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): August 27, 1999
---------------
SJNB Financial Corp
----------------------------------------------------
(Exact name of registrant as specified in its charter)
California 0-11771 77-0058227
-------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
One North Market Street
San Jose, California 95113
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 947-7562
--------------
<PAGE>
Item 5. Other Events.
On August 27, 1999, the Company, Saratoga Bancorp ("Saratoga"), and
Saratoga National Bank ("SNB") entered into a definitive Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which all of the outstanding shares
of Saratoga common stock will be exchanged for shares of the Company's Common
Stock pursuant to a tax-free exchange (the "Merger"), subject to dissenters'
rights under applicable law. The Merger Agreement, which has been approved by
the Board of Directors of both companies and the Board of Directors of SNB, is
subject to approval by the shareholders of both Saratoga and the Company,
clearance by regulatory authorities, including the Federal Reserve Board, and
other terms and conditions customary for transactions of this type. The parties
also entered into a Stock Option Agreement dated as of August 27, 1999 (the
"Stock Option Agreement"), as more fully described below.
Although no formal timetable for the Merger has been set, subject to
satisfaction of the conditions in the Merger Agreement, it is estimated the
closing will occur in the fourth quarter of 1999. The Merger Agreement and the
related Stock Option Agreement are attached as exhibits to this Report and are
incorporated herein by reference. The following summaries of the Merger
Agreement and the Stock Option Agreement do not purport to be complete and are
qualified in their entirety by reference to such exhibits.
The Merger Agreement provides for Saratoga shareholders to receive .70
shares of SJNB Common Stock for each outstanding share of Saratoga Common Stock.
The Merger Agreement provides that should SJNB's average price (as defined) on
the NASDAQ National Market prior to closing be below $29.3590, then Saratoga can
terminate the Merger Agreement. If, but only if, Saratoga terminates the Merger
Agreement under such a circumstance, then SJNB may, at its option, increase the
exchange ratio to a ratio which will provide approximately $29.3590 per share
for each Saratoga share and the Merger Agreement shall not be deemed terminated.
At the effective time of the Merger, stock options to acquire Saratoga Common
Stock would be converted into options to acquire SJNB Common Stock. If the
Merger were consummated as of August 27, 1999, based on the closing SJNB stock
price of $33.25 on August 27, 1999, the Merger would result in the issuance of
approximately 1,110,000 new shares of SJNB Common Stock, excluding currently
outstanding options. Based upon SJNB's closing price of $33.25 on August 27,
1999, the Merger would be valued at approximately $36.9 million. At August 25,
1999, SJNB had approximately 2,350,118 shares outstanding and Saratoga had
approximately 1,586,588 shares outstanding.
Following the execution of the Merger Agreement, Saratoga, as a condition
to, and in consideration for entering into, the Merger Agreement, entered into a
Stock Option Agreement which granted the Company an option to purchase up to
378,561 shares of Saratoga Common Stock (the "Option Shares"), subject to
adjustment, at an exercise price of $19.21 per share (the "Stock Option"). The
Option Shares, if issued pursuant to the Stock Option Agreement, would represent
approximately 19.9% of the issued and outstanding shares of Saratoga's Common
Stock after giving effect to the issuance of any shares pursuant to an exercise
of the Stock Option but in no event will the number of Option Shares exceed
19.9% of Saratoga's issued and outstanding Common Stock. The number of shares of
Saratoga's Common Stock subject to the Stock Option will be increased to the
extent that Saratoga issues additional shares of Common Stock (otherwise than
pursuant to an exercise of the Stock Option) such that the number of Option
Shares will continue to equal 19.9% of the then issued and outstanding shares of
Saratoga's Common Stock after giving effect to the issuance of shares pursuant
to an exercise of the Stock Option. In the event Saratoga issues or agrees to
issue any shares of Common Stock (other than pursuant to any warrants or options
outstanding at August 27, 1999 as permitted under the Merger Agreement) at a
price less than $19.21 per share (or lower than an adjusted price per share),
the exercise price will be equal to such lesser price. The number of shares of
Saratoga's Common Stock subject to the Stock Option, and the applicable exercise
price per Option Share, also will be appropriately adjusted in the event of any
stock dividend, split-up, merger, recapitalization, combination, subdivision,
conversion, exchange of shares, or similar event relating to Saratoga.
Provided that the Company shall not be in material breach of the Stock
Option Agreement or the Merger Agreement, and no injunction or other order
against exercise of the Stock Option or delivery of the Option Shares is
currently in effect, the Company may exercise the Stock Option, in whole or in
part, subject to regulatory approval, with written notice at any time within 30
days (subject to extension as provided in the Stock Option Agreement) after both
an "Initial Triggering Event" and a "Subsequent Triggering Event" occur prior to
termination of the Stock Option.
Termination of the Stock Option generally occurs at any of the following:
(i) the effective time of the Merger; (ii) termination of the Merger Agreement
in accordance with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event; (iii) the passage of 12 months
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event (provided that if an Initial
Triggering Event continues or occurs beyond termination of the Merger Agreement
and prior to the passage of such 12 month period, the termination of the Stock
Option will be 12 months from the expiration of the Last Triggering Event but in
no event more than 18 months after termination of the Merger Agreement); or (iv)
August 27, 2002. The "Last Triggering Event" means the last Initial Triggering
Event to occur.
"Initial Triggering Event" is defined as the occurrence of any of the
following events: (i) Saratoga or any of its subsidiaries, without the Company's
prior written consent, enters into an agreement with any person (the term
"person" having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934, and the rules and regulations
thereunder)(other than the Company or any subsidiary thereof) to engage in, or
the Board of Directors of Saratoga recommends that the shareholders of Saratoga
approve or accept (other than as contemplated by the Merger Agreement), (x) a
merger or consolidation, or any similar transaction, involving Saratoga or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC")) of Saratoga, (y) a purchase,
lease or other acquisition representing 15% or more of the consolidated assets
of Saratoga and its subsidiaries, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Saratoga or any
Significant Subsidiary of Saratoga (each of the transactions described in the
preceding clauses (x), (y) and (z) being referred to as an "Acquisition
Transaction"); (ii) Saratoga or any of its subsidiaries or affiliates, without
having received the Company's prior written consent, authorizes, recommends,
proposes or publicly announces its intention to authorize, recommend or propose,
to engage in an Acquisition Transaction with any person other than the Company
or a subsidiary thereof, or the Board of Directors of Saratoga publicly
withdraws or modifies, or publicly announces its intent to withdraw or modify,
in any manner adverse to the Company, its recommendation that the shareholders
of Saratoga approve the transactions contemplated by the Merger Agreement; (iii)
Any person (other than the Company, any subsidiary thereof or any Saratoga
subsidiary acting in a fiduciary capacity) acquires beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding shares
of Saratoga Common Stock; (iv) Any person (other than the Company or any
subsidiary thereof) makes a bona fide proposal to Saratoga or its shareholders
by public announcement or written communication that is or becomes the subject
of public disclosure to engage in an Acquisition Transaction; (v) A third party
makes a proposal to Saratoga or its shareholders to engage in an Acquisition
Transaction, followed by Saratoga breaching any covenant or obligation contained
in the Merger Agreement, such breach entitling the Company to terminate the
Merger Agreement, and such breach shall not be cured prior to the date that the
Company sends notice of its exercise of the Stock Option to Saratoga; or (vi)
Any person (other than the Company or any subsidiary thereof), other than in
connection with a transaction to which the Company has given its prior written
consent, files an application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or notice is
accepted for processing, for approval to engage in an Acquisition Transaction.
"Subsequent Triggering Event" is defined as either (A) the acquisition by
any person (other than the Company or any subsidiary thereof) of beneficial
ownership of 20% or more of the then outstanding Common Stock of Saratoga, or
(B) the occurrence of the Initial Triggering Event described in clause (i)
above, except that the percentage referenced in subclause (z) thereof shall be
20%.
