SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 2000
PACIFIC CAPITAL BANCORP
(Exact name of registrant as specified in its charter)
California 0-11113 95-3673456
- ---------------------------- ----------------- ------------------------
(State or other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation or Number) Identification Number)
Organization)
200 East Carrillo Street
Santa Barbara, California 93101
- -----------------------------------------------------------------------------
(Address of principal executive offices)
(805) 564-6298
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
On February 3, 2000, Pacific Capital Bancorp, Santa Barbara, California
(the "Company"), entered into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") with San Benito Bank providing for the acquisition
of San Benito Bank by the Company. The Company's acquisition of San Benito Bank
will be accomplished by virtue of the merger of a newly formed acquisition
subsidiary of the Company with and into San Benito Bank (the "Merger").
Completion of the Merger is subject to a number of terms and conditions,
including the receipt of all required regulatory approvals and the approval of
the shareholders of San Benito Bank. As a result of the Merger, shareholders of
San Bentio Bank who do not dissent from the Merger will become shareholders of
the Company. A copy of the Reorganization Agreement is attached as Exhibit 2.1
to this Current Report on Form 8-K.
In connection with the Reorganization Agreement, the Company and San
Benito Bank have entered into a Stock Option Agreement in favor of the Company.
A copy of the Stock Option Agreement is attached as Exhibit 10.1 to this Current
Report on Form 8-K.
A copy of the Company's press release announcing execution of the
Reorganization Agreement with San Benito Bank is attached as Exhibit 99.1 to
this Current Report on Form 8-K.
On January 20, 2000, the Company issued a press release announcing its
1999 year end earnings, a copy of which is attached as Exhibit 99.2 to this
Current Report on Form 8-K.
Forward-Looking Statements
Certain statements contained in this report that are not historical facts
including, but not limited to, statements that can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "anticipate",
"predict", "plan", "estimate" or "continue" or the negative thereof or other
variations thereon, or comparable terminology, are forward-looking statements
within the meaning of the Private Security Litigation Reform Act of 1995, that
involve a number of risks and uncertainties. The actual results of the future
events described in such forward-looking statements in this report may differ
materially from those stated in such forward-looking statements. Among the
factors that could cause actual results to differ materially are the risks and
uncertainties set forth from time to time in the company's periodic reports,
filings and other public statements.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not Applicable.
<PAGE>
(b) Pro forma financial information.
Not Applicable.
(c) Exhibits:
The following exhibits are furnished in accordance with Item 601 of
Regulation S-K.
Exhibit 2.1 Agreement and Plan of Reorganization, dated as of
February 3, 2000, by and between Pacific Capital Bancorp
and San Benito Bank.
Exhibit 10.1 Stock Option Agreement, dated as of March 2,
2000, by San Benito Bank in favor of Pacific Capital
Bancorp.
Exhibit 99.1 Press release, dated February 3, 2000, titled
"Pacific Capital Bancorp Signs Merger Agreement with
San Benito Bank."
Exhibit 99.2 Press release, dated January 20, 2000, titled
"Pacific Capital Bancorp Announces 1999 Record
Earnings."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PACIFIC CAPITAL BANCORP
(Registrant)
Date: March 7, 2000 By: /s/ Donald Lafler
---------------------------------------
Name: Donald Lafler
Title:Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Item Description
2.1 Agreement and Plan of Reorganization, dated as of February 3, 2000,
by and between Pacific Capital Bancorp and San Benito Bank.
10.1 Stock Option Agreement, dated as of March 2, 2000, by San
Benito Bank in favor of Pacific Capital Bancorp.
99.1 Press Release, dated February 3, 2000, titled "Pacific Capital
Bancorp Signs Merger Agreement with San Benito Bank."
99.2 Press Release, dated January 20, 2000, titled "Pacific Capital
Bancorp Announces 1999 Record Earnings."
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
PACIFIC CAPITAL BANCORP
AND
SAN BENITO BANK
Dated as of February 3, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
ACQUISITION OF SAN BENITO BY PACIFIC...................................2
SECTION 1.01 Merger of Newco with and into San Benito.................2
SECTION 1.02 Effective Date...........................................2
SECTION 1.03 Effects of the Merger....................................2
SECTION 1.04 Conversion of San Benito Common Stock....................2
SECTION 1.05 Stock Options............................................4
SECTION 1.06 Exchange Procedures; Surrender of Common Certificates....5
SECTION 1.07 Articles and Bylaws.......................................6
SECTION 1.08 Directors.................................................6
SECTION 1.09 Tax Consequences..........................................7
SECTION 1.10 Employee Benefits.........................................7
SECTION 1.11 Severance Payments........................................7
SECTION 1.12 Stock Option Agreement....................................7
SECTION 1.13 Access; Due Diligence.....................................7
ARTICLE II.
THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE...................8
SECTION 2.01 Time and Place of the Closing and Closing Date............8
SECTION 2.02 Actions to be Taken at the Closing by San Benito..........8
SECTION 2.03 Actions to be Taken at the Closing by Pacific............10
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SAN BENITO..........................11
SECTION 3.01 Organization and Qualification...........................11
SECTION 3.02 Capitalization...........................................12
SECTION 3.03 Execution and Delivery...................................12
SECTION 3.04 Consents and Approvals...................................12
SECTION 3.05 Financial Statements.....................................13
SECTION 3.06 Investments..............................................13
SECTION 3.07 List of Loans............................................14
SECTION 3.08 Title to Assets..........................................14
SECTION 3.09 Deposit Summary..........................................14
SECTION 3.10 Undisclosed Liabilities..................................14
SECTION 3.11 Litigation...............................................15
SECTION 3.12 Compliance with Laws, Permits and Instruments............15
SECTION 3.13 Community Reinvestment Act...............................16
SECTION 3.14 Fair Housing Act Home Mortgage Disclosure Act
and Equal Credit Opportunity Act..........................16
SECTION 3.15 Usury Laws and Other Consumer Compliance Laws............16
SECTION 3.16 Bank Secrecy Act.........................................16
SECTION 3.17 Absence of Certain Changes or Events.....................16
SECTION 3.18 Leases, Contracts and Agreements.........................19
SECTION 3.19 Taxes....................................................19
SECTION 3.20 Insurance................................................20
SECTION 3.21 No Adverse Change........................................21
SECTION 3.22 Patents, Trademarks and Copyrights.......................21
SECTION 3.23 Transactions with Certain Persons and Entities...........21
(i)
<PAGE>
SECTION 3.24 Evidences of Indebtedness................................21
SECTION 3.25 Condition of Assets......................................22
SECTION 3.26 Environmental Compliance.................................22
SECTION 3.27 Regulatory Compliance....................................22
SECTION 3.28 Periodic Reports.........................................23
SECTION 3.29 Absence of Certain Business Practices....................23
SECTION 3.30 Registration Statement; Proxy Statement/Prospectus.......23
SECTION 3.31 Dissenting Shareholders..................................24
SECTION 3.32 Pooling of Interests.....................................24
SECTION 3.33 Books and Records........................................24
SECTION 3.34 Forms of Instruments, Etc................................24
SECTION 3.35 Fiduciary Responsibilities...............................24
SECTION 3.36 Guaranties...............................................24
SECTION 3.37 Voting Trust or Buy-Sell Agreements......................24
SECTION 3.38 Employee Relationships...................................24
SECTION 3.39 Employee Benefit Plans...................................25
SECTION 3.40 Interest Rate Risk Management Instruments................28
SECTION 3.41 Representations Not Misleading...........................29
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PACIFIC.............................29
SECTION 4.01 Organization and Qualification...........................29
SECTION 4.02 Capitalization...........................................30
SECTION 4.03 Execution and Delivery...................................30
SECTION 4.04 Compliance with Laws, Permits and Instruments............31
SECTION 4.05 Financial Statements.....................................31
SECTION 4.06 Undisclosed Liabilities..................................32
SECTION 4.07 Litigation...............................................32
SECTION 4.08 Consents and Approvals...................................32
SECTION 4.09 Taxes....................................................32
SECTION 4.10 No Adverse Change........................................33
SECTION 4.11 Regulatory Compliance....................................33
SECTION 4.12 Securities and Exchange Commission Reports...............33
SECTION 4.13 Registration Statement; Proxy Statement/Prospectus.......34
SECTION 4.14 Representations Not Misleading...........................34
SECTION 4.15 Title to Assets..........................................34
SECTION 4.16 Community Reinvestment Act...............................35
SECTION 4.17 Fair Housing Act Home Mortgage Disclosure Act
and Equal Credit Opportunity Act..........................35
SECTION 4.18 Usury Laws and Other Consumer Compliance Laws............35
SECTION 4.19 Bank Secrecy Act.........................................35
SECTION 4.20 Leases, Contracts and Agreements.........................35
SECTION 4.21 Pooling of Interests.....................................36
SECTION 4.22 Books and Records........................................36
SECTION 4.23 Employee Relationships...................................36
SECTION 4.24 Employee Benefit Plans...................................37
SECTION 4.25 Interest Rate Risk Management Instruments................38
SECTION 4.26 Environmental Compliance.................................38
(ii)
<PAGE>
ARTICLE V.
COVENANTS OF SAN BENITO...............................................39
SECTION 5.01 Best Efforts............................................39
SECTION 5.02 Merger Agreement........................................39
SECTION 5.03 Submission of Merger to Shareholders....................39
SECTION 5.04 Information for Applications and Statements.............40
SECTION 5.05 Required Acts of San Benito. ..........................40
SECTION 5.06 Prohibited Acts of San Benito. ........................41
SECTION 5.07 Access; Pre-Closing Investigation.......................44
SECTION 5.08 Director and Committee Meetings.........................44
SECTION 5.09 Additional Financial Statements. ......................45
SECTION 5.10 Untrue Representations..................................45
SECTION 5.11 Litigation and Claims...................................45
SECTION 5.12 Adverse Changes.........................................45
SECTION 5.13 No Negotiation with Others..............................45
SECTION 5.14 Consents and Approvals..................................46
SECTION 5.15 Environmental Investigation; Right toTerminate Agreement46
SECTION 5.16 Restrictions on Resales.................................47
SECTION 5.17 Shareholder Lists.......................................47
SECTION 5.18 Employee Pension Plans..................................47
SECTION 5.19 Employee Welfare Benefit Plans..........................47
SECTION 5.20 San Benito Stock Option Plans...........................48
SECTION 5.21 Director Voting.........................................48
SECTION 5.22 Dividends...............................................48
SECTION 5.23 Non-Compete Agreements..................................48
SECTION 5.24 Pooling of Interests Accounting Treatment...............48
SECTION 5.25 Disclosure Schedules....................................48
SECTION 5.26 Additional Accruals and Reserves........................49
ARTICLE VI.
COVENANTS OF PACIFIC..................................................49
SECTION 6.01 Best Efforts.............................................49
SECTION 6.02 Incorporation and Organization of Newco..................49
SECTION 6.03 Merger Agreement.........................................49
SECTION 6.04 Regulatory Approvals and Registration Statement..........49
SECTION 6.05 Information for Applications and Statements..............50
SECTION 6.06 Acts of Newco. .........................................50
SECTION 6.07 Prohibited Acts of Pacific. ............................50
SECTION 6.08 Access; Pre-Closing Investigation........................51
SECTION 6.09 Untrue Representations...................................51
SECTION 6.10 Litigation and Claims....................................51
SECTION 6.11 Adverse Change...........................................51
SECTION 6.12 Consents and Approvals...................................52
SECTION 6.13 Stock Options............................................52
SECTION 6.14 Director and Officer Liability Insurance.................52
SECTION 6.15 Conduct of Business in the Ordinary Course...............52
SECTION 6.16 Pooling of Interests Accounting Treatment................53
SECTION 6.17 Disclosure Schedules.....................................53
SECTION 6.18 Assumption of Obligations................................53
(iii)
<PAGE>
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SAN BENITO.................53
SECTION 7.01 Compliance with Representations, Warranties andAgreements53
SECTION 7.02 Shareholder Approval.....................................53
SECTION 7.03 Government and Other Approvals...........................54
SECTION 7.04 No Litigation............................................54
SECTION 7.05 Delivery of Closing Documents............................54
SECTION 7.06 Receipt of Fairness Opinion..............................54
SECTION 7.07 Receipt of Pooling Opinions..............................54
SECTION 7.08 Registration Statement...................................55
SECTION 7.09 Federal Tax Opinion......................................55
SECTION 7.10 Accounting Treatment.....................................55
SECTION 7.11 No Material Adverse Change...............................55
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC....................55
SECTION 8.01 Compliance with Representations, Warranties andAgreements56
SECTION 8.02 Shareholder Approvals....................................56
SECTION 8.03 Government and Other Approvals...........................56
SECTION 8.04 No Litigation............................................56
SECTION 8.05 Delivery of Closing Documents............................57
SECTION 8.06 Receipt of Shareholder Letters...........................57
SECTION 8.07 Dissenting Shareholders..................................57
SECTION 8.08 Receipt of Pooling Opinions..............................57
SECTION 8.09 Registration Statement...................................57
SECTION 8.10 Federal Tax Opinion......................................57
SECTION 8.11 Accounting Treatment.....................................58
SECTION 8.12 No Material Adverse Change...............................58
ARTICLE IX.
EXPENSES, TERMINATION AND ABANDONMENT.................................58
SECTION 9.01 Expenses.................................................58
SECTION 9.02 Termination..............................................59
SECTION 9.03 Notice of Termination....................................61
SECTION 9.04 Effect of Termination....................................61
ARTICLE X.
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................61
SECTION 10.01 Nonsurvival of Representations and Warranties...........61
ARTICLE XI.
CONFIDENTIAL INFORMATION..............................................61
SECTION 11.01 Definition of "Recipient," "Disclosing Party,"
"Representative" and "Person"...........................61
SECTION 11.02 Definition of "Subject Information".....................61
SECTION 11.03 Confidentiality.........................................62
SECTION 11.04 Securities Law Concerns.................................62
SECTION 11.05 Return of Subject Information...........................62
SECTION 11.06 Specific Performance/Injunctive Relief..................62
ARTICLE XII.
MISCELLANEOUS.........................................................63
(iv)
<PAGE>
SECTION 12.01 Brokerage Fees and Commissions..........................63
SECTION 12.02 Entire Agreement........................................63
SECTION 12.03 Further Cooperation.....................................63
SECTION 12.04 Severability............................................63
SECTION 12.05 Notices.................................................64
SECTION 12.06 Governing Law...........................................65
SECTION 12.07 Multiple Counterparts...................................65
SECTION 12.08 Certain Definitions.....................................65
SECTION 12.09 Specific Performance....................................67
SECTION 12.10 Attorneys' Fees and Costs...............................67
SECTION 12.11 Rules of Construction...................................67
SECTION 12.12 Binding Effect; Assignment..............................67
SECTION 12.13 Public Disclosure.......................................67
SECTION 12.14 Extension; Waiver.......................................68
SECTION 12.15 Amendments..............................................68
EXHIBITS
Exhibit "A" - Agreement and Plan of Merger
- -----------
Exhibit "B" - San Benito Option Agreement
- -----------
Exhibit "C" - Opinion Matters of Counsel to San Benito
- -----------
Exhibit "D" - Opinion Matters of Counsel to Pacific
- -----------
Exhibit "E" - Form of Shareholder Letter
- -----------
Exhibit "F" - Persons to Deliver Non-Compete Agreements
- -----------
Exhibit "G" - Form of Non-Compete Agreement
- -----------
Exhibit "H" - Form of Lessor Estoppel Certificate
- -----------
Exhibit "I" - Form of Sublessor Estoppel Certificate
- -----------
(v)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of the 3rd day of February, 2000, by and between PACIFIC CAPITAL
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 in Santa Barbara, California ("Pacific"), and SAN BENITO BANK, a
California banking corporation with its principal offices in Hollister,
California ("San Benito").
