acknowledges receipt of the Notice of said Special Meeting of
Shareholders and the Joint Proxy Statement/Prospectus accompanying it.
This Proxy will be voted as specified by you above, or if no choice is
specified, this Proxy will be voted "For" the Proposals set forth above.
Please sign exactly as name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
provide full corporate name and name and capacity of the authorized officer
signing on behalf of such corporation. If a partnership, please provide
partnership name and name and capacity of the person signing on behalf of such
partnership.
I/We do [___] - or - I/We do not [___] plan to attend the Special Meeting.
Dated:_________________________, 1998
Signature:____________________________
Signature:____________________________
(If held jointly)
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY
IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
Exhibit (99)(b)
<PAGE>
PROXY
PACIFIC CAPITAL BANCORP
SPECIAL MEETING OF SHAREHOLDERS
to be held December ___, 1998
THIS REVOCABLE PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF PACIFIC CAPITAL BANCORP
The undersigned shareholder of Pacific Capital Bancorp, a California
corporation ("Pacific"), hereby appoints William J. Keller, William S. McAfee
and William H. Pope (the "Proxies"), and any of them, with full power to act
alone and with full power of substitution and revocation, as proxies of the
undersigned to attend the Special Meeting of Shareholders of Pacific to be held
at Corral de Tierra Country Club, Salinas, California, on December ___, 1998 at
_____ p.m. local time, and any adjournment or postponement thereof, and to vote
the number of shares the undersigned would be entitled to vote if personally
present upon the following items and to vote according to their discretion on
any other matter which may properly be presented for action at said meeting or
any adjournment or postponement thereof:
1. Merger. To adopt and approve the Agreement and Plan of Reorganization,
dated July 20, 1998, by and between Pacific and Santa Barbara Bancorp
("SBB"), and an Agreement and Plan of Merger between Pacific and SBB
and the transactions contemplated thereby, including the Merger of
Pacific with and into SBB.
[ ] For [ ] Against [ ] Abstain
2. Other Business. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the Special
Meeting and at any and all adjournments thereof, including matters
incidental to the conduct of the Special Meeting. The Board of
Directors at present knows of no other business to be presented by or
on behalf of Pacific or the Board of Directors at the Special Meeting.
The undersigned hereby ratifies and confirms all that said Proxies, or
any of them or their substitutes, may lawfully do or cause to be done by virtue
hereof, and acknowledges receipt of the Notice of said Special Meeting of
Shareholders and the Joint Proxy Statement/Prospectus accompanying it.
This Proxy will be voted as specified by you above, or if no choice is
specified, this Proxy will be voted "For" the Proposal set forth above.
Please sign exactly as name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
provide full corporate name and name and capacity of the authorized officer
<PAGE>
signing on behalf of such corporation. If a partnership, please provide
partnership name and name and capacity of the person signing on behalf of such
partnership.
I/We do [___] - or - I/We do not [___] plan to attend the Special Meeting.
Dated:_________________________, 1998
Signature:____________________________
Signature:____________________________
(If held jointly)
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY
IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