The information in this report shall not constitute an offer to exchange or
the solicitation of an offer to exchange, nor shall there be any exchange of the
Company's Common Stock in any state in which such offer, solicitation, or
exchange would be unlawful prior to the registration or qualification under the
securities laws of any such state. The Company's Common Stock to be exchanged
will be offered only by means of a prospectus filed with the SEC. A registration
statement relating to the Company's Common Stock to be exchanged will be filed
with the SEC. The Company's Common Stock may not be exchanged, nor may offers to
exchange be accepted, prior to the time such registration statement becomes
effective.
Item 7: Financial Statements and Exhibits
---------------------------------
(c) Exhibits. The following is furnished in accordance with the provisions
of Item 601 of Regulation S-K.
Exhibit 2.1: Agreement and Plan of Merger dated as of August 27, 1999,
among the Registrant, Saratoga Bancorp and Saratoga
National Bank.
Exhibit 99.1:Stock Option Agreement dated as of August 27, 1999,
among the Registrant and Saratoga Bancorp.
<PAGE>
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 thereunto duly authorized.
Dated: September 1, 1999
SJNB Financial Corp.
--------------------
(Registrant)
By /s/ Eugene E. Blakeslee
------------------------------
Eugene E. Blakeslee
Executive Vince President and
Chief Financial Officer (Chief
Accounting Officer)
================================================================================
AGREEMENT AND PLAN OF MERGER
dated as of August 27, 1999
among
SJNB FINANCIAL CORP.,
SARATOGA BANCORP
and
SARATOGA NATIONAL BANK
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER......................................................2
1.1 Effective Time of the Merger....................................2
1.2 Closing.........................................................2
1.3 Effects of the Merger...........................................2
1.4 Alternative Structure...........................................3
1.5 Absence of Control..............................................3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES..........................3
2.1 Effect on Capital Stock of the Constituent Corporations.........4
(a) Conversion of Saratoga Common Stock........................4
(b) SJNB Capital Stock.........................................4
2.2 No Further Ownership Rights in Saratoga Common Stock............4
2.3 Fractional Shares...............................................4
2.4 Surrender of Shares of Saratoga Common Stock....................5
2.5 Adjustments.....................................................6
2.6 Options.........................................................6
2.7 Dissenters' Rights..............................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................7
3.1 Representations and Warranties of Saratoga and SNB..............7
(a) Organization, Standing and Power...........................7
(b) Capital Structure; Ownership of SJNB Common Stock..........9
(c) Authority; No Violation...................................10
(d) Financial Statements......................................12
(e) Saratoga SEC Documents....................................12
(f) Saratoga Information Supplied.............................13
(g) Compliance with Applicable Laws...........................13
(h) Litigation................................................14
(i) Taxes.....................................................14
(j) Certain Agreements........................................15
(k) Benefit Plans.............................................16
(l) Subsidiaries..............................................18
(m) Agreements with Bank or Other Regulators..................19
(n) Absence of Certain Changes or Events......................19
(o) Undisclosed Liabilities...................................19
(p) Governmental Reports......................................19
(q) Environmental Liability...................................20
(r) Properties................................................22
(s) Transactions with Affiliates..............................23
(t) Brokers or Finders........................................23
(u) Intellectual Property.....................................23
(v) Pooling of Interests......................................23
(w) Opinion of Financial Advisor..............................23
(x) Community Reinvestment Act Compliance.....................24
(y) Year 2000 Readiness.......................................24
(z) Insurance.................................................24
(aa) Loans and Other Assets....................................25
(ab) Restrictions on Investments...............................26
(ac) No Brokered Deposits......................................26
(ad) Derivatives Contracts; Structured Notes; Etc..............26
(ae) Labor Matters.............................................27
3.2 Representations and Warranties of SJNB.........................27
(a) Organization, Standing and Power..........................27
(b) Capital Structure; Ownership of SJNB Common Stock.........27
(c) Authority; No Violation...................................28
(d) Financial Statements......................................30
(e) SJNB SEC Documents........................................30
(f) SJNB Information Supplied.................................31
(g) Compliance with Applicable Laws...........................31
(h) Litigation................................................32
(i) Taxes.....................................................32
(j) Certain Agreements........................................33
(k) Benefit Plans.............................................34
(l) Subsidiaries..............................................36
(m) Agreements with Bank or Other Regulators..................36
(n) Absence of Certain Changes or Events......................36
(o) Undisclosed Liabilities...................................36
(p) Governmental Reports......................................37
(q) Environmental Liability...................................37
(r) Properties................................................39
(s) Transactions with Affiliates..............................39
(t) No Broker or Finder.......................................40
(u) Intellectual Property.....................................40
(v) Pooling of Interests......................................40
(w) Community Reinvestment Act Compliance.....................40
(x) Year 2000 Readiness.......................................40
(y) Insurance.................................................41
(z) Loans and Other Assets....................................41
(aa) Derivatives Contracts; Structured Notes; Etc..............42
(ab) Labor Matters.............................................42
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS......................43
4.1 Covenants of Saratoga..........................................43
4.2 Covenants of SJNB..............................................47
ARTICLE V ADDITIONAL AGREEMENTS..........................................49
5.1 Regulatory Matters.............................................49
5.2 Access to Information..........................................50
5.3 Shareholders' Meetings.........................................50
5.4 No Solicitations...............................................51
5.5 Legal Conditions...............................................53
5.6 Employee Benefit Plans.........................................54
5.7 Indemnification; Directors' and Officers' Insurance............55
5.8 Additional Agreements..........................................56
5.9 Fees and Expenses..............................................56
5.10 Cooperation....................................................57
5.11 Affiliates.....................................................58
5.12 Stock Exchange Listing.........................................58
5.13 Advice of Changes..............................................58
5.14 Subsequent Interim and Annual Financial Statements; Certain
Reports........................................................58
5.15 Dissenters' Rights.............................................58
5.16 SNB Board of Directors and Executive Officers..................58
5.17 Transition Services............................................59
ARTICLE VI CONDITIONS PRECEDENT...........................................59
6.1 Conditions to Each Party's Obligation..........................59
(a) Shareholder Approvals.....................................59
(b) Other Approvals...........................................59
(c) No Injunctions or Restraints..............................59
(d) NASDAQ National Market Listing............................59
(e) S-4.......................................................60
(f) Pooling...................................................60
(g) Burdensome Condition......................................60
(h) Dissenters' Rights........................................60
6.2 Conditions to Obligations of SJNB..............................60
(a) Representations and Warranties............................60
(b) Performance of Obligations................................61
(c) Corporate Action..........................................61
(d) Tax Opinion...............................................61
(e) Material Adverse Effect...................................61
(f) Closing Documents.........................................61
(g) Bank Merger...............................................61
(h) Comfort Letter (S-4)......................................61
(i) Comfort Letter............................................62
6.3 Conditions to Obligations of Saratoga..........................62
(a) Representations and Warranties............................62
(b) Performance of Obligations................................62
(c) Corporate Action..........................................62
(d) Tax Opinion...............................................62
(e) Material Adverse Effect...................................63
(f) Closing Documents.........................................63
(g) Additions to SJNB Board of Directors......................63
(h) Fairness Opinion..........................................63
(i) Comfort Letter (S-4)......................................63
(j) Comfort Letter............................................63
ARTICLE VII TERMINATION AND AMENDMENT......................................63
7.1 Termination....................................................63
7.2 Effect of Termination..........................................67
7.3 Amendment......................................................67
7.4 Extension; Waiver..............................................67
ARTICLE VIII GENERAL PROVISIONS.............................................68
8.1 Survival of Representations, Warranties and Covenants..........68
8.2 Notices........................................................68
8.3 Interpretation.................................................69
8.4 Counterparts...................................................69
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership......................................................69
8.6 Governing Law; Consent to Jurisdiction.........................70
8.7 Severability...................................................70
8.8 Assignment.....................................................70
8.9 Publicity......................................................71
8.10 Attorneys' Fees................................................72
Exhibit A: Form of Agreement of Merger
Exhibit B: Form of Stock Option Agreement
Exhibit C-1: Form of Affiliate Agreement (Saratoga)
Exhibit C-2: Form of Affiliate Agreement (SJNB)
<PAGE>
Index of Defined Terms
----------------------
Page
----
Acquisition Event.............................................................53
Action........................................................................72
Actual Expenses...............................................................57
Affiliate......................................................................9