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, San Benito is a California banking corporation duly organized and
existing under the laws of the State of California; and
WHEREAS, this Agreement provides for the incorporation of a new
corporation ("Newco") as a direct or indirect wholly owned subsidiary of Pacific
in order for Pacific to directly or indirectly acquire 100% of the stock of San
Benito through the merger of Newco with and into the Bank (the "Merger"); and
WHEREAS, as a result of the Merger (i) all of the issued and outstanding
shares of common stock of San Benito (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 Pacific, and
(ii) all outstanding options to acquire common stock of San Benito shall be
converted into options to acquire common stock of Pacific, all pursuant to an
Agreement and Plan of Merger substantially in the form attached hereto as
Exhibit "A" (the "Merger Agreement"); and
WHEREAS, Pacific and San Benito 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; 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, Pacific and San Benito 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 Pacific
and San Benito and their respective shareholders; and
WHEREAS, the respective boards of directors of Pacific and San Benito 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.
1
<PAGE>
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.
ACQUISITION OF SAN BENITO BY PACIFIC
SECTION 1.01 Merger of Newco with and into San Benito. Subject to the
terms and conditions of this Agreement and the Merger Agreement, Pacific and San
Benito shall cause Newco to be merged with and into San Benito on the Effective
Date (as such term is defined in Section 1.02) in accordance with the provisions
of Section 1107 of the California General Corporation Law (the "GCL"). San
Benito shall be the surviving corporation in the Merger (the "Resulting Bank")
and shall continue its corporate existence under the laws of the State of
California. Upon consummation of the Merger, the separate corporate existence of
Newco 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" 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)).
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
Resulting Bank shall be deemed to be a continuation in entity and identity of
each of San Benito and Newco; 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 San Benito and
Newco. If, on the Effective Date, San Benito is acting as trustee, guardian,
executor, administrator, custodian or in any other fiduciary capacity, the
Resulting Bank shall, without the necessity of any judicial action or action by
the creator of such trust, continue such office, trust or fiduciary relationship
and shall perform all of the duties and obligations and exercise all of the
powers and authority connected with or incidental to such fiduciary relationship
in the same manner as though the Resulting Bank had been originally named or
designated as such fiduciary. The naming or designating by a testator, or the
creator of a living trust, of San Benito to act as trustee, guardian, executor
or in any other fiduciary capacity shall be considered the naming or designating
of the Resulting Bank. The name of the Resulting Bank shall be "San Benito
Bank." The existing offices and facilities of San Benito shall be the principal
office and facilities of the Resulting Bank following the Merger.
SECTION 1.04 Conversion of San Benito 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
2
<PAGE>
share, of San Benito (the "San Benito Common Stock") issued and outstanding
immediately prior to the Effective Date (other than shares of San Benito Common
Stock as to which dissenters' rights have been perfected or shares held directly
or indirectly by San Benito or Pacific (except for Trust Account Shares or DPC
Shares as defined in subsection (h) below) shall be converted into the right to
receive 0.605 shares (the "Exchange Ratio") of the fully-paid, nonassessable and
registered common stock, no par value per share, of Pacific (the "Pacific Common
Stock") (together with any cash payment in lieu of fractional shares, as
provided in subsection (b) below, the "Merger Consideration").
(b) No fractional shares of Pacific Common Stock shall be issued and, in
lieu thereof, holders of shares of San Benito Common Stock who would otherwise
be entitled to a fractional share interest (after taking into account all shares
of San Benito 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 Pacific Common Stock on the Nasdaq
National Market ("Nasdaq") on the business day immediately preceding the
Effective Date.
(c) All of the shares of San Benito Common Stock converted into Pacific
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 San Benito Common Stock shall thereafter
represent the right to receive (i) a certificate representing the number of
whole shares of Pacific Common Stock and (ii) cash in lieu of fractional shares
into which the shares of San Benito Common Stock represented by such Certificate
have been converted pursuant to this Section 1.04. Certificates previously
representing shares of San Benito Common Stock shall be exchanged for
certificates representing whole shares of Pacific 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.
(d) If, between the date hereof and the Effective Date, the outstanding
shares of Pacific Common Stock or San Benito 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 Pacific Common Stock into which a share of San Benito Common Stock
shall be converted pursuant to subsection (a) above shall be appropriately and
proportionately adjusted so that each shareholder of San Benito shall be
entitled to receive such number of shares of Pacific Common Stock as such
shareholder would have received pursuant to such Share Adjustment had the record
date therefor been immediately following the Effective Date.
(e) If any of the shares of San Benito 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 San Benito Common Stock
which shall cease to be a dissenting share shall have only such rights as are
provided under the GCL.
3
<PAGE>
(f) The number of shares of common stock of Newco outstanding at the
Effective Date shall, by virtue of the Merger and without any action on the part
of Pacific or any other party as holder thereof, be converted into shares of
common stock of the Resulting Bank, no par value per share, with the effect that
the number of shares of the common stock of the Resulting Bank outstanding
immediately after the Effective Date shall be equal to the aggregate number of
shares of San Benito Common Stock issued and outstanding immediately prior to
the Effective Date.
(g) On the Effective Date, the stock transfer books of San Benito shall be
closed, and no transfer of San Benito Common Stock theretofore outstanding shall
thereafter be made.
(h) On the Effective Date, all shares of San Benito Common Stock that are
owned, directly or indirectly, by San Benito or Pacific or any of their
respective subsidiaries (other than (i) shares of San Benito 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 San Benito Common Stock which are
similarly held, whether held directly or indirectly by San Benito or Pacific, as
the case may be, being referred to herein as "Trust Account Shares") and (ii)
shares of San Benito Common Stock held by San Benito 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 Pacific or
other consideration shall be delivered in exchange therefor.
SECTION 1.05 Stock Options.
(a) Between the date of this Agreement and the Effective Date, each person
holding one or more options to purchase shares of San Benito Common Stock
pursuant to any San Benito Stock Option Plan (as defined in Section 6.13), shall
continue to have the right to exercise any vested San Benito Stock Option (as
defined in Section 6.13) prior to the Effective Date.
(b) On the Effective Date, each non-statutory San Benito Stock Option
which is outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of San Benito Common Stock and shall be
assumed by Pacific and converted automatically into an option to purchase shares
of Pacific Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the San Benito Stock
Option Plans and the agreements evidencing grants thereunder):
(i) The number of shares of Pacific Common Stock to be subject to
the converted option shall be equal to the product of the number of shares
of San Benito 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 Pacific Common Stock under the
converted option shall be equal to the exercise price per share of San
Benito 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 San Benito Stock Option which is an
"incentive stock option" (as defined in Section 422 of the Code) and which is
outstanding and unexercised
4
<PAGE>
immediately prior thereto shall cease to represent a right to acquire shares of
San Benito Common Stock and shall be assumed Pacific and converted automatically
into an option to purchase shares of Pacific Common Stock in an amount and at an
exercise price determined in a manner which is consistent with Section 424(a) of
the Code.
(d) The duration and other terms of any converted option pursuant to this
Section 1.05 shall be the same as the original option, except that all
references to San Benito shall be deemed to be references to Pacific.
SECTION 1.06 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 ten (10) business days thereafter, the Exchange Agent shall mail to each
holder of record as of the Effective Date of one or more Certificates (as
indicated on the certified shareholder list to be delivered to Pacific in
accordance with Section 2.02(F) hereof, each a "San Benito 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 San Benito Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement and the Merger
Agreement.
(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 Pacific Common Stock to which such holder
of San Benito 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
1.06, 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 Pacific 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
5
<PAGE>
error, is incomplete or is not accompanied by all appropriate
Certificates, then the Exchange Agent will notify such San Benito
Shareholder promptly of the need for further information.
(c) If any certificate representing shares of Pacific 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 Pacific 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 San Benito
Shareholder claiming such Certificate to be lost, stolen or destroyed and, if
required by Pacific in its sole discretion, the posting by such person of a bond
in such amount as Pacific 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.
(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 Pacific Common Stock shall be delivered to a
San Benito Shareholder who is an "affiliate" (as such term is used in Section
5.16 and Section 8.06) of San Benito unless such "affiliate" shall have
theretofore executed and delivered to Pacific 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 Pacific after the Effective Date shall
be paid to persons entitled to receive such certificates for Pacific 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 Pacific 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 sixty (60) days after the Effective Date, holders of Certificates
representing shares of San Benito Common Stock shall be entitled to vote as
holders of shares of Pacific Common Stock notwithstanding that such Certificates
representing San Benito Common Stock have not been exchanged for shares of
Pacific Common Stock as provided in this Section 1.06.
SECTION 1.07 Articles and Bylaws. The Articles and Bylaws, respectively,
of the Resulting Bank shall be as set forth in the Merger Agreement.
6
<PAGE>
SECTION 1.08 Directors. In connection with the annual meeting of
shareholders of Pacific to be held in 2001, one (1) representative of San
Benito, mutually satisfactory to Pacific and San Benito, shall be nominated by
the Nominating Committee of the Board of Directors of Pacific to stand for
election to the Board of Directors of Pacific.
SECTION 1.09 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 1.10 Employee Benefits. Pacific shall, with respect to each
employee of San Benito at the Effective Date who continues in employment with
Pacific or its Subsidiaries (each a "Continued Employee"), provide the benefits
described in this Section 1.10. Subject to the right of subsequent amendment,
modification or termination in the sole discretion of Pacific as provided in
Section 5.18 and Section 5.19 hereof, each Continued Employee shall be entitled,
as an employee of Pacific or its Subsidiaries, to participate in Pacific
Employee Benefit Plans (as defined in Section 12.08(F)) 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. All such
participation shall be subject to such terms of such plans as may be in effect
from time to time and this Section 1.10 is not intended to give any Continued
Employee any rights or privileges superior to those of other employees of
Pacific or its Subsidiaries. The provisions of this Section 1.10 shall not be
deemed or construed so as to provide duplication of similar benefits but,
subject to that qualification, Pacific shall, for purposes of vesting and any
age or period of service requirements for commencement of participation with
respect to any Pacific Employee Plans in which a Continued Employee may
participate, credit each Continued Employee with his or her term of service with
San Benito. Notwithstanding the foregoing, no such credit for term of service
with San Benito 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 1.11 Severance Payments. The severance benefits set forth in
Schedule 1.11 hereto shall be provided to employees of San Benito who may be
terminated (i) by San Benito on the Effective Date upon confirmation that such
employees would be entitled to the severance benefit, or (ii) by Pacific or any
of its Subsidiaries without cause within one year following the Effective Date.
SECTION 1.12 Stock Option Agreement. As a condition to the execution of
this Agreement, San Benito is executing and delivering to Pacific a Stock Option
Agreement in substantially the form attached hereto as Exhibit "B".
SECTION 1.13 Access; Due Diligence. Subject to the confidentiality
provisions of Article XI, San Benito shall, for a period of fifteen (15)
business days following the date that a countersigned original of this Agreement
is received by Pacific, afford the officers, directors, employees, attorneys,
accountants, investment bankers and authorized representatives of Pacific and
its Subsidiaries full access to the properties, books, contracts and records of
San Benito in order to conduct due diligence of San Benito to assess the
condition and results of operations of San Benito. Pacific may terminate this
Agreement by giving written notice pursuant to Section 12.05 within
7
<PAGE>
thirty (30) days after the date of this Agreement if its due diligence review of
San Benito discloses material liabilities, obstacles to the mergers or other
circumstances that are not disclosed in this Agreement or the Schedules hereto,
and that in the good faith judgement of Pacific materially alter the economic
basis for or feasibility of the Merger; provided, however, that the sole remedy
that Pacific shall have in such event shall be termination of this Agreement.
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 Pacific and San Benito 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 Pacific and San Benito (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 Pacific, 200 East
Carrillo Street, Suite 300, Santa Barbara, California 93101 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 San Benito. At the
Closing, San Benito shall execute and acknowledge, or cause to be executed and
acknowledged (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 the Articles of
Incorporation of San Benito and all amendments thereto, duly certified as
of a recent date by the California Secretary of State (the "California
Secretary").
B. A certificate, dated as of a recent date, issued by the
California Department of Financial Institutions, duly certifying as to the
organization of San Benito under the laws of the State of California and
authorization to conduct commercial banking business within the State of
California.
C. A certificate of status dated as of a recent date, issued by the
California Secretary, duly certifying as to the good legal standing of San
Benito under the laws of the State of California.
8
<PAGE>
D. A certificate of good standing, dated as of a recent date, issued
by the California Franchise Tax Board, duly certifying as to the good
standing of San Benito in the State of California.
E. A certificate, dated as of a recent date, issued by the Federal
Deposit Insurance Corporation (the "FDIC"), duly certifying that the
deposits of San Benito are insured by the FDIC pursuant to the Federal
Deposit Insurance Act (the "FDIA").
F. A certificate, dated as of the Closing Date, executed by the
Corporate Secretary or other appropriate executive officer of San Benito,
pursuant to which such officer shall certify: (a) the due adoption by the
Board of Directors of San Benito 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 San Benito 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 San Benito 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 San
Benito; (d) that the copy of the Bylaws of San Benito 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 the San Benito Shareholders as of the Closing Date.
G. A certificate, dated as of the Closing Date, executed by an
executive officer of San Benito, pursuant to which San Benito 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 San Benito
since December 31, 1998, and (ii) San Benito 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.
H. Signed Non-Compete Agreements (as defined in Section 5.23) from
those persons identified on Exhibit "F" attached hereto and in
substantially the form attached hereto as Exhibit "G".
I. All consents required to be obtained by San Benito from third
parties to consummate the transactions contemplated by this Agreement.
J. An opinion of counsel to San Benito addressing each of the
matters identified in Exhibit "C" attached hereto.
9
<PAGE>
K. Lessor Estoppel Certificates, in the form attached hereto as
Exhibit "H", and Sublessor Estoppel Certificates, in the form attached
hereto as Exhibit "I", as applicable, relative to each of the Leased
Properties identified in Section 3.18 and dated as of date within one week
of the Closing Date.
M. All other documents required to be delivered to Pacific by San
Benito under the provisions of this Agreement, and all other documents,
certificates and instruments as are reasonably requested by Pacific or its
counsel.
SECTION 2.03 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 San Benito 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 San Benito's obligations to close
hereunder):
A. True, correct and complete copies of Pacific's Articles of
Incorporation and all amendments thereto, duly certified as of a recent
date by the California Secretary of State (the "California Secretary").
B. True, correct and complete copies of the Articles of
Incorporation and all amendments thereto, of Newco, duly certified as of a
recent date by the California Secretary.
C. Certificates of status, dated as of a recent date, issued by the
California Secretary, duly certifying as to the good legal standing of
each of Pacific and Newco under the laws of the State of California.
D. 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 each of Pacific and Newco in the State of California.
E. 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.
F. A certificate, dated as of the Closing Date, executed by the
Secretary or an Assistant Secretary 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 and the taking of all actions contemplated
hereby and thereby; (b) 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 other agreements and documents contemplated
hereby and the taking of all actions contemplated hereby and thereby on
behalf of Pacific, and (c) 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.
G. A certificate, dated as of the Closing Date, executed by a duly
authorized officer of Pacific, pursuant to which Pacific shall certify, to
the best knowledge of such
10
<PAGE>
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 Pacific since December 31, 1998, 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.
H. All consents required to be obtained by Pacific or Newco from
third parties to consummate the transactions contemplated by this
Agreement.
I. An opinion of counsel to Pacific addressing each of the matters
identified in Exhibit "D" attached hereto.
J. All other documents required to be delivered to San Benito by
Pacific under the provisions of this Agreement, and all other documents,
certificates and instruments as are reasonably requested by San Benito or
its counsel.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SAN BENITO
San Benito hereby makes the representations and warranties set forth in
this Article III to Pacific.
SECTION 3.01 Organization and Qualification.
(a) San Benito is a California banking 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 banking corporations located in
the State of California which are member banks of the Federal Reserve System
(the "Federal Reserve"). San Benito 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. San Benito
does not conduct any trust business. True and complete copies of the Articles of
Incorporation and Bylaws of San Benito, as amended to date, certified by the
Corporate Secretary of San Benito, have been delivered to Pacific. San Benito is
an insured bank as defined in the FDIA and a member bank of the Federal Reserve.
(b) The nature of the business of San Benito does not require it to be
qualified to do business in any jurisdiction other than the State of California.
San Benito does not engage in any activity that is prohibited by the FDIC or the
Federal Reserve.
(c) San Benito does not own or control any Affiliate (as defined in
Section 12.08(A) hereof) or Subsidiary (as defined in Section 12.08(B) hereof).
Except as disclosed on Schedule 3.01(c), San Benito does not have any equity
interest, direct or indirect, in any other bank or
11
<PAGE>
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 San Benito has not been conducted through any other direct or
indirect Subsidiary or Affiliate of San Benito.
SECTION 3.02 Capitalization. The entire authorized capital stock of San
Benito consists of (i) 9,765,624 shares of San Benito Common Stock, 2,853,344
shares of which are fully paid, validly issued, nonassessable and outstanding,
and 171,876 additional shares of which have been reserved for issuance to
holders of outstanding San Benito Stock Options (as defined in Section 6.13
hereto), and (ii) 2,000,000 shares of preferred stock, no par value per share
(the "San Benito Preferred Stock"), of which no shares of San Benito Preferred
Stock are issued or outstanding. Schedule 3.02 contains a list of each of the
San Benito Stock Option Plans, including (i) the number of outstanding options
with respect to each San Benito Stock Option Plan, (ii) the exercise price per
share with respect to each San Benito Stock Option, (iii) a list of all option
holders with respect to each San Benito Stock Option Plan, and (iv) the number
of vested and unvested San Benito Stock Options with respect to each such option
holder in each San Benito Stock Option Plan. All San Benito Stock Options were
issued and, upon issuance in accordance with the terms of the outstanding option
agreements, the shares of San Benito Common Stock shall be issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.02, 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, San Benito to
purchase or otherwise acquire any security of or equity interest in San Benito
or (iii) outstanding subscriptions, options, rights, warrants, calls,
convertible securities, irrevocable proxies or other agreements or commitments
obligating San Benito 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 San Benito 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
San Benito 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 San Benito Common Stock, except pursuant to applicable laws and regulations,
and all dividends declared prior to the date of this Agreement have been paid.
SECTION 3.03 Execution and Delivery. San Benito 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 San Benito and each constitutes and will constitute the legal, valid
and binding obligation of San Benito, 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 3.04 Consents and Approvals. San Benito's Board of Directors (at a
meeting called and duly held) has resolved, subject to its fiduciary duties to
the shareholders of San Benito,
12
<PAGE>
to recommend approval and adoption by San Benito's shareholders of the Merger,
this Agreement and the Merger Agreement. Except for shareholder and regulatory
approvals and except as disclosed in Schedule 3.04, 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 San
Benito 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 San Benito of the transactions
contemplated hereby or thereby, including, but not limited to, the Merger.
SECTION 3.05 Financial Statements.
(a) San Benito has furnished to Pacific true and complete copies of (i)
the audited balance sheets of San Benito as of December 31, 1997 and 1998, and
the related audited statements of income, stockholders' equity and cash flows
for the years ended December 31, 1996, 1997 and 1998, (ii) an unaudited balance
sheet of San Benito as of September 30, 1999, and the related unaudited
statement of income for the nine-month period ended September 30, 1999 (such
balance sheets and the related statements of income, stockholders' equity and
cash flows are collectively referred to herein as the "San Benito Financial
Statements"). Except as described in the notes to the San Benito Financial
Statements, the San Benito Financial Statements fairly present, in all material
respects, the financial position of San Benito as of the respective dates
thereof and the results of operations and changes in financial position of San
Benito 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 San Benito Financial Statements accurately and
fairly reflect in all material respects the transactions of San Benito. The San
Benito 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) San Benito has furnished Pacific with true and complete copies of the
Report of Condition and Income ("Call Reports") for San Benito for the periods
ended December 31, 1997, December 31, 1998 and September 30, 1999. Such Call
Reports fairly presents, in all material respects, the financial position of San
Benito 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.
To the best of its knowledge, San Benito 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 San Benito,
the allowance for loan losses account for San Benito 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 San Benito.
SECTION 3.06 Investments. San Benito has furnished to Pacific, as Schedule
3.06 of this Agreement, a complete list, as of December 31, 1999, of all
securities, including municipal bonds, owned by San Benito (the "Securities
Portfolio"). All securities in the Securities Portfolio are
13
<PAGE>
owned by San Benito (i) of record, and (ii) beneficially, free and clear of all
mortgages, liens, pledges and encumbrances, except as disclosed in Schedule
3.06.
SECTION 3.07 List of Loans. Schedule 3.07 contains a true and complete
list, as of December 31, 1999, of all loans (individually, a "Loan" and
collectively, the "Loans") of San Benito, showing for each such Loan the
outstanding principal balance due, before reduction for any discount. All
currently outstanding Loans of San Benito, including any current extensions of
any Loan, were solicited, originated and currently exist in material compliance
with all applicable requirements of federal and state law and regulations
promulgated thereunder. The Loans are adequately documented and each note
evidencing a Loan or credit agreement or security instrument related to a Loan
constitutes a valid and binding obligation of the obligor thereunder,
enforceable in accordance with the terms thereof, except where the failure
thereof, individually or in the aggregate, would not have a material adverse
effect on the condition (financial or otherwise), operations or prospects of San
Benito. For the purposes of this Section, the phrase "enforceable in accordance
with the terms thereof" does not mean that the borrower has the financial
ability to pay a Loan or that any collateral is sufficient to result in payment
of the Loan secured thereby. There are no oral modifications or amendments or
additional agreements related to the Loans that are not reflected in San
Benito's records, and no claim of defense as to the enforcement of any Loan has
been asserted, and San Benito is not aware of any acts or omissions that would
give rise to any claim or right of rescission, set off, counterclaim or defense,
except where such claim would not have, either individually or in the aggregate,
a material adverse effect on the condition (financial or otherwise), operations
or prospects of San Benito.
SECTION 3.08 Title to Assets. San Benito has good and indefeasible title
to all of its assets and properties including, without limitation, other real
estate owned and all personal and intangible properties reflected in the San
Benito 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 3.08, (ii) as noted in the San Benito Financial
Statements, or as set forth in the documents delivered to Pacific pursuant to
this Section 3.08, (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 San Benito Financial
Statements. Schedule 3.08 includes (a) a Property Information Sheet (the form of
which is prepared by the American Industrial Real Estate Association) and (b) a
copy of the title policy of insurance with respect to each parcel of real
property owned by San Benito.
SECTION 3.09 Deposit Summary. Schedule 3.09 contains a summary of the
amounts and types of the deposits held by San Benito as of December 31, 1999 and
the weighted average interest rates being paid thereon as of such date (the
"Deposit Summary"). The Deposit Summary and other data and information provided
by San Benito, relating to assets, liabilities and business of San Benito is
true, complete and correct in all material respects as of the date thereof.
SECTION 3.10 Undisclosed Liabilities. San Benito does not have any
material liability or obligation, accrued, absolute, contingent or otherwise and
whether due or to become due (including, without limitation, unfunded
obligations under any employment, deferred compensation,
14
<PAGE>
supplemental compensation, service recognition or severance agreement, whether
written or oral, or San Benito Employee Plans (as defined in Section 3.39
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 San Benito 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 San Benito Financial Statements
or (ii) as disclosed on Schedule 3.10.
SECTION 3.11 Litigation. Except as set forth on Schedule 3.11, 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 San Benito, threatened against or affecting San
Benito or any of its current or former officers and directors (while acting in
such capacity) at law or in equity, 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 San Benito or any of its current or former officers or directors (while
acting in such capacity) or any of their properties or capital stock. No matter
described in Schedule 3.11 would reasonably be anticipated to result in a
Material Adverse Change with respect to San Benito or materially and adversely
affect the transactions contemplated by this Agreement, and San Benito 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 best knowledge of San Benito, threatened against San Benito
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 San Benito pursuant hereto or thereto or seeks to enjoin
or otherwise restrain the transactions contemplated hereby or thereby.
SECTION 3.12 Compliance with Laws, Permits and Instruments.
(a) Except as set forth in Schedule 3.12, San Benito is in compliance
with, and is 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 San Benito, (ii) any material provision of any
loan agreement, security or pledge agreement, mortgage, indenture, lease,
contract, agreement or other instrument applicable to San Benito or its 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 or, to the best of its
knowledge, any 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 San Benito or its 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 San Benito.
(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
San Benito, (ii) any provision of any
15
<PAGE>
mortgage, indenture, lease, contract, agreement or other instrument applicable
to San Benito or its assets, operations, properties or businesses, or (iii) any
permit, concession, grant, franchise, license, authorization, judgment, writ,
injunction, order, decree or, to the best of its knowledge, any statute, law,
ordinance, rule or regulation applicable to San Benito or its assets,
operations, properties or businesses.
SECTION 3.13 Community Reinvestment Act. San Benito is in compliance with
the Community Reinvestment Act (12 U.S.C. ss. 2901 et seq.) and all regulations
promulgated thereunder, and San Benito has supplied Pacific with copies of San
Benito's current Community Reinvestment Act ("CRA") Statement, all letters and
written comments received by San Benito since January 1, 1996 pertaining thereto
and any responses by San Benito to such comments. San Benito had a rating of
"satisfactory" or better as of its most recent CRA compliance examination and
knows of no reason why it would not receive a rating of "satisfactory" or better
at its next CRA compliance examination or why any other governmental entity may
seek to restrain, delay or prohibit the transactions contemplated by this
Agreement as a result of any act or omission of San Benito under the CRA.
SECTION 3.14 Fair Housing Act Home Mortgage Disclosure Act and Equal
Credit Opportunity Act. San Benito is in material compliance with the Fair
Housing Act (42 U.S.C. ss. 3601 et seq.), the Home Mortgage Disclosure Act (12
U.S.C. ss. 2801 et seq.) and the Equal Credit Opportunity Act (15 U.S.C. ss.
1691 et seq.) and all regulations promulgated thereunder. San Benito has not
received any notices of any violation of said acts or any of the regulations
promulgated thereunder, nor does San Benito have any notice of, or knowledge of,
any threatened administrative inquiry, proceeding or investigation with respect
to San Benito's compliance with said acts.
SECTION 3.15 Usury Laws and Other Consumer Compliance Laws. All loans of
San Benito have been made substantially in accordance with all applicable
statutes and regulatory requirements at the time such loan or any renewal
thereof, including without limitation Regulation Z (12 C.F.R. ss. 226 et seq.)
issued by the Federal Reserve, the Federal Consumer Credit Protection Act (15
U.S.C. ss. 1601 et seq.) and all statutes and regulations governing the
operations of California banking corporations. Each Loan by San Benito was made
in the ordinary course of its business.
SECTION 3.16 Bank Secrecy Act. San Benito is in material compliance with
the Bank Secrecy Act (12 U.S.C. ss.ss. 1730(d) and 1829(b)) and all regulations
promulgated thereunder, and San Benito has properly certified all foreign
deposit accounts and has made all necessary tax withholdings on all of its
deposit accounts. San Benito has timely and properly filed and maintained all
requisite Currency Transaction Reports and other related forms, including, but
not limited to, any requisite Custom Reports required by any agency of the
United States Treasury Department, including, but not limited to, the Internal
Revenue Service (the "IRS").
SECTION 3.17 Absence of Certain Changes or Events. Except as disclosed on
Schedule 3.17, since December 31, 1998, San Benito 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
16
<PAGE>
a material adverse effect on the business, results of operations,
financial condition, or (insofar as they can reasonably be foreseen)
prospects of San Benito, 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);
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 3.08,
(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 San Benito 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 San Benito;
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 San Benito Proprietary Right
(as defined in Section 3.22 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
17
<PAGE>
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 San Benito's 1999/2000
budget and approved in advance by Pacific (which approval shall not be
unreasonably withheld), (ii) employee severance benefits contemplated by
Section 1.11 of this Agreement, and (iii) periodic increases consistent
with past practices;
K. Except for improvements or betterments relating to San Benito
Properties (as defined in Section 3.26 hereof), made any capital
expenditures or capital additions or betterments in excess of an aggregate
of $100,000;
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 $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. Taken any action that has caused San Benito to be an entity not
eligible to participate in a business combination transaction for which
"pooling of interests" accounting treatment is sought.
18
<PAGE>
S. 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;
T. 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
U. 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 T. above.
SECTION 3.18 Leases, Contracts and Agreements. Schedule 3.18 sets forth a
complete listing of all leases, subleases, licenses, contracts and agreements to
which San Benito is a party and which (i) relate to real property used by San
Benito in its operation (the "Leased Properties"), or (ii) involve payments to
or by San Benito in excess of $50,000 during the term of such San Benito
Contracts (exclusive of unfunded loan commitments and letters of credit issued
by San Benito), or (iii) involve any unfunded loan commitments and letters of
credit issued by San Benito where the borrower's total direct and indirect
indebtedness to San Benito is in excess of $250,000 (the "San Benito
Contracts"). True and correct copies of all such San Benito Contracts (other
than unfunded loan commitments and letters of credit issued by San Benito) are
included with Schedule 3.18. For the purposes of this Agreement, the San Benito
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 San Benito. Except as set forth in
Schedule 3.18, no participations or loans have been sold which have buy back,
recourse or guaranty provisions which create contingent or direct liabilities of
San Benito. To the best knowledge of San Benito, all of the San Benito Contracts
are legal, valid and binding obligations of the parties to the San Benito
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 3.18, all rent and
other payments by San Benito under the San Benito Contracts are current, there
are no existing defaults by San Benito under the San Benito 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. San Benito 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. The transactions
contemplated by this Agreement, including the Merger, will not result in any
material breach or termination of any such leasehold interest in the Leased
Properties.
SECTION 3.19 Taxes. San Benito 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
19
<PAGE>
owed by San Benito, or for which San Benito 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 San Benito with respect to employees' withholding taxes have been
duly made. San Benito 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
San Benito's best knowledge, there is no basis for any such deficiency or claim.
Except as set forth in Schedule 3.19, within the last six (6) years, San
Benito's Federal income tax return has not been audited or examined and no such
audit is currently pending or, to San Benito's best knowledge, threatened. San
Benito 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 San Benito or any waiver or agreement by San Benito for the extension of time
for the assessment or collection of any tax. Except as set forth in Schedule
3.19, San Benito (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 San Benito.
The amounts set up as provisions for current or deferred taxes on the San
Benito 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 San Benito applicable
to the periods covered by the San Benito Financial Statements, and all years and
periods prior thereto. True and complete copies of the Federal income tax
returns of San Benito as filed with the IRS for the years ended December 31,
1996, 1997, and 1998, have been delivered to Pacific.
SECTION 3.20 Insurance. Schedule 3.20 contains an accurate and complete
list and brief description of all policies of insurance, including fidelity and
bond insurance, of San Benito. 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. San Benito 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 3.20, San Benito has not been refused any
insurance with respect to its assets or operations, nor has its insurance been
limited by any insurance carrier to which San Benito has applied for any such
insurance within the last two (2) years. Each property of San Benito is insured
for the benefit of San Benito in amounts deemed adequate by San Benito's
management against risks customarily insured against. There have been no claims
under any fidelity bonds of San Benito within the last three (3) years, and San
Benito is not aware of any facts that would form the basis of a claim under such
bonds.
SECTION 3.21 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
20
<PAGE>
Material Adverse Change since December 31, 1998, 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 San Benito.
SECTION 3.22 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 3.22, San Benito does 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 ("San Benito Proprietary Rights")
for its business or operations, except for licensed computer software. To the
best knowledge of San Benito, it is not infringing upon or otherwise acting
adversely to any San Benito Proprietary Right owned by any other person or
persons. There is no claim or action by any such person pending, or, to the best
knowledge of San Benito, threatened, with respect thereto.
SECTION 3.23 Transactions with Certain Persons and Entities. Except as
disclosed in Schedule 3.23, San Benito does not owe any amount to (excluding
deposit liabilities), or have any loan, 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 San Benito, and none of such persons owes any amount to San Benito.
Except as set forth in Schedule 3.23, 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 San Benito, 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 San Benito. True
and correct copies of any such written understandings, agreements, instruments,
etc., are included with Schedule 3.23.