Agreement......................................................................1
Agreement of Merger............................................................2
Average SJNB Closing Price....................................................66
Bank Merger....................................................................1
Bank Regulators...............................................................13
Benefit Plans.................................................................17
BHC Act........................................................................7
BIF............................................................................7
Burdensome Condition..........................................................60
Business Day...................................................................2
CGCL...........................................................................2
Change in Control.............................................................54
Closing........................................................................2
Closing Date...................................................................2
Code...........................................................................1
Confidentiality Agreement.....................................................50
Consents......................................................................59
Constituent Corporations.......................................................3
CRA...........................................................................24
date hereof....................................................................1
Derivatives Contract..........................................................26
Determination Date............................................................66
Dissenting Shares..............................................................7
DPC Shares....................................................................10
Effective Time.................................................................2
ERISA.........................................................................16
Exchange Act..................................................................12
Exchange Agent.................................................................5
Exchange Ratio.................................................................4
FDIC...........................................................................7
Federal Reserve...............................................................11
FFIEC.........................................................................24
GAAP..........................................................................12
Governmental Entity...........................................................11
Indemnified Liabilities.......................................................55
Indemnified Parties...........................................................55
Injunction....................................................................59
knowledge......................................................................9
Litigation....................................................................14
material.......................................................................8
material adverse effect........................................................8
Merger.........................................................................1
Minimum Price.................................................................65
NASDAQ........................................................................66
OCC...........................................................................12
OREO..........................................................................25
PBGC..........................................................................17
person.........................................................................9
Proxy Statement...............................................................12
Representatives...............................................................51
Requisite Regulatory Approvals................................................59
S-4...........................................................................30
Saratoga.......................................................................1
Saratoga Benefit Plans........................................................17
Saratoga Certificates..........................................................5
Saratoga Common Stock..........................................................1
Saratoga Consolidated Financial Statements....................................12
Saratoga Designees.............................................................2
Saratoga Disclosure Schedule...................................................9
Saratoga Intellectual Property................................................23
Saratoga Option................................................................6
Saratoga Permits..............................................................13
Saratoga Preferred Stock.......................................................9
Saratoga SEC Reports..........................................................12
Saratoga Shareholder Approval.................................................10
Saratoga Shareholders' Meeting................................................13
Saratoga Stock Option Plans....................................................6
Saratoga's Current Premium....................................................56
SEC...........................................................................51
SEC Fees......................................................................57
Securities Act................................................................12
SFAS No. 5.....................................................................8
Significant Subsidiary........................................................51
SJNB...........................................................................1
SJNB Benefit Plans............................................................34
SJNB Common Stock..............................................................4
SJNB Consolidated Financial Statements........................................30
SJNB Disclosure Schedule......................................................28
SJNB Intellectual Property....................................................40
SJNB Permits..................................................................31
SJNB Preferred Stock..........................................................27
SJNB SEC Reports..............................................................30
SJNB Shareholder Approval.....................................................29
SJNB Shareholders' Meeting....................................................31
SNB............................................................................1
SNB Common Stock...............................................................1
Stock Option Agreement.........................................................1
Subsidiary.....................................................................8
Superior Proposal.............................................................52
Surviving Corporation..........................................................3
Takeover Proposal.............................................................51
tax...........................................................................15
Tax return....................................................................15
taxable.......................................................................15
taxes.........................................................................15
Termination Fee...............................................................52
to the best knowledge of.......................................................9
trading day...................................................................66
Transaction Agreements.........................................................9
Trust Account Shares..........................................................10
Violation.....................................................................11
Year 2000 Ready...............................................................24
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August 27, 1999
(the "date hereof"), among SJNB FINANCIAL CORP., a California corporation
("SJNB"), SARATOGA BANCORP, a California corporation ("Saratoga"), and SARATOGA
NATIONAL BANK, a national banking association and a wholly-owned subsidiary of
Saratoga ("SNB").
WHEREAS, Saratoga is the beneficial and record owner of 300,000 shares of
the issued and outstanding common stock, $5.00 par value per share (the
"SNB Common Stock"), of SNB, constituting all of the issued and outstanding
shares of SNB Common Stock;
WHEREAS, the Board of Directors of SJNB has approved this Agreement,
declared it advisable and deems it advisable and in the best interests of the
shareholders of SJNB to consummate the transactions provided for herein in
which, inter alia, Saratoga would merge with and into SJNB pursuant to an
Agreement of Merger substantially in the form attached hereto as Exhibit A (the
"Merger");
WHEREAS, the Boards of Directors of Saratoga and SNB have approved this
Agreement and declared it advisable and deem it advisable and in the best
interests of the shareholders of Saratoga and SNB to consummate the Merger;
WHEREAS, it is the intention of the parties that the Merger qualify as a
tax-free reorganization pursuant to section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that the Merger shall be accounted for as
a "pooling of interests";
WHEREAS, it is the intention of the parties that, immediately after
consummation of the Merger or, at the discretion of SJNB, as soon as reasonably
practicable thereafter, SNB shall be merged with and into San Jose National Bank
(the "Bank Merger"), and San Jose National Bank shall be the surviving entity in
the Bank Merger and shall continue as a wholly-owned Subsidiary (as defined
herein) of SJNB;
WHEREAS, the Boards of Directors of SJNB, Saratoga and SNB have each
determined that the Merger and the other transactions contemplated by this
Agreement are consistent with, and will contribute to the furtherance of, their
respective business strategies and goals; and
WHEREAS, as a condition and inducement to SJNB's willingness to enter into
this Agreement, SJNB and Saratoga are entering into a Stock Option Agreement
dated as of the date hereof in the form of Exhibit B hereto (the "Stock Option
Agreement") pursuant to which Saratoga has granted to SJNB an option to purchase
shares of the Common Stock, no par value, of Saratoga (the "Saratoga Common
Stock") constituting 19.9% of the outstanding shares of Saratoga Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the terms and conditions of
this Agreement, the Merger shall become effective upon the occurrence of the
filing of an agreement of merger in substantially the form of Exhibit A hereto
(the "Agreement of Merger") and officers' certificates prescribed by section
1103 of the California General Corporation Law ("CGCL") with the Secretary of
State of the State of California, or at such time thereafter as is provided by
mutual agreement in the Agreement of Merger (the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m., California time, on the first Friday which is at least ten Business
Days after receipt of all Requisite Regulatory Approvals and the expiration of
all requisite waiting periods (subject to the satisfaction of the condition set
forth in Section 6.1(a)), but in no event shall such date be later than
March 31, 2000, unless otherwise agreed in writing by the parties hereto or as
provided in Section 7.1(c) (the "Closing Date"). The Closing shall be held at
the offices of SJNB Financial Corp., One North Market Street, San Jose,
California 95113, or at such other location as is agreed to in writing by the
parties hereto. As used in this Agreement, "Business Day" shall mean any day
that is not a Saturday, Sunday or other day on which banks are required or
authorized by law to be closed in California.