SECTION 3.24 Evidences of Indebtedness. All evidences of indebtedness and
leases that are reflected as assets of San Benito are, to San Benito'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 San Benito or the present holder thereof, except as disclosed
in Schedule 3.24. The credit files of San Benito contain all material
information (excluding general, local or national industry, economic or similar
conditions) known to San Benito that is reasonably required to evaluate in
accordance with generally prevailing practices in the banking industry the
collectibility of the loan portfolio of San Benito (including loans that will be
outstanding if any of them advances funds they are obligated to advance). San
Benito has disclosed all of the substandard, doubtful, loss, nonperforming or
loans identified as problem loans on its internal watch list, a copy of which as
of December 31, 1999, has been provided to Pacific. Except as disclosed in
Schedule 3.24, San Benito is not aware of, nor has San Benito 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 San Benito.
21
<PAGE>
SECTION 3.25 Condition of Assets. All tangible assets used by San Benito
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 San Benito's 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 3.26 Environmental Compliance.
(a) San Benito is not aware of, nor has San Benito 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 San Benito's continued compliance in all
respects with all Environmental Laws.
(b) San Benito has obtained all permits, licenses and authorizations that
are required under any Environmental Laws.
(c) To San Benito's best knowledge, no Hazardous Materials (as defined in
Section 12.08(E) hereof) exist on, about, or within any of the San Benito
Properties (as defined in this Section 3.26) in violation of any Environmental
Laws, nor, to San Benito's best 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 San Benito Properties
in violation of any Environmental Law and which have not been subsequently
remediated. The use that San Benito makes and intends to make of the San Benito
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 San Benito 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
San Benito's best knowledge, threatened against San Benito relating in any way
to any Environmental Law. To the best of San Benito's knowledge, San Benito has
no liability for remedial action under any Environmental Law. San Benito has not
received any request for information by any governmental authority with respect
to the condition, use or operation of any of the San Benito Properties nor has
San Benito 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 San
Benito 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 3.26, the term "San Benito Property" or "San
Benito Properties" shall include all real property currently owned or leased by
San Benito, including, but not limited to, properties that San Benito has
foreclosed on as well as the banking premises and all improvements and fixtures
thereon. The phrase "to San Benito's knowledge" or similar phrases as used in
this Section 3.26 shall mean the current actual knowledge of executive
management of San Benito.
SECTION 3.27 Regulatory Compliance. All reports, records, registrations,
statements, notices and other documents or information required to be filed by
San Benito during the last two
22
<PAGE>
(2) years with any federal or state regulatory authority including, without
limitation, the California Department of Financial Institutions, the Federal
Reserve, 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 3.27, San
Benito is not now nor has 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. San Benito does
not believe any such regulatory bodies have any present intent to place San
Benito under any new administrative action. Except as set forth on Schedule
3.27, there are no actions or proceedings pending or threatened against San
Benito 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 3.28 Periodic Reports. San Benito 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, 1996 by San Benito with the Federal Reserve and/or 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 "San Benito
Reports"), and (b) communication mailed by San Benito to its shareholders since
January 1, 1996 and prior to the date hereof. Except as set forth on Schedule
3.28, 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, 1996,
San Benito has timely filed all San Benito 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 San Benito Reports complied in all material respects
with the published rules and regulations of the Federal Reserve and the S.E.C.
with respect thereto.
SECTION 3.29 Absence of Certain Business Practices. Except as set forth on
Schedule 3.29, to the best of San Benito's knowledge, neither San Benito nor any
officer, employee or agent of San Benito, 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 San Benito as a whole (or assist San Benito in connection
with any actual or proposed transaction) that (i) would subject San Benito 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 San Benito, or (iii) if not continued in the
future would result in a Material Adverse Change with respect to San Benito or
would subject San Benito to suit or penalty in any private or governmental
litigation or proceeding.
SECTION 3.30 Registration Statement; Proxy Statement/Prospectus. None of
the information supplied or to be supplied by San Benito or any of its
directors, officers, employees or agents for inclusion in the Registration
Statement (as defined in Section 5.03(c)) or the 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
23
<PAGE>
they were made, not misleading, or at the time of the San Benito Shareholders'
Meeting (as defined in Section 5.03(a)), 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 San Benito Shareholders' Meeting. All documents that San Benito 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 3.31 Dissenting Shareholders. Except as set forth on Schedule
3.31, San Benito has no knowledge of any plan or intention on the part of any of
the shareholders of San Benito to make written demand for payment of the fair
value of their shares of San Benito Common Stock in the manner provided by
applicable law.
SECTION 3.32 Pooling of Interests. As of the date of this Agreement, San
Benito has no reason to believe that the Merger will not qualify as a "pooling
of interests" for accounting purposes.
SECTION 3.33 Books and Records. The minute books, stock certificate books
and stock transfer ledgers of San Benito (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 San Benito
that were required to have been set forth therein and that have not been
accurately so set forth.
SECTION 3.34 Forms of Instruments, Etc. San Benito will make available to
Pacific upon 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 San Benito in the ordinary course of their businesses.
SECTION 3.35 Fiduciary Responsibilities. Except as disclosed in Schedule
3.35, San Benito has performed in all material respects all of its 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 3.36 Guaranties. None of the obligations or liabilities of San
Benito 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 San Benito, except in the ordinary course of business, according
to prudent business practices and in compliance with applicable law.
SECTION 3.37 Voting Trust or Buy-Sell Agreements. San Benito 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 San Benito or any voting agreement or voting trust with respect
to shares of capital stock of San Benito (other than that contemplated by
Section 5.21).
SECTION 3.38 Employee Relationships. San Benito (including its officers
and directors while acting in such capacities) have complied in all material
respects with all applicable laws relating to its relationships with its
employees, and San Benito believes that the relationships between San Benito
(including its officers and directors while acting in such capacities), and its
24
<PAGE>
employees are good. To the best knowledge of San Benito, no key executive
officer or manager of any of the operations operated by San Benito or any group
of employees of San Benito have any present plans to terminate their employment
with San Benito. San Benito is not 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 San
Benito before the National Labor Relations Board and no similar claims pending
before any similar state, local or foreign agency. To the best of its knowledge,
there is no activity or proceeding of any labor organization (or representative
thereof) or employee group to organize any employees of San Benito, nor of any
strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with
respect to any such employees. San Benito is 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 San
Benito is not engaged in any unfair labor practice.
SECTION 3.39 Employee Benefit Plans.
(a) Set forth on Schedule 3.39(a) is a complete and correct list of all
"employee benefit plans" (as defined in ERISA), all "multiemployer 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 San Benito, or
with respect to which San Benito has any liability, and (b) provides benefits,
or describes policies or procedures applicable to, or for the welfare of any
officer, director, independent contractor, employee, service provider, former
officer or former employee of San Benito, or the dependents or spouses of any
such person, regardless of whether funded (the "San Benito Employee Plans").
True, accurate and complete copies of the documents comprising each San Benito
Employee Plan, including each trust, funding vehicle, documents, records or
other materials related thereto, are included in Schedule 3.39(a).
(b) No San Benito Employee Plan is a defined benefit plan within the
meaning of Section 3(35) of ERISA or is otherwise subject to Title IV of ERISA,
and San Benito has never sponsored or otherwise maintained such a plan. To the
best knowledge of San Benito, there have been no prohibited transactions,
breaches of fiduciary duty or any other breaches or violations of any law
applicable to the San Benito Employee Plans that would subject Pacific or San
Benito to any taxes, penalties, or other liabilities. Each San Benito Employee
Plan that is represented to be qualified under Section 401(a) of the Code has a
favorable determination letter and has no amendments for which the remedial
amendment period under Section 401(b) of the Code has expired. To the best
knowledge of San Benito, each such San Benito Employee Plan is so qualified and
has been operated in compliance with applicable law and in accordance with its
terms and any related trust is exempt from federal income tax under Section
501(a) of the Code. There are no pending claims, lawsuits or actions relating to
any San Benito Employee Plan (other than ordinary course claims for benefits)
25
<PAGE>
and, to the best knowledge of San Benito, none are threatened. No written or
oral representations have been made to any employee or former employee of San
Benito promising or guaranteeing any employer payment or funding for the
continuation of medical, dental, life or disability coverage or any other
welfare benefit (as defined in ERISA Section 3(1)) 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 would not create any
material change to the San Benito Financial Statements. Except as required in
connection with qualified plan amendments required by tax law changes and except
for those San Benito Employee Plans identified on Schedule 3.39(b), the
consummation of the transactions contemplated by this Agreement will not cause a
termination or partial termination, or otherwise accelerate the time of payment,
exercise, or vesting, or increase the amount of compensation due to any
employee, officer, former employee or former officer of San Benito. There are no
surrender charges, penalties, or other costs or fees that would be imposed by
any person against San Benito, a San Benito Employee Plan, or any other person,
including without limitation, a San Benito Employee Plan participant or
beneficiary, as a result of the hypothetical liquidation as of the Closing Date
of any insurance, annuity, or investment contracts or any other similar
investment held by any San Benito Employee Plan.
(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 San Benito 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 best knowledge of San Benito, all Controlled Group Plans
that are "group health plans" (as defined in Section 5000(b)(1) of the
Code and Section 733(a) of ERISA) have been operated up to the Closing in
a manner so as to not subject San Benito to any material liability under
Sections 4980B or 4980D of the Code;
(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; and
(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.
Each such Controlled Group Plan is included in the listing of San Benito
Employee Plans on Schedule 3.39(a).
(d) Except as set forth on Schedule 3.39(d), all San Benito Employee Plan
documents, annual reports or returns, audited or unaudited financial statements,
actuarial valuations, summary annual reports, and summary plan descriptions
issued with respect to the San Benito Employee Plans are correct, complete, and
current in all material respects, have been timely filed, and there have been no
changes in the information set forth therein.
(e) Except as set forth on Schedule 3.39(e), no payment that is owed or
may become due to any director, officer, employee, or agent of San Benito as a
result of the Merger will be non-deductible to San Benito or Pacific, as the
case may be, or subject to tax under Sections 280G
26
<PAGE>
or 4999, nor will San Benito or Pacific be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax on a
payment to such person.
(f) With respect to the San Benito Bank 1996 Deferred Compensation Plan
and each Executive Supplemental Compensation Agreement, Director Supplemental
Agreement, Life Insurance Endorsement Method Split Dollar Plan Agreement, and
Deferred Fee Agreement that is maintained or contributed to or required to be
contributed to, currently or in the past, by San Benito (the "Deferred
Compensation Plans"):
(i) Each of the Deferred Compensation Plans is a "top hat plan" (as
defined in Section 201(2) of ERISA), and a statement, pursuant to Section
2520.104-23 of the Department of Labor Regulation, has been timely filed
for each such plan;
(ii) The value of the assets and the cash surrender value of any
insurance policy maintained pursuant to each of the Deferred Compensation
Plans exceeds the benefit payments and other liabilities that are payable
to participants in such plan as of the Closing Date;
(iii) Schedule 3.39(f)(iii) sets forth the following information
with respect to the 1996 Deferred Compensation Plan:
(A) the name and age of each participant; (B) the value of
each participant's deferral account as of
December 31, 1999 (which shall be updated to the Closing Date); (C)
the amount of the irrevocable deferral election made by
each participant and the specified number of plan years that such
election is effective; and
(D) the value of each participant's death benefit and the
following information as of the date of this Agreement (which shall
be updated to the Closing Date) regarding each insurance policy
purchased in connection with the death benefit: name of the insurer,
name of the policyholder, name of each covered insured, issue date,
policy number, policy name, policy form, face amount, cash value,
total amount of premiums paid, and the number and annual cost of
remaining premiums due;
(iv) Schedule 3.39(f)(iv) sets forth the following information with
respect to each Executive Supplemental Compensation Agreement:
(A) the name of each participant;
(B) the value of each participant's benefit account as of
December 31, 1999 (which shall be updated to the Closing Date); and
(C) the value of each participant's death benefit and the
following information as of the date of this Agreement (which shall
be updated to the Closing Date) regarding each insurance policy
purchased in connection with the benefits under agreement: name of
the insurer, name of the policyholder, name of each covered insured,
issue date, policy number, policy name, policy form, face amount,
cash value, total amount of premiums paid, and the number and annual
cost of remaining premiums due;
(v) Schedule 3.39(f)(v) sets forth the following information with
respect to each Director Supplemental Compensation Agreement:
27
<PAGE>
(A) the name of each participant;
(B) the value of each participant's benefit account as of
December 31, 1999 (which shall be updated to the Closing Date); and
(C) the value of each participant's death benefit and the
following information as of the date of this Agreement (which shall
be updated to the Closing Date) regarding each insurance policy
purchased in connection with the benefits under agreement: name of
the insurer, name of the policyholder, name of each covered insured,
issue date, policy number, policy name, policy form, face amount,
cash value, total amount of premiums paid, and the number and annual
cost of remaining premiums due;
(vi) Schedule 3.39(f)(vi) sets forth the following information with
respect to each Life Insurance Endorsement Method Split Dollar Plan
Agreement:
(A) the name of each participant; and
(B) the following information as of the date of this Agreement
(which shall be updated to the Closing Date) regarding each
insurance policy purchased in connection with agreement: name of the
insurer, name of the policyholder, name of each covered insured,
issue date, policy number, policy name, policy form, face amount,
cash value, total amount of premiums paid, and the number and annual
cost of remaining premiums due; and
(vii) Schedule 3.39(f)(vii) sets forth the following information
with respect to each Deferred Fee Agreement:
(A) the name and age of each participant; (B) the value of
each participant's deferral account as of
December 31, 1999 (which shall be updated to the Closing Date); and
(C) the value of each participant's death benefit and the
following information as of the date of this Agreement (which shall
be updated to the Closing Date) regarding each insurance policy
purchased in connection with the death benefit: name of the insurer,
name of the policyholder, name of each covered insured, issue date,
policy number, policy name, policy form, face amount, cash value,
total amount of premiums paid, and the number and annual cost of
remaining premiums due.
SECTION 3.40 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 San Benito or
for the account of a customer of San Benito, were entered into in the ordinary
course of business and, to San Benito's best 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 San
Benito 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. San Benito has duly performed in all material
respects all of its material obligations thereunder to the extent that such
obligations to perform have accrued; and, to San Benito's best knowledge, there
are no material breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
28
<PAGE>
SECTION 3.41 Representations Not Misleading. To San Benito's best
knowledge, all material facts relating to the business operations, properties,
assets, liabilities (contingent or otherwise) and financial condition of San
Benito have been disclosed to Pacific in or in connection with this Agreement.
No representation or warranty by San Benito contained in this Agreement, nor any
statement, exhibit or schedule furnished to Pacific by San Benito 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 San Benito or its properties of
the facts and circumstances upon which they were based. Except as disclosed
herein, there is no matter that materially and adversely affects San Benito or
San Benito's ability to perform the transactions contemplated by this Agreement
or the other agreements contemplated hereby, or to the best knowledge of San
Benito, will in the future result in a Material Adverse Change with respect to
San Benito, 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 San Benito.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PACIFIC
Pacific hereby makes the representations and warranties set forth in this
Article IV to San Benito.
SECTION 4.01 Organization and Qualification.
(a) Pacific 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.
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. True and
complete copies of the Articles of Incorporation and Bylaws of Pacific, as
amended to date, certified by the Secretary of Pacific, have been delivered to
San Benito.
(b) Schedule 4.01(b) sets forth a complete list of each Subsidiary (as
defined in Section 12.08(B)) of Pacific (collectively, the "Pacific
Subsidiaries"); including Santa Barbara Bank & Trust and First National Bank of
Central California (such banks are referred to as the "Pacific Banking
Subsidiaries"). Except as set forth on Schedule 4.01(b), (i) Pacific does not
own or control any Affiliate (as defined in Section 12.08(A) hereof) other than
the Pacific Subsidiaries, and (ii) none of the Pacific Subsidiaries owns or
controls any Affiliate or Subsidiary. 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
29
<PAGE>
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.
(c) The nature of the business of Pacific and the Pacific 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(c), neither Pacific nor any of the Pacific 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.
SECTION 4.02 Capitalization. The entire authorized capital stock of
Pacific consists of (i) 60,000,000 shares of Pacific Common Stock, 24,554,294
shares of which are fully paid, validly issued, nonassessable and outstanding,
and 1,511,957 additional shares of which have been reserved for issuance to
holders of outstanding stock options to purchase shares of Pacific Common Stock,
and (ii) 1,000,000 shares of preferred stock, 60,000 shares of which are
designated and no shares of which are issued or outstanding. Except as disclosed
in Schedule 4.02, 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, 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 4.03 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 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
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).