1.3 Effects of the Merger.
(a) At the Effective Time (i) Saratoga shall be merged with and into SJNB
and the separate corporate existence of Saratoga shall cease, (ii) the Articles
of Incorporation of SJNB as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation, (iii) the
By-laws of SJNB as in effect immediately prior to the Effective Time shall be
the By-laws of the Surviving Corporation, (iv) the directors of SJNB at the
Effective Time shall be the directors of the Surviving Corporation (except that
the Board of Directors of SJNB shall take all necessary action to appoint
Richard L. Mount and four other representatives of Saratoga (collectively, the
"Saratoga Designees"), mutually acceptable to SJNB and Saratoga, to serve on the
Surviving Corporation's board of directors as of and after the Effective Time,
with three of such Saratoga Designees to serve as Class I Directors and one each
of such Saratoga Designees to serve as a Class II Director and a Class III
Director of SJNB, such Saratoga Designees to serve as directors until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be; provided, however, that
Richard L. Mount shall remain a director of SJNB following any termination of
his employment with SJNB or its Subsidiaries; provided further that the Board of
Directors of SJNB or the nomination committee thereof shall nominate and
recommend the election of each of the five Saratoga Designees for reelection as
directors of SJNB at the conclusion of the term of their respective director
class as necessary in order that each such Saratoga Designee shall serve as an
SJNB director for at least three years after the Effective Time; provided
further, however, that in the event any such Saratoga Designee resigns, is
removed (other than by a vote of the shareholders of SJNB) or otherwise
terminates service, the remaining Saratoga Designees may select a former
Saratoga director as his or her replacement and SJNB shall nominate for election
such replacement so selected to serve as a director of SJNB for at least the
remainder of the term of the Saratoga Designee being replaced (as such term may
be required to be extended as provided in the second proviso above)), (v) the
officers of SJNB immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be, (vi) Richard L. Mount shall be appointed to serve on the Executive
Management Committee of SJNB, and (vii) each of the Saratoga Designees will be
appointed to serve on the Board of Directors of San Jose National Bank until the
earlier of his resignation or removal, until his respective successor is duly
elected and qualified or until he ceases to serve as a member of the Board of
Directors of SJNB.
(b) As used in this Agreement, "Constituent Corporations" shall mean each
of SJNB and Saratoga, and "Surviving Corporation" shall mean SJNB, at and after
the Effective Time, as the surviving corporation in the Merger and SNB shall be
a subsidiary of SJNB.
(c) At and after the Effective Time, the Merger will have the effects set
forth in the CGCL.
1.4 Alternative Structure. Notwithstanding anything contained in this
Agreement to the contrary, upon receipt of Saratoga's prior written consent
(which consent shall not be unreasonably withheld), SJNB may specify, for any
reasonable business, tax or regulatory purpose, that, before the Merger, SJNB,
Saratoga and SNB shall enter into transactions other than those described herein
in order to effect the purposes of this Agreement, and the parties hereto shall
take all action necessary and appropriate to effect, or cause to be effected,
such transactions; provided, however, that no such specification may
(a) materially and adversely affect the timing of the consummation of the
transactions contemplated herein, or (b) adversely affect the economic benefits,
the form of consideration or the tax effect of the Merger to the holders of
Saratoga Common Stock.
1.5 Absence of Control. Subject to any specific provisions of this
Agreement, it is the intent of the parties hereto that neither SJNB nor Saratoga
by reason of this Agreement shall be deemed (until consummation of the
transactions contemplated hereby) to control, directly or indirectly, the other
party and shall not exercise, or be deemed to exercise, directly or indirectly,
a controlling influence over the management or policies of such other party.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock of the Constituent Corporations. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of Saratoga or SJNB capital stock:
(a) Conversion of Saratoga Common Stock. Subject to Sections 2.3, 2.5
and 7.1(h), each of the shares of Saratoga Common Stock issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares perfected in accordance with Chapter 13 of the CGCL) shall be
converted into the right to receive 0.7 shares (the "Exchange Ratio") of
fully paid and nonassessable shares of Common Stock, no par value per share
(the "SJNB Common Stock"), of SJNB. All such shares of Saratoga Common
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent the right to
receive (i) a certificate representing the number of whole shares of SJNB
Common Stock into which such Saratoga Common Stock has been converted and,
if applicable, (ii) cash in lieu of fractional shares as provided in
Section 2.3 hereof. Certificates previously representing shares of Saratoga
Common Stock shall be exchanged for certificates representing whole shares
of SJNB Common Stock issued in consideration therefor (and, if applicable,
cash in lieu of fractional shares as provided in Section 2.3 hereof) upon
the surrender of such certificates.
(b) SJNB Capital Stock. At and after the Effective Time, each share of
SJNB Common Stock issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of capital stock of SJNB
and shall not be affected by the Merger.
2.2 No Further Ownership Rights in Saratoga Common Stock. All shares of
SJNB Common Stock issued upon conversion of shares of Saratoga Common Stock in
accordance with the terms hereof shall be deemed to represent all rights
pertaining to such shares of Saratoga Common Stock, and, after the Effective
Time, there shall be no further registration of transfers on the stock transfer
books of Saratoga of the shares of Saratoga Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates formerly representing shares of Saratoga Common Stock are presented
to SJNB for any reason, they shall be canceled and, if applicable, exchanged as
provided in this Article II.
2.3 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of SJNB Common Stock shall be issued to holders of shares of
Saratoga Common Stock. In lieu thereof, each such holder entitled to a fraction
of a share of SJNB Common Stock (after taking into account all shares of
Saratoga Common Stock held at the Effective Time by such holder) shall receive,
at the time of surrender of the certificates representing such holder's Saratoga
Common Stock, an amount in cash equal to the Average SJNB Closing Price,
multiplied by the fraction of a share of SJNB Common Stock to which such holder
would otherwise be entitled. No such holder shall be entitled to dividends,
voting rights, interest on the value of, or any other rights in respect of a
fractional share.
2.4 Surrender of Shares of Saratoga Common Stock.
(a) Prior to the Effective Time, SJNB shall appoint U.S. Stock Transfer
Corp. or its successor, or any other bank or trust company (having capital of at
least $50 million) mutually acceptable to Saratoga and SJNB, as exchange agent
(the "Exchange Agent") for the purpose of exchanging certificates representing
the SJNB Common Stock which are to be issued pursuant to Section 2.1, and at and
after the Effective Time, SJNB shall issue and deliver to the Exchange Agent
certificates representing the shares of SJNB Common Stock, as shall be required
to be delivered to holders of shares of Saratoga Common Stock pursuant to
Section 2.1 hereof. As soon as practicable after the Effective Time, each holder
of shares of Saratoga Common Stock converted pursuant to Section 2.1, upon
surrender to the Exchange Agent of one or more Saratoga share certificates (the
"Saratoga Certificates") for cancellation, will be entitled to receive a
certificate representing the number of shares of SJNB Common Stock determined in
accordance with Section 2.1 and a payment in cash with respect to fractional
shares, if any, determined in accordance with Section 2.3.
(b) No ividends or other distributions of any kind which are declared
payable to shareholders of record of the shares of SJNB Common Stock after the
Effective Time will be paid to persons entitled to receive such certificates for
shares of SJNB Common Stock until such persons surrender their Saratoga
Certificates. Upon surrender of such Saratoga Certificate, the holder thereof
shall be paid, without interest, any dividends or other distributions with
respect to the shares of SJNB Common Stock as to which the record date and
payment date occurred on or after the Effective Time and on or before the date
of surrender.
(c) If any certificate for shares of SJNB Common Stock is to be issued in
a name other than that in which the Saratoga Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer costs,
taxes or other expenses required by reason of the issuance of certificates for
such shares of SJNB Common Stock in a name other than the registered holder of
the Saratoga Certificate surrendered, or such persons shall establish to the
satisfaction of SJNB and the Exchange Agent that such costs, taxes or other
expenses have been paid or are not applicable.