30
<PAGE>
SECTION 4.04 Compliance with Laws, Permits and Instruments.
(a) Except as set forth in Schedule 4.04, 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/Association
or Bylaws of Pacific or any Pacific Subsidiary, (ii) any material provision of
any loan agreement, security or pledge agreement, mortgage, indenture, lease,
contract, agreement or other instrument applicable to Pacific or any Pacific
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 or, to the best of its knowledge, any 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 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/Association or
Bylaws of Pacific or any Pacific Subsidiary, (ii) 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 (iii) any permit, concession, grant, franchise, license,
authorization, judgment, writ, injunction, order, decree or, to the best of its
knowledge, any statute, law, ordinance, rule or regulation applicable to
Pacific, the Pacific Subsidiaries or their assets, operations, properties or
businesses.
SECTION 4.05 Financial Statements. Pacific has furnished to San Benito
true and complete copies of (i) the audited consolidated balance sheets of
Pacific as of December 31, 1997 and 1998, and the related audited consolidated
statements of income, stockholders' equity and cash flows for the years ended
December 31, 1996, 1997 and 1998, (ii) an unaudited consolidated balance sheet
of Pacific as of September 30, 1999, and the related unaudited consolidated
statement of income for the three-month period ended September 30, 1999 (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 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
31
<PAGE>
income or any other income not earned in the ordinary course of business except
as expressly specified therein.
SECTION 4.06 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 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 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 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, 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 best
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 4.08 Consents and Approvals. Except for 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 Pacific 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 Pacific of the transactions contemplated hereby or thereby.
SECTION 4.09 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
32
<PAGE>
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 best knowledge, there is no
basis for any such deficiency or claim. Except as set forth in Schedule 4.09,
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 best
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 4.09, 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.
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 IRS for the years ended December 31, 1996,
1997, and 1998, have been delivered to San Benito
SECTION 4.10 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, 1998, 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 4.11 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 FDIC, the Office of the Comptroller of the Currency (the "OCC"),
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 4.11,
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 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 4.11, 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 4.12 Securities and Exchange Commission Reports. Pacific has
previously made available to San Benito an accurate and complete copy of each
final registration statement, prospectus, report, schedule and definitive proxy
statement filed since January 1, 1996 by Pacific with the S.E.C. pursuant to the
Securities Act or the Exchange Act, and prior to the date hereof (the "Pacific
Reports"). Except as set forth in Schedule 4.12, no such registration statement,
prospectus,
33
<PAGE>
report, schedule or proxy statement 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, 1996, 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 4.13 Registration Statement; 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 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
San Benito 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 San Benito 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 4.14 Representations Not Misleading. To Pacific's best 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 San Benito 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 San Benito 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 best 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.
SECTION 4.15 Title to Assets. Pacific has good and indefeasible title to
assets and properties material to the business of Pacific and the Pacific
Subsidiaries including, without limitation, real property and 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 4.15,
(ii) as noted in the Pacific 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
34
<PAGE>
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.
SECTION 4.16 Community Reinvestment Act. The Pacific Banking Subsidiaries
are in compliance with the CRA and all regulations promulgated thereunder, and
Pacific has made available to San Benito copies of current CRA Statements for
each Pacific Banking Subsidiary, all letters and written comments received by
the Pacific Banking Subsidiaries since January 1, 1996 pertaining thereto and
any responses by the Pacific Banking Subsidiaries to such comments. Each Pacific
Banking Subsidiary had a rating of "satisfactory" or better as of its most
recent CRA compliance examination and knows of no reason why it would not
receive a rating of "satisfactory" or better at its next CRA compliance
examination or why any other governmental entity may seek to restrain, delay or
prohibit the transactions contemplated by this Agreement as a result of any act
or omission of any Pacific Banking Subsidiary under the CRA.
SECTION 4.17 Fair Housing Act Home Mortgage Disclosure Act and Equal
Credit Opportunity Act. Each Pacific Banking Subsidiary is in material
compliance with the Fair Housing Act (42 U.S.C. ss. 3601 et seq.), the Home
Mortgage Disclosure Act (12 U.S.C. ss. 2801 et seq.) and the Equal Credit
Opportunity Act (15 U.S.C. ss. 1691 et seq.) and all regulations promulgated
thereunder. No Pacific Banking Subsidiary has received any notices of any
violation of said acts or any of the regulations promulgated thereunder, nor
does any Pacific Banking Subsidiary have any notice of, or knowledge of, any
threatened administrative inquiry, proceeding or investigation with respect to
its compliance with said acts.
SECTION 4.18 Usury Laws and Other Consumer Compliance Laws. All loans
originated by a Pacific Banking Subsidiary have been made substantially in
accordance with all applicable statutes and regulatory requirements at the time
such loan or any renewal thereof, including without limitation Regulation Z (12
C.F.R. ss. 226 et seq.) issued by the Federal Reserve, the Federal Consumer
Credit Protection Act (15 U.S.C. ss. 1601 et seq.) and all statutes and
regulations governing the operations of California banking corporations or
national banking associations, as the case may be. Each such loan was made in
the ordinary course of business of a Pacific Banking Subsidiary.
SECTION 4.19 Bank Secrecy Act. Each Pacific Banking Subsidiary is in
material compliance with the Bank Secrecy Act (12 U.S.C. ss.ss. 1730(d) and
1829(b)) and all regulations promulgated thereunder, and each Pacific Banking
Subsidiary has properly certified all foreign deposit accounts and has made all
necessary tax withholdings on all of its respective deposit accounts. Each
Pacific Banking Subsidiary has timely and properly filed and maintained all
requisite Currency Transaction Reports and other related forms, including, but
not limited to, any requisite Custom Reports required by any agency of the
United States Treasury Department, including, but not limited to, the IRS.
SECTION 4.20 Leases, Contracts and Agreements. Schedule 4.20 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 and which
(i) relate to real property used by Pacific in its operation, or (ii) involve
annual payments to or by Pacific in excess of $1,000,000 and are material to the
business or operations of Pacific and the Pacific Subsidiaries (exclusive of
unfunded loan commitments and letters of credit issued by a Pacific Banking
Subsidiary), or (iii) involve any
35
<PAGE>
unfunded loan commitments and letters of credit issued by a Pacific Banking
Subsidiary where the borrower's total direct and indirect indebtedness to such
Pacific Banking Subsidiary is in excess of $15,000,000 (the "Pacific
Contracts"). True and correct copies of all such Pacific Contracts (other than
unfunded loan commitments and letters of credit issued by a Pacific Banking
Subsidiary) are included with Schedule 4.20. 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 a Pacific Banking
Subsidiary. Except as set forth in Schedule 4.20, 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 best 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 4.20, 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. The transactions contemplated by this Agreement, including the
Merger, will not result in any material breach or termination of any such
leasehold interest.
SECTION 4.21 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 4.22 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 any Pacific Subsidiary that were required to have been
set forth therein and that have not been accurately so set forth.
SECTION 4.23 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
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 best 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
36
<PAGE>
before any similar state, local or foreign agency. To the best of its knowledge,
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 4.24 Employee Benefit Plans.
(a) Set forth on Schedule 4.24(a) is a complete and correct list of all
"employee benefit plans" (as defined in ERISA), all "multiemployer 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, or for the welfare of, any officer, director,
independent contractor, employee, service provider, former officer or former
employee of Pacific or any Pacific Subsidiary, or the dependents or spouses 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 or is otherwise subject to Title IV of ERISA, and
Pacific has never sponsored or otherwise maintained such a plan. Pacific has
delivered or made available to San Benito 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 San Benito.
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 Pacific to any
material taxes, penalties, or other 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
operated in compliance with applicable law and in accordance with its terms.
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). Pacific is in compliance with FAS
106. Except as required in connection with qualified plan amendments required by
tax law changes and except for those plans identified on Schedule 4.24(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.
37
<PAGE>
(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 best knowledge of Pacific, all Controlled Group Plans
that are "group health plans" (as defined in Section 5000(b)(1) of the
Code and Section 733(a) of ERISA) have been operated up to the Closing in
a manner so as to not subject Pacific to any material liability under
Sections 4980B or 4980D 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 4.25 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
(including any Pacific Subsidiary) or for the account of a customer of Pacific
(including any Pacific Banking Subsidiary), were entered into in the ordinary
course of business and, to Pacific's best 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 effect. Pacific (including any
Pacific Subsidiary) has duly performed in all material respects all of its
material obligations thereunder to the extent that such obligations to perform
have accrued; and, to Pacific's best knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
SECTION 4.26 Environmental Compliance.
(a) Except as set forth on Schedule 4.26(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) Except as set forth on Schedule 4.26(c), to Pacific's best 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 4.26) in
violation of any Environmental Laws, nor, to Pacific's best 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
38
<PAGE>
violation of any Environmental Law and which have not been subsequently
remediated. 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 best 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 4.26, the term "Pacific Property" or "Pacific
Properties" shall include all real property currently owned or leased by Pacific
or any of the Pacific Subsidiaries that is material in the conduct of its
business, including, but not limited to, banking premises and material
improvements and fixtures thereon. The phrase "to Pacific's knowledge" or
similar phrases as used in this Section 4.26 shall mean the current actual
knowledge of executive management of Pacific.
ARTICLE V.
COVENANTS OF SAN BENITO
San Benito hereby makes the covenants set forth in this Article V to
Pacific.
SECTION 5.01 Best Efforts. San Benito 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. San Benito will duly authorize and, as soon
as practicable after the San Benito Shareholders' Meeting (as defined in Section
5.03(a)), 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. San Benito shall:
(a) Duly call, give notice of, convene and hold, on a date mutually
selected by San Benito and Pacific, a meeting of its shareholders (the
"San Benito 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, including the Merger, as
required by the GCL;
39
<PAGE>
(b) Not impose a requirement that the holders of more than the
minimum required percentage (as set forth in San Benito's current Articles
of Incorporation, current Bylaws or pursuant to provisions of the GCL
requiring the lowest percentage vote) of the San Benito Common Stock
entitled to vote on the Merger and the Merger Agreement approve the Merger
and the Merger Agreement;
(c) Cooperate and assist Pacific in (i) preparing a Registration
Statement on Form S-4 relating to the shares of Pacific Common Stock to be
issued to the Shareholders of San Benito as the Merger Consideration (the
"Registration Statement") and a proxy statement/prospectus, including
letter to shareholders, notice of special meeting and form of proxy
(collectively, the "Proxy Statement/Prospectus") and (ii) filing the
Registration Statement and the Proxy Statement/Prospectus (forming a part
of the Registration Statement) with the S.E.C., including furnishing to
Pacific all information concerning San Benito that Pacific may reasonably
request in connection with preparation of such Registration Statement and
Proxy Statement/Prospectus;
(d) Subject to the fiduciary duties of the San Benito Board of
Directors to the shareholders of San Benito, (i) include in the Proxy
Statement/Prospectus the recommendation of the San Benito Board of
Directors that the shareholders of San Benito vote in favor of the
approval and adoption of the Merger and the Merger Agreement and the
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
Pacific to ensure that such shareholder approval of the Merger and the
Merger Agreement is obtained; and
(e) Cause the Proxy Statement/Prospectus to be mailed to the
shareholders of San Benito as soon as practicable following the
effectiveness of the Registration Statement.
SECTION 5.04 Information for Applications and Statements. San Benito will
promptly, but in no event later than ten (10) business days after receipt of a
written request by Pacific, furnish to Pacific all information, data and
documents concerning San Benito, 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 (including the Registration
Statement and the Proxy Statement/Prospectus), or in connection with any other
transactions during the pendency of this Agreement, and San Benito 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. San Benito shall otherwise fully cooperate with Pacific in the
filing of any applications or other documents necessary to consummate the
transactions contemplated by this Agreement.
SECTION 5.05 Required Acts of San Benito. Prior to the Closing, San Benito
shall, unless otherwise permitted in writing by Pacific:
(a) Operate only in the ordinary course of business and consistent
with prudent banking practices;
40
<PAGE>
(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 San Benito 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 San Benito shall have the authority to purchase a rider to San
Benito's existing policy of directors' and officers' liability insurance
providing for the continuation of coverage provided by such policy for a
period of thirty-six (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 $30,000;
provided, however, in the event the premium for such coverage exceeds
$30,000, San Benito must first obtain the written consent of Pacific,
which consent will not be unreasonably withheld;
(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 San Benito 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 San Benito. Prior to the Closing, San
Benito 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 San Benito;
41
<PAGE>
(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 San Benito 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;
(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 San Benito, except (i) in
the form of wages, salaries, fees for legal services and reimbursement of
expenses and (ii) loans to its officers, directors and employees made in
the ordinary course of business and consistent with San Benito's past
practice; provided that, with respect to all such loans made after the
date of this Agreement, San Benito shall immediately thereafter notify
Pacific and provide appropriate loan file documentation with respect to
each such loan made;
(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 5.22, 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 San Benito
Common Stock pursuant to the valid exercise of San Benito Stock Options,
as defined in Section 6.13 hereof, which are outstanding on the date of
this Agreement);
(h) Grant any new stock options or, except as provided by the San
Benito Stock Option Plans, accelerate the vesting, or permit the
acceleration of 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 San Benito, except as provided in the deferred compensation
plans of San Benito listed on Schedule 5.06(i);
(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
42
<PAGE>
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 (i) employee severance benefits contemplated by
Section 1.11 of this Agreement, (ii) compensation adjustments contemplated
within San Benito's 1999/2000 budget approved in advance by Pacific (which
approval shall not be unreasonably withheld) and consistent with safe and
sound banking principles, and (iii) except as required by applicable law
or outstanding agreements listed on Schedule 5.06(m);
(n) Except for improvements or betterments relating to San Benito
Properties, make any capital expenditures or capital additions or
betterments in excess of an aggregate of $100,000;
(o) Hire or employ any person as a replacement for an existing
position with an annual salary equal to or greater than $50,000 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 (i) credit
underwriting standards or practices, (ii) asset liability management
techniques, or (iii) accounting methods, principles or material practices,
except as required by changes in GAAP as concurred in by San Benito's
independent auditors, or as required by any applicable regulatory
authority;
(r) Take any action that would prevent the Merger from qualifying as
a business combination transaction for which "pooling of interests"
accounting is available.
43
<PAGE>
(s) Sell any investment securities in a transaction involving a book
gain or loss of more than $50,000 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 Pacific of
any purchases in excess of $1,000,000);
(t) 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(u)), to any single borrower and his or her
related interests in excess of the principal amount of $350,000; provided,
however, that Pacific shall be deemed to have given its consent under this
Section 5.06(t) 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;
(u) 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 $100,000;
provided, however, that Pacific shall be deemed to have given its consent
under this Section 5.06(u) 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; or
(v) 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, San Benito 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 San
Benito, permit Pacific 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 Pacific during such period all such information concerning San
Benito 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 San Benito, including, without limitation,
access sufficient to verify the absence of any Material Adverse Change with
respect to San Benito, the accuracy of the representations and warranties made
by San Benito in this Agreement, the value of the assets and the liabilities of
San Benito and the satisfaction of the conditions precedent to Pacific's
obligations described in Article VIII of this Agreement. Pacific shall use its
best efforts not to disrupt the normal business operations of San Benito. San
Benito 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 5.08 Director and Committee Meetings. San Benito 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 San Benito and all
regular and special meetings of any board or senior management committee of San
Benito; provided, however, that San Benito reserves the right to exclude such
invitees from any portion of any such meeting specifically relating to the
transactions contemplated by this Agreement or which, upon the advice of
counsel, are otherwise privileged. In addition, San Benito shall provide Pacific
with copies of the minutes of all regular and special meetings of the Board of
Directors of San Benito and minutes of all regular and special meetings of
44
<PAGE>
any board or senior management committee of San Benito held on or after the date
of this Agreement (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 fifteen (15) business days following the date of such meeting.
SECTION 5.09 Additional Financial Statements. San Benito shall promptly
furnish Pacific with true and complete copies of (i) Exchange Act reports and
Call Reports of San Benito for the year and/or quarter ended December 31, 1999
and each quarter thereafter until the Effective Date, (ii) monthly directors'
reports of San Benito, and (iii) unaudited month-end financial statements of San
Benito.