(d) All dividends or distributions, and any cash to be paid in lieu of
fractional shares pursuant to Section 2.3, if held by the Exchange Agent for
payment or delivery to the holders of unsurrendered Saratoga Certificates
representing shares of Saratoga Common Stock and unclaimed at the end of one
year from the Effective Time, shall (together with any interest earned thereon)
at such time be paid or redelivered by the Exchange Agent to SJNB, and after
such time any holder of a Saratoga Certificate who has not surrendered such
Saratoga Certificate to the Exchange Agent shall, subject to applicable law,
look as a general creditor only to SJNB for payment or delivery of such
dividends or distributions or cash, as the case may be.
(e) Neither SJNB nor the Surviving Corporation shall be liable to any
holder of Saratoga Common Stock for such shares (or dividends or distributions
thereon) or cash payable in lieu of fractional shares pursuant to Section 2.3
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
2.5 Adjustments. In the event SJNB changes (or establishes a record date
for changing) the number of shares of SJNB Common Stock issued and outstanding
prior to the Effective Time as a result of an issuance of shares of SJNB Common
Stock, or a recapitalization, reclassification, split-up, combination, exchange,
readjustment, reorganization, merger, consolidation, distribution, stock split,
stock or other dividend, or similar transaction with respect to the outstanding
SJNB Common Stock and the record date therefor, if applicable, shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted with
the result that the holders of Saratoga Common Stock shall receive the same
economic benefit set forth in Section 2.1. Further, in the event SJNB, prior to
the Effective Time, grants, issues, delivers, sells or otherwise distributes any
warrant, option, security, right or other instrument convertible into or
exchangeable for any shares of SJNB Common Stock (collectively, an "SJNB
Instrument"), then (i) the Exchange Ratio shall be proportionately adjusted in
the manner prescribed above as if the shares of SJNB Common Stock issuable
pursuant to such SJNB Instrument were outstanding prior to the Effective Time
or, (ii) in the sole discretion of SJNB, SJNB shall provide, at or prior to the
Effective Time, for the holders of the Saratoga Common Stock whose shares are to
be converted into shares of SJNB Common Stock pursuant to the Merger
proportionately equivalent SJNB Instruments upon consummation of the Merger;
provided, however, that no adjustment hereunder shall be made for the grant of
options under the SJNB 1996 Stock Option Plan made by the Board of Directors of
SJNB in its sole discretion; and provided further, that no adjustment shall be
made hereunder for any option granted in connection with a Takeover Proposal (as
defined in Section 5.4(a)) to which SJNB is a party (either as acquiror or
target) and no adjustment shall be made in the event that SJNB takes any action
to authorize, approve or adopt a shareholder rights plan in accordance with
Section 4.2(a)(ii).
2.6 Options. At the Effective Time, each option granted by Saratoga to
purchase shares of Saratoga Common Stock (each, an "Saratoga Option") which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Saratoga Common Stock and shall be converted
automatically into an option to purchase shares of SJNB Common Stock in an
amount and at an exercise price determined as provided below (and otherwise
subject to the terms of the stock option plans of Saratoga (the "Saratoga Stock
Option Plans") and the agreements evidencing grants thereunder, including but
not limited to, the accelerated vesting of such options which shall occur in
connection with and by virtue of the consummation of the Merger as and to the
extent required by such plans and agreements): (a) the number of shares of SJNB
Common Stock to be subject to the new option shall be equal to the product of
the number of shares of Saratoga Common Stock subject to the original option and
the Exchange Ratio, provided that any fractional shares of SJNB Common Stock
resulting from such multiplication shall be rounded down to the nearest share;
and (b) the exercise price per share of SJNB Common Stock under the new option
shall be equal to the exercise price per share of Saratoga Common Stock under
the original option divided by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. In the case of any options which
are "incentive stock options" (as defined in section 422 of the Code), the
exercise price, the number of shares purchasable pursuant to such options and
the terms and conditions of exercise of such options shall be determined in
order to comply with section 424(a) of the Code. The duration and other terms of
the new option shall be the same as the original option except that all
references to Saratoga shall be deemed to be references to SJNB.
2.7 Dissenters' Rights. Notwithstanding anything in this Agreement to the
contrary, shares of Saratoga Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders that
have not voted such shares in favor of the Merger and have delivered a written
demand for the valuation of such shares in the manner provided in the CGCL (such
shares, the "Dissenting Shares") shall not be converted into or represent the
right to receive SJNB Common Stock as provided in Section 2.1 and the holders
thereof shall only be entitled to such rights as are granted by Chapter 13 of
the CGCL. Each holder of Dissenting Shares that becomes entitled to payment for
such shares pursuant to Chapter 13 of the CGCL shall receive payment therefor
from the Surviving Corporation in accordance with the CGCL; provided, however,
that (i) if any such holder of Dissenting Shares shall have failed to establish
that such holder is entitled to dissenters' rights as provided in Chapter 13 of
the CGCL, or (ii) if any such holder of Dissenting Shares shall have effectively
withdrawn the demand for valuation of such shares or lost the right to valuation
and payment of such shares under Chapter 13 of the CGCL, or (iii) if neither the
Surviving Corporation nor such holder of Dissenting Shares shall have filed a
petition demanding a determination of the value of all Dissenting Shares within
the time provided in section 1309 of the CGCL, such holder's or holders' (as the
case may be) shares of Saratoga Common Stock shall thereupon be deemed to have
been converted, as of the Effective Time, into and represent the right to
receive from the Surviving Corporation the shares of SJNB Common Stock as
provided in Section 2.1 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Saratoga and SNB. Each of Saratoga
and SNB hereby represent and warrant to SJNB as follows:
(a) Organization, Standing and Power. Saratoga is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). SNB is a wholly owned Subsidiary of Saratoga and is a national banking
association organized under the laws of the United States. The deposit accounts
of SNB are insured by the Bank Insurance Fund ("BIF") of the Federal
Deposit Insurance Corporation ("FDIC") to the fullest extent permitted by law,
and all premiums and assessments required in connection therewith have been paid
when due. Saratoga and each of its Subsidiaries is a bank or corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not, either individually or
in the aggregate, have a material adverse effect on Saratoga. The Articles of
Incorporation or Association and By-laws of each of Saratoga, and each
Subsidiary of Saratoga, copies of which were previously made available to SJNB,
are true, complete and correct. The minute books of Saratoga and its
Subsidiaries which have been made available to SJNB contain a complete (except
for certain portions thereof relating to the Merger and the transactions
contemplated hereby) and accurate record of all meetings of the respective
Boards of Directors (and committees thereof) and shareholders.
As used in this Agreement,
(i) the term "Subsidiary" when used with respect to any party means
any corporation or other organization, whether incorporated or
unincorporated, (x) of which such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do
not have a majority of the voting interests in such partnership), or (y) at
least a majority of the securities or other interests of which having by
their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by
such party and one or more of its Subsidiaries,
(ii) any reference to any event, change or effect being "material"
with respect to any entity means an event, change or effect which is
material in relation to the condition (financial or otherwise), properties,
assets, liabilities, businesses, results of operations or prospects of such
entity and its Subsidiaries taken as a whole,
(iii) the term "material adverse effect" means, with respect to any
entity, a material adverse effect (whether or not required to be accrued or
disclosed under Statement of Financial Accounting Standards No. 5 ("SFAS
No. 5")) (A) on the condition (financial or otherwise), properties, assets,
liabilities, businesses, results of operations or prospects of such entity
and its Subsidiaries taken as a whole (but does not include any such effect
resulting from or attributable to any action or omission by Saratoga or
SJNB or any Subsidiary of either of them taken with the prior written
consent of the other parties hereto, in contemplation of the transactions
contemplated hereby), or (B) on the ability of such entity to perform its
obligations under the Transaction Agreements (as defined below) on a timely
basis,
(iv) the term "Transaction Agreements" shall mean this Agreement, the
Stock Option Agreement and the Agreement of Merger,
(v) the term "knowledge" or "to the best knowledge of" a party hereto
means the actual knowledge of a director or executive officer of a party
after reasonable inquiry under all the circumstances,
(vi) the term "Affiliate" means, as to any person, a person which
controls, is controlled by or is under common control with such person, and
(vii) the term "person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(b) Capital Structure; Ownership of SJNB Common Stock.