SECTION 5.10 Untrue Representations. San Benito shall promptly notify
Pacific in writing if San Benito 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 San Benito's
failure to comply with any covenant, condition or agreement contained in this
Agreement.
SECTION 5.11 Litigation and Claims. San Benito 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 San
Benito or affecting any of its properties if such litigation or potential
litigation would, in the event of an unfavorable outcome, result in a Material
Adverse Change with respect to San Benito, and San Benito shall promptly notify
Pacific of any legal action, suit or proceeding or judicial, administrative or
governmental investigation, pending or, to the best knowledge of San Benito,
threatened against San Benito 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 San
Benito pursuant hereto or thereto or seeks to enjoin or otherwise restrain the
transactions contemplated hereby or thereby.
SECTION 5.12 Adverse Changes. San Benito shall promptly notify Pacific in
writing if any change or development shall have occurred or, to the best
knowledge of San Benito, been threatened (or any development shall have occurred
or been threatened involving a prospective change) in the business, financial
condition, operations or prospects of San Benito that has or may reasonably be
expected to have or lead to a Material Adverse Change with respect to San Benito
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, San
Benito shall not be relieved of any liability to Pacific pursuant to this
Agreement for, nor shall the providing of such information by San Benito to
Pacific be deemed a waiver by Pacific of, the breach of any representation or
warranty of San Benito contained in this Agreement.
SECTION 5.13 No Negotiation with Others. Until the Effective Date or the
earlier termination of this Agreement, San Benito 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 San Benito, 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,
45
<PAGE>
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 San Benito. As soon as practicable following receipt of any
unsolicited written offer, San Benito will communicate in writing to Pacific the
terms of any proposal or request for information.
SECTION 5.14 Consents and Approvals. San Benito 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) Pacific and its consultants, agents and representatives shall have the
right, to the same extent that San Benito has such right, but not the obligation
or responsibility, to inspect any San Benito 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 San Benito prior to any physical inspections of the San
Benito Property, and San Benito 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 San Benito of any San Benito 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 San Benito of such secondary
investigations, and San Benito 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 3.26 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) San Benito 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 San Benito 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 San Benito 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 San Benito 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
46
<PAGE>
San Benito 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. San Benito 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) calendar days from the date of this
Agreement. In the event that San Benito 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) San Benito agrees to make available to Pacific and its consultants,
agents and representatives all documents and other material relating to
environmental conditions of any San Benito Property including, without
limitation, the results of other environmental inspections and surveys. San
Benito 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 "San Benito Property" or "San
Benito Properties" shall have the same meaning given in Section 3.26(e).
SECTION 5.16 Restrictions on Resales. At least forty (40) days prior to
the Closing Date, San Benito shall deliver to Pacific a list identifying each
person who may reasonably be deemed an "affiliate" of San Benito within the
meaning of such term as used in Rule 145 under the Securities Act. San Benito
shall obtain and deliver to Pacific, not less than thirty-one (31) days prior to
the Closing Date, the signed agreement, in the form of Exhibit "E" hereto (the
"Shareholder Letter"), of each "affiliate" of San Benito, and of any person who
may become an "affiliate" of San Benito 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 San Benito Common Stock or Pacific 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. San Benito 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, San
Benito shall from time to time make available to Pacific, upon request, a list
of its shareholders and their addresses, a list showing all transfers of San
Benito Common Stock and such other information as Pacific may reasonably request
regarding both the ownership and prior transfers of San Benito Common Stock.
SECTION 5.18 Employee Pension Plans. San Benito agrees the employee
pension plans of San Benito, including the San Benito Bank 401(k)/Profit Sharing
Plan, as amended (collectively, the "San Benito Pension Plans") may be frozen,
modified or merged into similar employee pension plans maintained by Pacific or
any Pacific Subsidiary, including the Pacific Capital Bancorp Employee Stock
Ownership Plan and the Incentive and Investment and Salary Savings Plan, on or
after the Effective Date, as determined by Pacific in its sole discretion,
subject to compliance with applicable law, so long as any such action preserves
the rights of the participants in such San Benito Pension Plans (including,
without limitation, vesting rights).
47
<PAGE>
SECTION 5.19 Employee Welfare Benefit Plans. San Benito agrees that San
Benito's employee welfare benefit plans, as defined in Section 3(1) of ERISA,
may be terminated, modified or merged into Pacific's welfare benefit plans on or
after the Effective Date, as determined by Pacific 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 San Benito Stock Option Plans. The Board of Directors of San
Benito shall, pursuant to the terms of the San Benito Stock Option Plans (as
defined in Section 6.13), provide for the assumption by Pacific of all
outstanding San Benito Stock Options (as defined in Section 6.13), whether or
not exercisable or vested, in the manner set forth in Section 6.13. Within
thirty (30) days following the date of this Agreement, San Benito shall use its
best efforts to obtain from each employee who maintains an employment contract
with San Benito and who holds or has held a San Benito Stock Option a signed
acknowledgment indicating that the economic value of the difference between the
market value and the exercise price of any San Benito Stock Option granted to
such employee of San Benito is not included or factored into any calculation of
such employee's compensation for purposes of any severance arrangement relative
to such employee. Signed acknowledgments shall be delivered to Pacific at
Closing pursuant to Section 2.02(L).
SECTION 5.21 Director Voting. San Benito shall use its best efforts to
have each of its directors agree to vote, or cause to be voted, all shares of
San Benito Common Stock beneficially owned by them at the San Benito
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 San
Benito Common Stock in favor of the Merger at the San Benito Shareholders'
Meeting.
SECTION 5.22 Dividends. Except as consistent with prior practices in
previous years in terms of both amount and timing (which amount shall not exceed
25% of San Benito's year-end net income), San Benito shall not declare, set
aside or pay any dividend in respect of San Benito 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.
SECTION 5.23 Non-Compete Agreements. Prior to the Closing Date, San Benito
shall use its best efforts to cause each of the persons identified on Exhibit
"F" to enter into an agreement not to compete with Pacific 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 5.24 Pooling of Interests Accounting Treatment. San Benito 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 Pacific's independent accounting firm and by any
securities regulatory body which may review the Registration Statement,
including, without limitation, the S.E.C.
48
<PAGE>
SECTION 5.25 Disclosure Schedules. San Benito agrees at or prior to the
Closing to provide Pacific with supplemental Schedules to be delivered by San
Benito pursuant to this Agreement reflecting any material changes thereto
between the date of this Agreement and the Closing Date.
SECTION 5.26 Additional Accruals and Reserves. San Benito shall establish
such additional accruals and reserves as may be necessary to conform San
Benito's accounting and credit loss reserve practices and methods to those of
Pacific and Pacific's plans with respect to the conduct of San Benito's business
following the Merger and to provide for the costs and expenses relating to the
consummation by San Benito of the Merger and the other transactions contemplated
by this Agreement. Pacific acknowledges that the establishment of such accruals
and reserves and provision for such costs and expenses (i) shall not be deemed
to cause the San Benito Financial Statements to have been prepared other than in
accordance with GAAP, (ii) shall not constitute a material adverse change in the
condition of San Benito, and (iii) shall not constitute a breach of any
provision of this Agreement by San Benito.
ARTICLE VI.
COVENANTS OF PACIFIC
Pacific hereby makes the covenants set forth in this Article VI to San
Benito.
SECTION 6.01 Best Efforts. Pacific 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.
SECTION 6.02 Incorporation and Organization of Newco. Pacific will
incorporate, or will cause the incorporation of, Newco under the laws of the
State of California.
SECTION 6.03 Merger Agreement. Pacific will, and will cause Newco to, as
soon as practicable after the San Benito Shareholders' Meeting, enter into the
Merger Agreement, the form of which is attached hereto as Exhibit "A", and
Pacific shall perform, and shall cause Newco to perform, all of their respective
obligations thereunder.
SECTION 6.04 Regulatory Approvals and Registration Statement.
(a) Pacific, with the cooperation of San Benito, shall promptly file or
cause to be filed applications for all regulatory approvals required to be
obtained by Pacific 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, the California
Department of Financial Institutions and the FDIC. Pacific shall use its best
efforts to obtain all such regulatory approvals and any other approvals from
third parties at the earliest practicable time.
(b) Pacific shall reserve and make available for issuance in connection
with the Merger and in accordance with the terms of this Agreement, the Pacific
Common Stock for the Merger Consideration and shall, with the cooperation of San
Benito, file with the S.E.C. the Registration Statement, which Registration
Statement will contain the Proxy Statement/Prospectus, and Pacific
49
<PAGE>
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 San Benito, at the time of the San Benito Shareholders' Meeting
and on the Effective Date, the 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) Pacific 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) Pacific shall promptly and properly prepare and file (i) any
application required to list on Nasdaq the shares of Pacific 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) Pacific shall keep San Benito reasonably informed as to the status of
such applications and filings, and Pacific shall promptly furnish San Benito and
its counsel with copies of all such regulatory filings and all correspondence
for which confidential treatment has not been requested.
(f) Pacific 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 6.05 Information for Applications and Statements. Pacific will
promptly, but in no event later than ten (10) business days after receipt of a
written request by San Benito, furnish to San Benito all information, data and
documents concerning Pacific and Newco, including, but not limited to, financial
statements, required for inclusion in any application or statement to be made by
San Benito to, or filed by San Benito 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 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 San Benito in the
filing of any applications or other documents necessary to consummate the
transactions contemplated by this Agreement.
SECTION 6.06 Acts of Newco. Prior to the Closing, Pacific shall not cause
Newco to take any action or execute any agreement, document or certificate
except as contemplated by this Agreement and the other agreements contemplated
hereby, including, but not limited to, the Merger Agreement.
50
<PAGE>
SECTION 6.07 Prohibited Acts of Pacific. Prior to the Closing, Pacific
and, as applicable, the Pacific Subsidiaries shall not, without the prior
written consent of San Benito:
(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 IV 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) 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;
SECTION 6.08 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 San
Benito reasonable access to the properties, books, contracts and records of
Pacific and the Pacific Subsidiaries, permit San Benito to make such inspections
as they may require and furnish to San Benito during such period all such
information concerning Pacific and the Pacific Subsidiaries and its affairs as
San Benito may reasonably request, in order that San Benito may have the
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 San
Benito's obligations described in Article VII of this Agreement. San Benito
shall use its best efforts not to disrupt the normal business operations of
Pacific and the Pacific Subsidiaries. Pacific agrees at any time, and from time
to time, to furnish to San Benito as soon as practicable, any additional
information that San Benito may reasonably request.
SECTION 6.09 Untrue Representations. Pacific shall promptly notify San
Benito 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 San Benito or any representation or warranty
made in or pursuant to this Agreement or that results in Pacific's failure to
comply with any material covenant, condition or agreement contained in this
Agreement.
SECTION 6.10 Litigation and Claims. Pacific shall promptly notify San
Benito of any legal action, suit or proceeding or judicial, administrative or
governmental investigation, pending or, to the best knowledge of Pacific,
threatened against Pacific or any Pacific 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 Pacific pursuant hereto or thereto or seeks to enjoin or otherwise
restrain the transactions contemplated hereby or thereby.
SECTION 6.11 Adverse Change. Pacific shall promptly notify San Benito in
writing if any change or development shall have occurred or, to the best
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
51
<PAGE>
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 San Benito of
any such change, Pacific shall not be relieved of any liability to San Benito
pursuant to this Agreement for, nor shall the providing of such information by
Pacific to San Benito be deemed a waiver by San Benito of, the breach of any
representation or warranty of Pacific contained in this Agreement.
SECTION 6.12 Consents and Approvals. Pacific 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 6.13 Stock Options.
(a) On the Effective Date, each outstanding option to purchase shares of
San Benito Common Stock (a "San Benito Stock Option") issued pursuant to the San
Benito Bank 1984 Amended Stock Option Plan and the San Benito Bank 1995 Stock
Option Plan (together, the "San Benito Stock Option Plans"), whether or not
exercisable or vested, shall be assumed by Pacific as hereinafter provided. Each
San Benito Stock Option shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such San Benito Stock
Option, the number of full shares of Pacific Common Stock calculated in
accordance with the provision of Section 1.05. In no event shall Pacific be
required to issue fractional shares of Pacific Common Stock upon the exercise of
a converted option.
(b) Pacific 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 Pacific Common Stock calculated in accordance with Section 1.05.
As soon as practicable after the Effective Date, Pacific shall deliver to each
holder of San Benito Stock Options appropriate notices setting forth such
holders' rights pursuant to the San Benito Stock Option Plans, and the
agreements evidencing the grants of such San Benito Stock Options shall continue
in effect on the same terms and conditions (subject to the conversion required
by Section 1.05 after giving effect to the Merger and the assumption by Pacific
as set forth above). To the extent necessary to effectuate the provisions of
this Section 6.13, Pacific may deliver new or amended agreements reflecting the
terms of each San Benito Stock Option assumed by Pacific and amend the San
Benito Stock Option Plans to reflect the terms hereof.
(c) As soon as practicable after the Effective Date, Pacific shall file
with the S.E.C. a registration statement on an appropriate form with respect to
the shares of Pacific 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.
SECTION 6.14 Director and Officer Liability Insurance. Upon the Effective
Date, any executive officer or director of San Benito who becomes an officer or
director of Pacific (including any Pacific Subsidiary) shall be included in
Pacific's director and officer insurance policy.
52
<PAGE>
SECTION 6.15 Conduct of Business in the Ordinary Course. Except as
specifically provided for in this Agreement, Pacific shall conduct its business
in the ordinary course as heretofore conducted. For purposes of this Section
6.15, the ordinary course of business shall consist of the banking and related
business as presently conducted by Pacific and the Pacific Subsidiaries, and
engaging in acquisitions and assisting in the management of its Subsidiaries.
SECTION 6.16 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 Pacific's independent accounting firm and by any
securities regulatory body which may review the Registration Statement,
including without limitation, the S.E.C.
SECTION 6.17 Disclosure Schedules. Pacific agrees at or prior to the
Closing to provide San Benito 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.
SECTION 6.18 Assumption of Obligations. If, prior to the Effective Date,
Pacific should enter into a definitive agreement with a third party providing
for (i) the acquisition of 50% or more of the outstanding capital stock of
Pacific by such third party or an affiliate of such third party, (ii) any merger
or consolidation of Pacific into any entity of which Pacific is not the
surviving entity, (iii) the sale of all or substantially all of the assets of
Pacific, (iv) any reorganization of Pacific in a transaction that will result in
the disposition of substantially all of the assets of Pacific, or (v) the
issuance and sale or disposition of securities representing 50% or more of the
Pacific Common Stock, Pacific will expressly provide for the assumption by such
third party of Pacific's rights and obligations under this Agreement with San
Benito.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SAN BENITO
All obligations of San Benito under this Agreement are subject to the
fulfillment (or, if legally permissible, waiver by San Benito), 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 Pacific in this Agreement
or in any document or schedule delivered to San Benito pursuant hereto shall
have been true and correct 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) 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.
53
<PAGE>
SECTION 7.02 Shareholder Approval. The holders of at least the minimum
required percentage of San Benito 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.
SECTION 7.03 Government and Other Approvals. Pacific and San Benito shall
have received approvals, acquiescence or consents, all on terms and conditions
mutually acceptable to Pacific and San Benito, 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., the Federal Reserve, the FDIC and the California Department of
Financial Institutions, and all applicable waiting periods shall have expired,
and Pacific and San Benito 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 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 San Benito or subject any officer, director, shareholder or employee of
San Benito 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. San Benito shall have received
all documents required to be received from Pacific on or prior to the Closing
Date as set forth in Section 2.03 hereof, all in form and substance reasonably
satisfactory to San Benito.
SECTION 7.06 Receipt of Fairness Opinion. The Board of Directors of San
Benito shall have received, on or before the date of the mailing of the Proxy
Statement/Prospectus, from its investment advisor, Hoefer & Arnett Incorporated,
an unqualified written opinion to the effect that the Merger Consideration is
fair to the shareholders of San Benito from a financial point of view.
SECTION 7.07 Receipt of Pooling Opinions. San Benito shall have received
an opinion letter, dated as of the Closing Date, from Deloitte & Touche LLP,
independent public accountants
54
<PAGE>
for San Benito, to the effect that San Benito 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"). San Benito shall have also received a copy of an opinion letter,
dated as of the Closing Date, from Arthur Andersen LLP, independent public
accountants for Pacific, 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. San Benito shall have received a copy of
the opinion of Jenkens & Gilchrist, P.C., counsel to Pacific, 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 San Benito Common Stock upon
receipt of the Merger Consideration (except for cash received in lieu of
fractional shares), (iii) the basis of shares of Pacific Common Stock received
by the shareholders of San Benito will be the same as the basis of shares of San
Benito Common Stock exchanged therefor, and (iv) the holding period of the
shares of Pacific Common Stock received by such shareholders will include the
holding period of the shares of San Benito 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 Pacific,
San Benito and others.
SECTION 7.10 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 San Benito, San Benito shall not have received notification from
any proper regulatory authority that San Benito's accounting and tax treatment,
entries and adjustments used in connection with the Merger are improper, and San
Benito 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 7.11 No Material Adverse Change. There shall have been no Material
Adverse Change with respect to Pacific since December 31, 1998.
55
<PAGE>
ARTICLE VIII.
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 8.01 Compliance with Representations, Warranties and Agreements.
(a) All representations and warranties made by San Benito in this
Agreement or in any document or schedule delivered to Pacific pursuant hereto
shall have been true and correct 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) San Benito 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 San Benito prior to or at the Closing.
SECTION 8.02 Shareholder Approvals. The holders of at least the minimum
required percentage of San Benito 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.
SECTION 8.03 Government and Other Approvals. Pacific and San Benito shall
have received approvals, acquiescence or consents, all on terms and conditions
acceptable to 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., the Federal
Reserve, the FDIC and the California Department of Financial Institutions, and
all applicable waiting periods shall have expired, and Pacific and San Benito
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, Pacific 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 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
56
<PAGE>
unenforceable, (b) require the divestiture of a material portion of the assets
of San Benito, (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 8.05 Delivery of Closing Documents. Pacific shall have received
all documents required to be received from San Benito on or prior to the Closing
Date as set forth in Section 2.02 hereof, all in form and substance reasonably
satisfactory to Pacific.
SECTION 8.06 Receipt of Shareholder Letters. Pacific shall have received
from San Benito, at least 31 days prior to the Closing Date, the signed
Shareholder Letters, in the form attached hereto as Exhibit "E" hereof, of each
person who may reasonably be deemed an "affiliate" of San Benito within the
meaning of such term as used in Rule 145 under the Securities Act.
SECTION 8.07 Dissenting Shareholders. Holders of not more than a certain
percentage (not to exceed 9.9%) of the issued and outstanding shares of San
Benito 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 APB 16.
SECTION 8.08 Receipt of Pooling Opinions. Pacific shall have received an
opinion letter, dated as of the Closing Date, from Deloitte & Touche LLP,
independent public accountants for San Benito, to the effect that San Benito
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.
Pacific 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 8.09 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.
57
<PAGE>
SECTION 8.10 Federal Tax Opinion. Pacific 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
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 San Benito Common Stock upon receipt of the
Merger Consideration (except for cash received in lieu of fractional shares),
(iii) the basis of shares of Pacific Common Stock received by the shareholders
of San Benito will be the same as the basis of shares of San Benito Common Stock
exchanged therefor, and (iv) the holding period of the shares of Pacific Common
Stock received by such shareholders will include the holding period of the
shares of San Benito 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 Pacific, San Benito and others.
SECTION 8.11 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 8.12 No Material Adverse Change. There shall have been no Material
Adverse Change with respect to San Benito since December 31, 1998.
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 Pacific because (i) the Merger
Agreement is not approved by the required vote of shareholders at the San
Benito Shareholders' Meeting, and (ii) either (a) the Board of Directors
of San Benito (subject to compliance with its fiduciary duties as advised
by counsel) shall have failed to have used its best efforts to obtain
shareholder approval or (b) San Benito shall have entered into an
agreement to effect a Third Party Transaction (as defined in Section
9.02(i) herein) within twelve (12) months from the date of this Agreement,
San Benito shall pay to Pacific within ten (10) business days after such
termination (y) a termination fee of $1,650,000, and (z) all documented
fees and expenses of Pacific related to this Agreement and the
transactions contemplated hereby (which fees and expenses, as communicated
to San Benito by Pacific within five (5) business days after termination,
shall not exceed $150,000) ; or
(b) this Agreement is terminated by San Benito because of a Third
Party Transaction (as defined in Section 9.02(i) herein), San Benito shall
pay to Pacific within ten
58
<PAGE>
(10) business days after such termination (y) a termination fee of
$1,650,000, and (z) all documented fees and expenses of Pacific related to
this Agreement and the transactions contemplated hereby (which fees and
expenses, as communicated to San Benito by Pacific within five (5)
business days after termination, shall not exceed $150,000); or
(c) this Agreement is terminated by San Benito due to the failure of
Pacific to perform its obligations pursuant to Section 6.18, Pacific shall
pay to San Benito within ten (10) business days after such termination (y)
a termination fee of $1,650,000, and (z) all documented fees and expenses
of San Benito related to this Agreement and the transactions contemplated
hereby (which fees and expenses, as communicated to Pacific by San Benito
within five (5) business days after termination, shall not exceed
$150,000).
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, San Benito 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 Pacific and San Benito, 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 Pacific or San Benito, if the Effective Date has not
occurred by the close of business on October 1, 2000, or such later date
as may be mutually agreed to by Pacific and San Benito;
(c) by Pacific, if there has been a Material Adverse Change with
respect to San Benito;
(d) by San Benito, if there has been a Material Adverse Change with
respect to Pacific.
(e) by either Pacific or San Benito, 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 Pacific or San Benito, 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 making such
representation or warranty, provided that any such notice shall be
delivered promptly upon discovery of the breach;
59
<PAGE>
(g) by either Pacific or San Benito, 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 San Benito or Pacific 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 Pacific or San Benito, if the Merger Agreement is not
approved by the required vote of shareholders of San Benito;
(i) by San Benito, by written notice to Pacific, if (i) a proposal
for a Third Party Transaction (as defined below) involving San Benito has
been made or received and the Board of Directors of San Benito 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
San Benito's Board of Directors to comply with its fiduciary duties to San
Benito's shareholders, or (ii) following receipt by San Benito of a
proposal for a Third Party Transaction, the Board of Directors of San
Benito shall have altered its determination to recommend that the
shareholders of San Benito approve this Agreement, the Merger Agreement
and/or the Merger or shall have failed to proceed to hold the San Benito
Shareholders' Meeting to approve this Agreement, the Merger Agreement
and/or the Merger, in either case of which San Benito shall give Pacific
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 San Benito, (ii) any merger or consolidation of San
Benito with or into any entity other than Pacific or an affiliate of
Pacific, (iii) any sale of all or substantially all of the assets of San
Benito, (iv) any reorganization of San Benito or other transaction that
results or when completed would result in a disposition of substantially
all of the assets of San Benito, or (v) the issuance, sale or disposition
of securities representing 50% or more of the common stock of San Benito;
(j) by Pacific pursuant to the terms of Section 1.13 hereof;
(k) by Pacific pursuant to the terms of Section 5.15(b) hereof;
(l) by San Benito, if the average of the average closing bid and
asked price of a share of Pacific 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 "Pacific Average Price") shall
be less than $25.00 (which number shall be appropriately adjusted to give
effect to any Share Adjustment relative to shares of Pacific Common
Stock); provided, however, that if the Pacific Average Price shall be less
than $25.00, San Benito and Pacific shall attempt in good faith to
renegotiate the Exchange Ratio, subject to existing
60
<PAGE>
market conditions. Should the parties fail to so renegotiate the Exchange
Ratio within three (3) business days after determination of the Pacific
Average Price, San Benito may terminate this Agreement pursuant to this
Section 9.02(l); or
(m) by San Benito, if San Benito 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
Consideration is fair to the shareholders of San Benito 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
(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
61
<PAGE>
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.
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
62
<PAGE>
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) Pacific hereby represents to San Benito that, except as set forth on
Schedule 12.01(a), no agent, representative or broker has represented Pacific or
any or all of the shareholders in connection with the transactions described in
this Agreement. San Benito 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 San Benito harmless for any amounts owed to any agent, representative
or broker of Pacific or any shareholder of Pacific.
(b) San Benito hereby represents to Pacific that, except as set forth on
Schedule 12.01(b), no agent, representative or broker has represented San Benito
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
San Benito or any shareholder of San Benito, and San Benito hereby agrees to
indemnify and hold Pacific harmless for any amounts owed to any agent,
representative or broker of San Benito or any shareholder of San Benito.
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 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
63
<PAGE>
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 SAN BENITO:
San Benito Bank
300 Tres Pinos Road
Hollister, California 95023
Telecopy: (831) 637-8091
Attention: Mr. Edward T. Stephenson,
President and Chief Executive Officer
WITH A COPY TO:
R. Brent Faye, Esq.
Lillick & Charles LLP
2 Embarcadero Center
Suite 2700
San Francisco, California 94111
Telecopy: (415) 984-8300
IF TO PACIFIC:
Pacific Capital Bancorp
64
<PAGE>
200 East Carrillo Street
Suite 300
Santa Barbara, California 93101
Telecopy: (805) 882-3888
Attention: Mr. David W. Spainhour,
President and Chief Executive Officer
WITH A COPY TO:
Charles E. Greef, Esq.
Scott J. Luedke, Esq.
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
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.
65
<PAGE>
C. "Material Adverse Change" means any material adverse change
(excluding the occurrence of expenses in connection with the Merger) since
December 31, 1998 in the business, results of operations, condition
(financial or otherwise), assets, properties, liabilities (absolute,
accrued, contingent or otherwise), reserves of San Benito or Pacific, as
the case may be, and their respective Subsidiaries taken as a whole, and
specifically includes, without limitation, with respect to San Benito, any
change that reduces the tangible shareholders' equity of San Benito below
$17,500,000, or, with respect to Pacific, any change that reduces the
tangible shareholders' equity of Pacific below $225,000,000.
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 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) any substance the presence of which on the
property in question is prohibited under any Environmental Law, and (j)
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.
F. "Pacific Employee Benefit Plans" mean 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,
66
<PAGE>
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.
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
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.
67
<PAGE>
SECTION 12.13 Public Disclosure. Neither Pacific nor San Benito 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, Pacific and San Benito 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.
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 Pacific and San Benito at any time before or after adoption of this
Agreement by the shareholders of San Benito but, after any submission of this
Agreement to the shareholders of San Benito for approval, no amendment shall be
made that (i) decreases the Merger Consideration to be paid for the San Benito
Common Stock as set forth in Section 1.04 or (ii) materially and adversely
affects the rights of the shareholders of San Benito 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.
[Signatures Follow]
68
<PAGE>
IN WITNESS WHEREOF, Pacific and San Benito have caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
PACIFIC CAPITAL BANCORP,
a California corporation
By: /s/ David W. Spainhour
David W. Spainhour, President and Chief
Executive Officer
and
By: /s/ Clayton C. Larson
Clayton C. Larson, Vice Chairman
SAN BENITO BANK,
a California banking corporation
By: /s/ Gerald T. McCullough
Gerald T. McCullough, Chairman of the Board
and
By: /s/ Edward T. Stephenson
Edward T. Stephenson, President and
Chief Executive Officer
69
<PAGE>
Exhibit 10.1
70
<PAGE>
SAN BENITO STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of February ___, 2000
(the"Agreement"), is by and between SAN BENITO BANK, a California banking
corporation ("Issuer"), and PACIFIC CAPITAL BANCORP, a California corporation
and registered bank holding company (including any successor in interest,
"Grantee").
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Reorganization dated as of February 3, 2000 (the "Reorganization Agreement")
providing for, among other things, the merger of Issuer with a wholly owned
subsidiary of Grantee (the "Merger"); and
WHEREAS, as a condition and inducement to Grantee's execution of the
Reorganization 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 Reorganization Agreement, and intending to be legally bound hereby, Issuer
and Grantee agree as follows:
1 . Defined Terms. Capitalized terms which are used but not defined herein shall
have the meanings ascribed to such terms in the Reorganization Agreement.
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
525,000 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 $19.00; 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 Reorganization
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
Reorganization Agreement in accordance with the terms thereof before the
occurrence of a Purchase Event or a Preliminary Purchase Event (as defined
below) other than a termination of the Reorganization Agreement by Grantee
pursuant to Sections 9.02(e), 9.02(f) or 9.02(m) of the Reorganization Agreement
(a "Default Termination"); (C) the close of business on the 365th day after the
occurrence of a Default Termination; and (D) the close of business on the 365th
day after termination of the Reorganization Agreement (other than by reason of a
Default Termination)
1
<PAGE>
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
Reorganization 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 Stock are
subject, including, if applicable, but not limited to, 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
Issuer's Board of Directors shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's
2
<PAGE>
Board of Directors with respect to the Reorganization Agreement, in each
case, after it shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (A) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (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, the Bank Merger Act, as
amended, or the change in Bank Control Act of 1978, as amended, seeking
approval to engage in an Acquisition Transaction; or
(iii) any person (other than Grantee or any subsidiary of Grantee)
shall have made a bona fide proposal to Issuer or its shareholders by
public announcement, or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction; or
(iv) after a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, or such third party
states its intention to the Issuer to make such a proposal if the
Reorganization Agreement terminates, Issuer shall have breached any
representation, warranty, covenant or agreement contained in the
Reorganization Agreement and such breach would entitle Grantee to
terminate the Reorganization Agreement under Article IX thereof (without
regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Merger pursuant
to the terms of the Reorganization Agreement); or
(v) any person (other than Grantee or any subsidiary of Grantee),
other than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with any
regulatory authority for 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 (not to exceed 120 days) 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 cooperate 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
3
<PAGE>
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
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 FEBRUARY ___, 2000. 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.
4
<PAGE>
(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 in the event, under any federal or state
law, prior notice to or consent of any regulatory authority is necessary before
the Option may be exercised cooperating 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 preemptive 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 Bylaws 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.
5
<PAGE>
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
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,
6
<PAGE>
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 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
7
<PAGE>
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 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).
(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,
8
<PAGE>
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
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
9
<PAGE>
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
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. If Issuer or any successor in interest
to Issuer (including any holding company of Issuer) is or shall become subject
to the registration requirements
10
<PAGE>
of the Securities Act of 1933, as amended, Issuer (including any such successor
or holding company of 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 Reorganization
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 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.
11
<PAGE>
(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
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
12
<PAGE>
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
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.
13
<PAGE>
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. Limitation on Total Profit.
(a) Notwithstanding anything to the contrary contained herein, in no event
shall Grantee's Total Profit (as defined below in Section 12(b) hereof) with
respect to this Agreement exceed $2,500,000 and, if it otherwise would exceed
such amount, Grantee, at its sole election, shall either (i) reduce the number
of shares of Issuer Common subject to the Option, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee in exchange for the
Purchase Price with respect to such Option Shares, or (iii) any combination
thereof, so that Grantee's actually realized Total Profit shall not exceed
$2,500,000 after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the aggregate
amount (after taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 8 hereof, (ii)(x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 8 hereof, less (y) Grantee's
purchase price for such Option Shares, and (iii) any equivalent amount with
respect to the Substitute Option.
13. 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 Reorganization 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
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 13(h)) any rights or
remedies hereunder. If any term, provision, covenant or
14
<PAGE>
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 and as limited pursuant to
Section 12), 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:
San Benito Bank
300 Tres Pinos Road
Hollister, California 95023
Telecopy: (831) 637-8091
Attention: Mr. Edward T. Stephenson,
President and Chief Executive Officer
WITH A COPY TO:
Mr. R. Brent Faye
Lillick & Charles LLP
2 Embarcadero Center
Suite 2700
San Francisco, California 94111
Telecopy: (415) 984-8300
IF TO GRANTEE TO:
Pacific Capital Bancorp
200 East Carrillo Street
Suite 300
Santa Barbara, California 93101
Telecopy: (805) 882-3888
Attention: Mr. David W. Spainhour,
President and Chief Executive Officer
15
<PAGE>
WITH A COPY TO:
Mr. Charles E. Greef
Mr. Scott J. Luedke
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.