(i) The authorized capital stock of Saratoga consists of 20,000,000
shares of Saratoga Common Stock and 1,000,000 shares of preferred stock, no
par value (the "Saratoga Preferred Stock"), of which (A) as of August 25,
1999, 1,586,588 shares of Saratoga Common Stock were outstanding (none
having been issued thereafter except from the exercise of Saratoga Options)
and (B) as of the date hereof, no shares of Saratoga Preferred Stock are
outstanding. All outstanding shares of Saratoga Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable and not
subject to preemptive rights.
(ii) The authorized capital stock of SNB consists of 405,000 shares of
SNB Common Stock of which 300,000 shares are outstanding. All outstanding
shares of SNB Common Stock have been duly authorized and validly issued and
are fully paid and non-assessable (except to the extent provided in the
National Bank Act) and not subject to preemptive rights.
(iii)Except for this Agreement and the Stock Option Agreement and
except as set forth in Section 3.1(b)(iii) of the disclosure schedule of
Saratoga delivered to SJNB on the date hereof (the "Saratoga Disclosure
Schedule"), (A) there are no options, warrants, calls, rights, commitments
or agreements of any character to which Saratoga or any of its Subsidiaries
or Affiliates (as defined herein) is a party or by which any of the
foregoing are bound obligating Saratoga or any of its Subsidiaries,
including SNB, or Affiliates to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of Saratoga
or any of its Subsidiaries or obligating Saratoga or any of its
Subsidiaries or Affiliates to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement, (B) there are no outstanding
contractual obligations of Saratoga or any of its Subsidiaries or
Affiliates to repurchase, redeem or otherwise acquire any shares of capital
stock of Saratoga or any of its Subsidiaries and (C) there are no
outstanding securities of any kind convertible into or exchangeable for the
capital stock of Saratoga or any of its Subsidiaries (or any interest
therein). Except as set forth in Section 3.1(b)(iii) of the Saratoga
Disclosure Schedule, there is no agreement of any kind to which Saratoga or
SNB is a party and, to the knowledge of Saratoga (without inquiry), no
other agreement of any kind, in each case that gives any person any right
to participate in the equity, value or income of, or to vote (x) in the
election of directors or officers of, or (y) otherwise with respect to the
affairs of, Saratoga or any of its Subsidiaries.
(iv) Neither Saratoga nor any of its Subsidiaries or, to the best
knowledge of Saratoga, its Affiliates, beneficially owns, directly or
indirectly, any shares of capital stock of SJNB, securities of SJNB
convertible into, or exchangeable for, such shares, or options, warrants or
other rights to acquire such shares (regardless of whether such securities,
options, warrants or other rights are then exercisable or convertible), nor
is Saratoga or any of such Subsidiaries or Affiliates a party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of shares of capital stock of SJNB or any such
other securities, options, warrants or other rights.
(v) No shares of Saratoga Common Stock are held directly or indirectly
by Saratoga or its Subsidiaries in trust accounts, managed accounts and the
like or otherwise held in a fiduciary or nominee capacity (any such shares,
and shares of SJNB Common Stock which are similarly held, whether held
directly or indirectly by Saratoga or SJNB or any of their respective
Subsidiaries, as the case may be, being referred to herein as "Trust
Account Shares") and no shares of Saratoga Common Stock are held by
Saratoga or its Subsidiaries in respect of a debt previously contracted
(any such shares and shares of SJNB Common Stock which are similarly held,
whether held directly or indirectly by Saratoga or SJNB or any of their
respective Subsidiaries, as the case may be, being referred to herein as
"DPC Shares").
(c) Authority; No Violation.
(i) Each of Saratoga and SNB, as applicable, has all requisite
corporate power and authority to enter into this Agreement and the other
Transaction Agreements and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
other Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Saratoga and SNB, other than the approval
of this Agreement and the Agreement of Merger by the holders of a majority
of the outstanding shares of Saratoga Common Stock (the "Saratoga
Shareholder Approval"). The Saratoga Shareholder Approval is the only vote
of any class or series of Saratoga capital stock necessary to approve this
Agreement and the other Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the other
Transaction Agreements have been duly executed and delivered by each of
Saratoga and SNB, as applicable, and (assuming due authorization, execution
and delivery by SJNB) constitute the valid and binding obligations of each
of Saratoga and SNB, as applicable, enforceable against each of Saratoga
and SNB in accordance with their terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles. SNB has
full corporate power and authority to consummate the Bank Merger.
(ii) Except as set forth in Section 3.1(c)(ii) of the Saratoga
Disclosure Schedule, the execution and delivery by each of Saratoga and
SNB, as applicable, of this Agreement and the other Transaction Agreements
does not or will not when delivered, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or constitute a default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security interest, charge
or other encumbrance on any assets (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation") pursuant to, (x) any provision of the articles of
incorporation or association or by-laws or comparable organizational
documents of Saratoga or any Subsidiary of Saratoga, or (y) subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph
(iii) below, any loan or credit agreement, note, mortgage, indenture,
lease, Saratoga Benefit Plan (as defined in Section 3.1(k)) or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Saratoga or any Subsidiary of Saratoga or its properties or
assets, which Violation, in the case of clause (y), individually or in the
aggregate, would have a material adverse effect on Saratoga.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign (a "Governmental Entity"), is required by or with respect to
Saratoga or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the other Transaction Agreements or the
consummation by Saratoga or SNB of the transactions contemplated hereby or
thereby, which, if not made or obtained, would have a material adverse
effect on Saratoga or on the ability of Saratoga or SNB to perform its
respective obligations hereunder or thereunder on a timely basis, or on
SJNB's ability to own, possess or exercise the rights of an owner with
respect to the business and assets of Saratoga and its Subsidiaries, except
for (A) the filing of applications and notices with the Board of Governors
of the Federal Reserve System (the "Federal Reserve") under the BHC Act and
approval of same, (B) the filing by Saratoga and SJNB with the SEC of a
joint proxy statement (the "Proxy Statement") in definitive form relating
to the meetings of the shareholders of Saratoga and SJNB to be held to
approve and adopt this Agreement and the transactions contemplated hereby,
(C) such applications, filings, authorizations, orders and approvals as may
be required by the Office of the Comptroller of the Currency ("OCC"), and
(D) the filing with the Secretary of State of the State of California of
the Agreement of Merger.
(d) Financial Statements. Saratoga has previously delivered to SJNB copies
of (a) the consolidated statements of financial condition of Saratoga and its
Subsidiaries, as of December 31, for the fiscal years 1997 and 1998, and the
related consolidated statements of income, shareholders' equity and cash flows
for the fiscal years 1996 through 1998, inclusive, as reported in Saratoga's
Annual Reports on Form 10-K for the relevant fiscal years filed with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
each case accompanied by the report of Deloitte & Touche LLP, independent
auditors with respect to Saratoga (the consolidated financial statements of
Saratoga and its Subsidiaries referred to in this sentence being hereinafter
sometimes referred to as the "Saratoga Consolidated Financial Statements"). Each
of the financial statements referred to in this Section 3.1(d) (including the
related notes, where applicable) fairly present, and the financial statements
referred to in Section 5.14 hereof will fairly present (subject, in the cases of
the unaudited statements, to normal recurring and year-end audit adjustments,
none of which are expected to be material in nature or amount), the results of
the consolidated operations and changes in shareholders' equity and consolidated
financial condition of Saratoga and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth. Each of such statements
(including the related notes, where applicable) complies, and the financial
statements referred to in Section 5.14 hereof will comply, in all material
respects, with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto and each of such statements
(including the related notes, where applicable) has been, and the financial
statements referred to in Section 5.14 will be, prepared, in all material
respects, in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except in
each case as indicated in such statements or in the notes thereto or, in the
case of unaudited statements (subject to normal recurring and year-end audit
adjustments), as permitted by Form 10-Q. The books and records of Saratoga and
its Subsidiaries have been, and are being, maintained where required in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and, where such books and records purport to reflect any
transactions, the transactions so reflected are actual transactions.