[Signatures Follow]
16
<PAGE>
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.
SAN BENITO BANK,
a California banking corporation
By: /s/ Gerald T. McCullough
Gerald T. McCullough, Chairman of the Board
and
By: /s/ Edward T. Stephenson
Edward T. Stephenson, President and
Chief Executive Officer
PACIFIC CAPITAL BANCORP,
a California corporation
By: /s/ David W. Spainhour
David W. Spainhour, President and Chief
Executive Officer
and
By: /s/ Clayton C. Larson
Clayton C. Larson, Vice Chairman
17
<PAGE>
Exhibit 99.1
18
<PAGE>
Contact: Clay Larson (Monterey)
(831) 373-4900
Vern Horton (Salinas)
(831) 757-4900
Ed Stephenson (Hollister)
(831) 638-3349
Tom Thomas (Santa Barbara)
(805) 564-6216
Pacific Capital Bancorp
Signs Merger Agreement With
San Benito Bank
Salinas, California, February 3, 2000 - Pacific Capital Bancorp
(Nasdaq:SABB), holding company for First National Bank of Central California,
its affiliate South Valley National Bank, and Santa Barbara Bank & Trust,
announced today that it has signed a merger agreement with Hollister,
California-based San Benito Bank (OTC BB:SABH).
The acquisition presents a significant opportunity for in-market savings
and is expected to be accretive to Pacific Capital Bancorp earnings within the
first full year of operation. It will be accounted for under the pooling of
interests method of accounting for business combinations. Under the terms of the
agreement, each outstanding share of San Benito Bank common stock will be
converted into the right to receive .605 shares of Pacific Capital Bancorp
common stock. Based on the closing price of Pacific Capital Bancorp common stock
on Thursday, February 3, of $30 per share, the transaction is valued at $51.8
million, representing 2.80 times San Benito Bank's book value at December 31,
1999, and 22.9 times the bank's 1999 earnings. The transaction, which is subject
to regulatory approval and the approval of San Benito Bank shareholders, is
expected to close during the second quarter of 2000.
San Benito Bank operates three offices in San Benito County, in the
communities of Hollister and San Juan Bautista, and an office in Gilroy, in
Santa Clara County. Pacific Capital Bancorp is the parent of a 37-office
community bank network serving customers in six Central Coast counties. First
National Bank of Central California maintains branches in Monterey, Salinas (2),
Carmel, Watsonville, and Soledad. Offices in Gilroy, Morgan Hill, Hollister and
San Juan Bautista operate under the name South Valley National Bank. Santa
Barbara Bank & Trust operates 27 offices in Santa Barbara and West Ventura
counties.
At December 31, 1999, San Benito Bank reported net income of $2.26 million
and assets of $201 million. Pacific Capital Bancorp reported record earnings of
$44.3 million, and assets of $2.78 billion at year-end 1999.
"This is a very natural and timely combination of community banks which
have similar philosophies on serving their customers and communities," said
Clayton C. Larson, Vice Chairman of Pacific Capital Bancorp and President of
First National Bank of Central California. "San Benito Bank's commitment to
'Community Banking at its Best' is a perfect fit with our dedication to
legendary service to the customers and communities we serve. Bringing this
organization into the Pacific Capital Bancorp network of community banks is an
excellent next growth step for us as we continue to position ourselves as the
bank of choice along the Central Coast."
"We are very enthusiastic about our alliance with Pacific Capital
Bancorp," said Gerald T. McCullough, Chairman of the Board of San Benito Bank,
which has served its local markets since 1984. "Our board considered a number of
possible affiliations and, after careful review, unanimously concluded that
joining the Pacific Capital Bancorp community bank network offers the best
opportunity for our bank, our community and our shareholders. The current market
for our stock is not very active, and we
1
<PAGE>
feel that our shareholders will benefit from owning stock in a company with
greater market liquidity and a favorable dividend policy."
"As the pressures on community banks increase, it is imperative for those
organizations that strive to continue serving their markets with superior
service to align with other institutions that share their operating philosophy,"
said Edward T. Stephenson, President & Chief Executive Officer of San Benito
Bank. "Our alliance with Pacific Capital Bancorp will allow us to preserve the
name and identity of San Benito Bank."
Stephenson will remain President of San Benito Bank, which will become an
affiliate of First National Bank of Central California. One member of the San
Benito Bank board will be nominated for election to the Pacific Capital Bancorp
board of directors at the company's annual shareholders' meeting in 2001, and
additional members of the current board of San Benito Bank will join the board
of First National Bank of Central California following the close of the
transaction.
"We intend to maintain the high level of service that San Benito Bank
customers have come to expect from their financial institution," said Vernon
Horton, Vice Chairman of Pacific Capital Bancorp and Chairman of the Board of
First National Bank of Central California, "which includes the local leadership,
authority and decision making that sets community banks apart from their larger
competitors. Additionally, we are looking forward to providing our new customers
with some exciting new banking products and services which they've not had
before, including trust and investment services, international banking, trade
finance, and the largest proprietary ATM network on the Central Coast.
"Overall," said Horton, "we believe that the alliance between these
highly-respected community banks will result in the best of both worlds for our
customers - all the products and services of a big bank, delivered with the same
personalized high quality service our customers have come to expect from their
local banker."
This press release contains forward-looking statements with respect to the
financial condition, results of operation and business of Pacific Capital
Bancorp. These include statements that relate to or are dependent on estimates
or assumptions relating to the prospects of continued loan growth, improved
credit quality and certain operating efficiencies resulting from the integration
of combined operations. These forward-looking statements involve certain risks
and uncertainties. Factors that may cause actual results to differ materially
from those contemplated by such forward-looking statements include, among
others, the following possibilities: (1) competitive pressure among financial
services companies increases significantly; (2) changes in the interest rate
environment reduce interest margins; (3) general economic conditions,
internationally, nationally or in the State of California are less favorable
than expected; (4) legislation or regulatory requirements or changes adversely
affect the business in which the combined organization will be engaged; and (5)
other risks detailed in the Pacific Capital Bancorp reports filed with the
Securities and Exchange Commission.
This press release does not constitute an offer of any securities for
sale. Pacific Capital Bancorp will file a registration statement on Form S-4
with the Securities and Exchange Commission in connection with the securities of
Pacific Capital Bancorp to be offered and issued to shareholders of San Benito
Bank in the proposed transaction. The registration statement will include a
prospectus/proxy statement which will be sent to shareholders of San Benito Bank
seeking their approval of the proposed transaction. When filed, the registration
statement can be obtained free of charge at the Internet World Wide Website
maintained by the Securities and Exchange Commission at http://www.sec.gov.
2
<PAGE>
Exhibit 99.2
<PAGE>
FOR IMMEDIATE RELEASE
January 20, 2000
PACIFIC CAPITAL BANCORP
ANNOUNCES 1999
RECORD EARNINGS
Santa Barbara, Calif. -- Pacific Capital Bancorp (Nasdaq: SABB) today
announced record net income of $44.3 million for 1999, and fourth quarter 1999
record net income of $10.8 million, marking the 17th consecutive quarter in
which the Company achieved higher earnings than in the comparable quarter of the
prior year. The Company's record earnings during the first year following its
merger are a strong validation of its ability to achieve real growth in its
markets along the Central Coast.
Excluding the costs absorbed in the fourth quarter of 1998 in
connection with the merger between Santa Barbara Bancorp and the former Pacific
Capital Bancorp, pro forma net income for 1998 would have been $37.9 million for
the year and $9.0 million for the fourth quarter. Net income for 1999 and for
the fourth quarter of the year significantly exceeded these pro forma amounts by
16.8% and 19.9%, respectively. Diluted earnings per share in 1999 were $0.43 for
the fourth quarter and $1.79 for the year, increases of 16.2% and 15.5%
respectively over pro forma earnings per share without the impact of the
merger-related costs for the comparable periods of 1998.
For the fourth quarter 1999, the Company's return on average equity and
return on average assets were 18.50% and 1.52%, respectively, compared to 16.28%
and 1.38% (pro forma), respectively, for the fourth quarter of 1998. For the
twelve months ended December 31, 1999, Pacific Capital Bancorp's return on
average equity and return on average assets were 19.44% and 1.59%, respectively,
compared to 18.18% and 1.53% (pro forma), respectively, for the twelve months
ended December 31, 1998.
"Our earnings for 1999 represent substantial growth, even when you
compare net income for 1999 to the prior year, exclusive of 1998 merger-related
expenses," said David W. Spainhour, President & Chief Executive Officer of
Pacific Capital Bancorp. "From the beginning, we committed that we would not
allow the challenges of our merger to distract us from our focus on generating a
strong return for our shareholders. Throughout the process, we never lost sight
of that responsibility, which enabled us to produce record earnings for the
fourth quarter and for the year.
"We believe that this significant financial achievement in the first
year of our partnership demonstrates the Company's long-term potential to
generate strong revenues," said Spainhour. "During the year, we completed two
very time and cost-intensive projects related to information technology, our
conversion to a single operating system, and preparing for the century date
change. We dedicated appropriate resources to ensure the success of both
critical projects, while remaining focused on what we do best: providing our
customers with the breadth of product and exceptional customer service that
differentiates our banks in their respective markets.
"Staying focused on our customers enabled our community banks to
continue their strong growth during 1999, despite challenges which might have
detracted from our mission," said Spainhour. "With those projects now
successfully behind us, we are looking forward to focusing our full attention on
leveraging the tremendous resources of our network and being the community bank
of choice along the Central Coast."
Results during all of 1999 were favorably impacted by loan growth and a
lower cost of funds compared to 1998. According to Spainhour, loan demand has
continued to exceed expectations, driving an increase in loans during 1999 of
$399 million or 25.2%, a trend that is expected to continue into 2000. The
higher proportion of loans in the Company's asset mix resulted in an improvement
of the net interest margin to 5.74% for 1999, compared with 5.65% for 1998.
The Company's ratio of nonperforming assets to total assets decreased
to 0.49% at December 31, 1999, down from 0.52% at September 30, 1999, evidencing
a stable trend in credit quality.
In keeping with its stated intent to distribute 35%-40% of earnings to
shareholders, the Board of Directors declared a quarterly cash dividend of $0.18
per share, payable February 15, 2000, to shareholders of record January 25,
2000.
Pacific Capital Bancorp is the parent company of Santa Barbara Bank &
Trust, First National Bank of Central California and its affiliate South Valley
National Bank, a 37-branch community banking network serving customers in six
Central Coast counties. Santa Barbara Bank & Trust serves customers from 27
offices throughout Santa Barbara and West Ventura counties. First National Bank
maintains offices in Monterey, Salinas (2), Carmel, Watsonville, and Soledad.
Offices in Gilroy, Morgan Hill, Hollister, and San Juan Bautista operate under
the name South Valley National Bank. The Company's subsidiary banks also offer a
complete menu of trust and investment management services from the only
self-contained, full-service trust company located between San Jose and Los
Angeles, and offer the largest ATM network along the Central Coast.
This press release contains forward-looking statements with respect to
the financial conditions, results of operations and businesses of Pacific
Capital Bancorp. These include statements that relate to or are dependent on
estimates or assumptions relating to the prospects of continued loan growth and
improved credit quality in 2000 .These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following possibilities: (1) competitive pressure among
financial services companies increases significantly; (2) unanticipated
difficulties arise related to modifying or replacing critical systems to address
the Century Date Change subsequent to the event; (3) changes in the interest
rate environment reduce interest margins; (4) general economic conditions,
internationally, nationally or in the State of California, are less favorable
than expected; and (5) legislation or regulatory requirements or changes
adversely affect the business in which the combined company will be engaged.
For Information Contact:
David W. Spainhour, (805) 564-6345
President & Chief Executive Officer
William S. Thomas, Jr. (805) 564-6216
Vice Chairman & Chief Operating Officer
<PAGE>
PACIFIC CAPITAL BANCORP Summary Financial Data (Unaudited) (In thousands except
per share earnings):
For the Three-Month
For the Year Ended Periods Ended
December 31, December 31,
1999 1998 1999 1998
Interest income from:
Loans $164,572 $138,537 $42,963 $35,536
Securities 43,145 45,350 10,750 11,377
Federal funds sold and
resell agreements 3,590 8,653 199 2,638
Bankers' acceptances and
commercial paper 336 1,099 -- 120
Total interest income 211,643 193,639 53,912 49,671
Interest expense on:
Deposits 61,300 64,770 16,136 16,320
Federal funds purchased and
repurchase agreements 1,743 1,098 691 350
Other borrowed funds 4,813 2,245 1,436 559
Total interest expense 67,856 68,113 18,263 17,229
Net interest income 143,787 125,526 35,649 32,442
Provision for loan losses 6,375 9,123 1,023 1,095
Net interest income after
provision for loan losses 137,412 116,403 34,626 31,347
Other operating income:
Service charges on deposits 8,911 8,660 2,290 2,199
Trust fees 13,095 11,676 3,402 2,944
Other service charges,
commissions and fees, net 18,624 16,602 3,281 2,808
Net (loss) gain on
securities transactions (286) 214 -- 5
Other operating income 1,274 1,069 322 407
Total other income 41,618 38,221 9,295 8,363
Other operating expense:
Salaries and benefits 51,645 49,278 13,394 12,562
Net occupancy expense 9,362 8,160 2,553 1,911
Equipment expense 6,254 6,965 1,836 2,293
Other expense 43,128 41,679 10,327 19,102
Total other
operating expense 110,389 106,082 28,110 35,868
Income before income taxes 68,641 48,542 15,811 3,842
Income taxes 24,367 18,975 5,036 2,430
Net income $ 44,274 $ 29,567 $10,775 $ 1,412
Earnings per share - basic $1.81 $1.24 $0.44 $0.06
Earnings per share - diluted $1.79 $1.21 $0.43 $0.06
Average shares for
basic earnings per share 24,417 23,886 24,528 24,171
Average shares for
diluted earning per share 24,790 24,447 24,893 24,627
Taxable Equivalent Adjustment $5,775 $5,737 $1,580 $1,457
Average Earning Assets
(excl of FAS 114
market value adj.) $2,605,041 $2,320,985 $2,650,151 $2,449,942
Net interest margin
(tax-equivalent) 5.74% 5.65% 5.62% 5.53%
Average Assets $2,787,824 $2,477,702 $2,843,916 $2,611,617
Average Equity $227,738 $208,387 $232,962 $220,795
As of As of
12/31/99 12/31/98
Selected Balance Sheet Accounts:
Loans $1,981,879 $1,582,781
Assets $2,879,282 $2,649,418
Deposits $2,440,181 $2,329,676
Capital $ 234,573 $ 214,000
Actual shares
outstanding at end of period 24,554 24,209
Nonperforming assets:
Loans past due 90
days or more $ 80 $ 78
Nonaccrual loans 14,152 8,148
Total nonperforming loans 14,232 8,226
Other real estate owned and
other foreclosed assets -- --
Total nonperforming assets $14,232 $8,226
Nonperforming assets as a
percentage of total assets 0.49% 0.31%
Allowance for credit losses as
a percentage of nonper-
forming loans 202% 356%
The following data (dollars in millions except per share amounts) compares
actual operating results with pro forma results exclusive of the merger-related
expenses incurred in the combination discussed in the text of this release.
For the Three-Month
For the Year Ended Periods Ended
December 31, December 30,
1999 1998 1999 1998
Merger-related expenses -- $11.7 -- $10.8
Net Income:
Actual $44.3 $29.6 $10.8 $ 1.4
Pro Forma $37.9 $ 9.0
Operating efficiency ratio:
Actual 57.65% 62.1% 60.42% 84.7%
Pro Forma 55.1% 58.6%
Return on average assets:
Actual 1.59% 1.19% 1.52% 0.22%
Pro Forma 1.53% 1.38%
Return on average equity:
Actual 19.44% 14.19% 18.50% 2.56%
Pro Forma 18.18% 16.28%
Diluted earnings per share:
Actual $1.79 $1.21 $0.43 $0.06
Pro Forma $1.55 $0.37