(e) Saratoga SEC Documents. Saratoga has made available to SJNB a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Saratoga with the SEC pursuant to the Securities Act of
1933 (the "Securities Act") or the Exchange Act (other than reports filed
pursuant to section 13(g) of the Exchange Act), since December 31, 1997 (as such
documents have since the time of their filing been amended, the "Saratoga SEC
Reports"), which are all the documents (other than preliminary material and
reports required pursuant to section 13(g) of the Exchange Act) that Saratoga
was required to file with the SEC since such date. As of their respective dates
of filing with the SEC, the Saratoga SEC Reports complied as to form in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Saratoga SEC Reports, and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Saratoga included in the Saratoga SEC Reports (including any
related notes and schedules thereto) complied as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared, in all material respects, in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements (subject to normal recurring and year-end audit
adjustments), as permitted by Form 10-Q of the SEC) and fairly present in all
material respects the consolidated financial position of Saratoga and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of operations, changes in shareholders' equity and cash flows of such companies
for the periods then ended.
(f) Saratoga Information Supplied. None of the information supplied or to
be supplied by Saratoga for inclusion or incorporation by reference in the Proxy
Statement relating to the meeting of the shareholders of Saratoga (the "Saratoga
Shareholders' Meeting") at which the Saratoga Shareholder Approval will be
sought or for inclusion in the S-4 (as defined herein) will, at the date of
mailing to shareholders of Saratoga and at the time of the Saratoga
Shareholders' Meeting, (i) contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or (ii) at the time and in the light of the
circumstances under which it is made, 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 not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of a proxy for the
Saratoga Shareholders' Meeting which has become false or misleading.
(g) Compliance with Applicable Laws. Saratoga and its Subsidiaries hold,
and at all relevant times have held, all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are material
to the operation of the businesses of Saratoga and its Subsidiaries, taken as a
whole (the "Saratoga Permits"). Saratoga and its Subsidiaries are in compliance
and have complied with the terms of the Saratoga Permits, except where the
failure so to comply, individually or in the aggregate, would not have a
material adverse effect on Saratoga. The businesses of Saratoga and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which,
individually or in the aggregate, do not, and, insofar as reasonably can be
foreseen, in the future will not, have a material adverse effect on Saratoga.
Except for routine examinations by Federal or state Governmental Entities
charged with the supervision or regulation of banks or bank holding companies or
engaged in the insurance of bank deposits ("Bank Regulators"), no investigation
by any Governmental Entity with respect to Saratoga or any of its Subsidiaries
is pending or threatened, and no proceedings by any Bank Regulator are pending
or threatened which seek to revoke or materially limit any of the Saratoga
Permits. Saratoga and its Subsidiaries do not offer or sell insurance and/or
securities products, including but not limited to annuity products, for their
own account or the account of others.
(h) Litigation. Except as set forth in Section 3.1(h) of the Saratoga
Disclosure Schedule, to the best knowledge of Saratoga, there is no suit,
action, proceeding, arbitration or investigation ("Litigation") pending to which
Saratoga or any Subsidiary of Saratoga is a party or by which any of such
persons or their respective assets may be bound or, to the best knowledge of
Saratoga, threatened against or affecting Saratoga or any Subsidiary of
Saratoga, or challenging the validity or propriety of the transactions
contemplated hereby which, if adversely determined, would, individually or in
the aggregate, have or reasonably be expected to have a material adverse effect
on Saratoga or on the ability of Saratoga or SNB to perform its respective
obligations under this Agreement or the Stock Option Agreement in a timely
manner, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Saratoga or any Subsidiary
of Saratoga.
(i) Taxes. Saratoga and each of its Subsidiaries have timely filed all tax
returns required to be filed by any of them and all such tax returns were, when
filed, correct and complete in all material respects. Saratoga and each of its
Subsidiaries have timely paid (or Saratoga has paid on their behalf), or have
set up an adequate reserve for the payment of, all taxes required to be paid
(whether or not shown as due on such returns), and the most recent financial
statements that have been delivered to SJNB reflect an adequate reserve (other
than reserves for deferred taxes established to reflect differences between tax
and book basis of assets and liabilities) for all taxes accrued but not yet due
and owing, by Saratoga and its Subsidiaries accrued through the date of such
financial statements. Saratoga and its Subsidiaries file tax returns in all
jurisdictions where required to file tax returns. No material deficiencies for
any taxes have been asserted or assessed against Saratoga or any of its
Subsidiaries that are not adequately reserved for (other than reserves for
deferred taxes established to reflect differences between tax and book basis of
assets and liabilities). Except as set forth in Section 3.1(i) of the Saratoga
Disclosure Schedule: (i) there are no liens with respect to taxes upon any of
the assets or properties of Saratoga and its Subsidiaries, other than with
respect to taxes not yet due and payable, (ii) no material issue relating to
taxes of Saratoga and its Subsidiaries has been raised in writing by any taxing
authority in any audit or examination which can result in a proposed adjustment
or assessment by a governmental authority in a taxable period (or portion
thereof) ending on or before the Closing Date nor, to the best knowledge of
Saratoga, does any basis exist for the raising of any such issue, (iii) Saratoga
and its Subsidiaries have duly and timely withheld from all payments (including
employee salaries, wages and other compensation) and paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over for all periods for which the statute of limitations has not expired under
all applicable laws and regulations, (iv) as of the Closing Date, none of
Saratoga nor any of its Subsidiaries shall be a party to, be bound by or have
any obligation under, any tax sharing agreement or similar contract or
arrangement or any agreement that obligates any of them to make any payment
computed by reference to the taxes, taxable income or taxable losses of any
other person, (v) except as set forth on Section 3.1(i) of the Saratoga
Disclosure Schedule, there is no contract or agreement, plan or arrangement by
Saratoga or any of its Subsidiaries covering any person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by Saratoga or any of its Subsidiaries by reason of section 280G of
the Code, (vi) Saratoga and its Subsidiaries have collected all material sales
and use taxes required to be collected, and have remitted, or will remit on a
timely basis, such amounts to the appropriate governmental authorities, or have
been furnished properly completed exemption certificates and have maintained all
such records and supporting documents in all material respects in the manner
required by all applicable sales and use tax statutes and regulations for all
periods for which the statute of limitations has not expired, (vii) neither
Saratoga nor any of its Subsidiaries has been a United States real property
holding corporation within the meaning of section 897(c)(2) of the Code during
the applicable period specified in section 897(c)(1)(A)(ii) of the Code, and
(viii) none of Saratoga nor any of its Subsidiaries (A) has been a member of an
affiliated group (other than the group to which they are currently members)
filing a consolidated federal income tax return or (B) has any liability for the
taxes of any person (other than the members of such current group) under
Treasury Regulation section 1.1502-6(a) (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
For the purpose of this Agreement, the term "tax" (including, with correlative
meaning, the terms "taxes" and "taxable") shall include, except where the
context otherwise requires, all Federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise, occupancy, custom, duty, capital stock, ad valorem, value
added, estimated, stamp, alternative, environmental, any taxes imposed under
Subchapter H of Chapter I of Subtitle A of the Code, and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts. As used in this Agreement, the
term "Tax return" shall mean any return, declaration, report, claim for refund
or information return or statement relating to taxes, including any schedule or
attachment thereto, and including any amendment thereof. None of Saratoga nor
any of its Subsidiaries has filed a consent to the application of section 341(f)
of the Code.
(j) Certain Agreements. Section 3.1(j) of the Saratoga Disclosure Schedule
sets forth a listing of all of the following contracts and other agreements,
oral or written (which are currently in force or which may in the future be
operative in any respect) to which Saratoga or any of its Subsidiaries is a
party or by or to which Saratoga or any of its Subsidiaries or any of their
respective assets or properties are bound or subject: (i) consulting agreements
not terminable on six months or less notice involving the payment of more than
$25,000 per annum, or union, guild or collective bargaining agreements covering
any employees in the United States, (ii) agreements with any officer or other
key employee of Saratoga or any of its Subsidiaries (x) providing any term of
employment or (y) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving Saratoga
of the nature contemplated by this Agreement, (iii) any agreement or plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement, (iv) contracts and other agreements for the sale or lease (other than
where Saratoga or any of its Subsidiaries is a lessor) of any assets or
properties (other than in the ordinary course of business) or for the grant to
any person (other than to Saratoga or any of its Subsidiaries) of any
preferential rights to purchase any assets or properties, (v) contracts and
other agreements relating to the acquisition by Saratoga or any of its
Subsidiaries of any operating business or entity or any interest therein, (vi)
contracts or other agreements under which Saratoga or any of its Subsidiaries
agrees to indemnify any party, other than in the ordinary course of business,
consistent with past practice, or to share a tax liability of any party,
(vii) contracts and other agreements containing covenants restricting Saratoga
or any of its Subsidiaries from competing in any line of business or with any
person in any geographical area or requiring Saratoga or any of its Subsidiaries
to engage in any line of business, (viii) contracts or other agreements (other
than contracts in the ordinary course of their banking business) relating to the
borrowing of money by Saratoga or any of its Subsidiaries, or the direct or
indirect guaranty by Saratoga or any of its Subsidiaries of any obligation for,
or an agreement by Saratoga or any of its Subsidiaries to service, the repayment
of borrowed money, or any other contingent obligations of Saratoga or any of its
Subsidiaries in respect of indebtedness of any other person, and (ix) any other
material contract or other agreement whether or not made in the ordinary course
of business, including any contract required to be filed by Saratoga pursuant to
Item 601(b)(10) of Regulation S-K of the SEC. There have been delivered or made
available to SJNB true and complete copies of all of the contracts and other
agreements set forth in Section 3.1(j) of the Saratoga Disclosure Schedule and
in any other Section of the Saratoga Disclosure Schedule. Except as set forth in
Section 3.1(j) of the Saratoga Disclosure Schedule, each such contract and other
agreement is in full force and effect and constitutes a legal, valid and binding
obligation of Saratoga or its Subsidiaries, as the case may be, and to the best
knowledge of Saratoga, each other party thereto, enforceable in accordance with
its terms subject, as to enforceability, to bankruptcy, insolvency, and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles. Neither Saratoga nor any Subsidiary of Saratoga has
received any notice, whether written or oral, of termination or intention to
terminate from any other party to such contract or agreement. None of Saratoga
or any of its Subsidiaries or (to the best knowledge of Saratoga) any other
party to any such contract or agreement is in violation or breach of or default
under any such contract or agreement (or with or without notice or lapse of time
or both, would be in violation or breach of or default under any such contract
or agreement), which violation, breach or default has had or would have,
individually or in the aggregate, a material adverse effect on Saratoga.
(k) Benefit Plans.
(i) Section 3.1(k) of the Saratoga Disclosure Schedule contains a true
and complete list of each "employee benefit plan" (within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), including, without limitation, multiemployer plans
(within the meaning of ERISA section 3(37)), and all stock purchase, stock
option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation, employee
stock ownership, retirement, profit sharing and all other employee benefit
plans, agreements, programs, policies or other arrangements, whether or not
subject to ERISA, and whether formal or informal, oral or written (all the
foregoing being herein called "Benefit Plans"), that are sponsored or are
being maintained or contributed to, or required to be contributed to, by
Saratoga or any of its Subsidiaries (the "Saratoga Benefit Plans"). No
Saratoga Benefit Plan is a multiemployer plan or is subject to a collective
bargaining agreement.
(ii) With respect to each Saratoga Benefit Plan, Saratoga has
delivered to SJNB a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement or other funding instrument;
(B) the most recent determination letter; (C) any summary plan description
and other written communications (or a description of any oral
communications) by Saratoga or any of its Subsidiaries to any of their
respective employees concerning the extent of the benefits provided under
any Saratoga Benefit Plan; and (D) except as described in Section
3.1(k)(ii) of the Saratoga Disclosure Schedule, for the two most recent
years (I) the Form 5500 and attached schedules; (II) audited financial
statements; and (III) actuarial valuation reports.
(iii) Except as set forth in Section 3.1(k) of the Saratoga Disclosure
Schedule, (A) each Saratoga Benefit Plan has been established and
administered in accordance with its terms, and in compliance in all
material respects with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations; (B) each Saratoga Benefit
Plan which is intended to be qualified within the meaning of Code section
401(a) is so qualified and has received a favorable determination letter as
to its qualification and nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification; (C) with respect
to any Saratoga Benefit Plan, no audits, actions, suits or claims (other
than routine claims for benefits in the ordinary course) are pending or
threatened, and no facts or circumstances exist which could give rise to
any such audits, actions, suits or claims; (D) neither Saratoga nor any
other party has engaged in a prohibited transaction which could subject
Saratoga or any of its Subsidiaries, or the Surviving Corporation, to any
taxes, penalties or other liabilities under Code section 4975 or ERISA
sections 409 or 502(i); (E) no event has occurred and no condition exists
that could subject Saratoga or any of its Subsidiaries, or the Surviving
Corporation, either directly or by reason of any such entity's affiliation
with any member of any such entity's Controlled Group (defined as any
organization which is a member of a controlled group of organizations
within the meaning of Code sections 414(b), (c), (m) or (o)), to any tax,
fine, liability or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations; (F) all insurance and Pension Benefit Guaranty
Corporation ("PBGC") premiums required to be paid with respect to Saratoga
Benefit Plans through the Closing Date have been or will be paid prior
thereto and adequate reserves will have been provided for on Saratoga's
consolidated statement of financial condition as of the month end
immediately prior to the Closing Date for any premiums (or portions
thereof) attributable to service on or prior to the Closing Date; (G) all
contributions required to be made prior to the Closing Date under the terms
of each Saratoga Benefit Plan, the Code, ERISA or other applicable laws,
rules and regulations have been or will be timely made and adequate
reserves will have been provided for on Saratoga's consolidated statement
of financial condition as of the month end immediately prior to the Closing
Date for all benefits attributable to service on or prior to the Closing
Date; (H) no Saratoga Benefit Plan has incurred any "accumulated funding
deficiency" as such term is defined in ERISA section 302 and (including,
but not limited to the voting of any securities held pursuant to an
Saratoga Benefit Plan) Code section 412 (whether or not waived); (I) the
consummation of this Agreement will not result in a nonexempt prohibited
transaction or a breach of fiduciary duty under ERISA; and (J) no Saratoga
Benefit Plan provides health coverage beyond the termination of employment
except as provided under Code section 4980B.
(iv) Except as set forth in Section 3.1(k)(iv) of the Saratoga
Disclosure Schedule, with respect to each of the Saratoga Benefit Plans
which is subject to Title IV of ERISA, as of the Closing Date, the assets
of each such Plan shall be at least equal in value to the present value of
the accrued benefits (vested and unvested) of the participants in such Plan
on a termination and projected basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
(v) Except as set forth on Section 3.1(k)(v) of the Saratoga
Disclosure Schedule, no Saratoga Benefit Plan exists which provides for an
increase in benefits on or after the Closing Date or could result in the
payment to any employee of Saratoga or any of its Subsidiaries of any money
or other property or rights or accelerate or provide any other rights or
benefits to any such employee as a result of the transactions contemplated
by this Agreement. The aggregate amount of payments due from Saratoga under
all such contracts and the amount due under each such contract, at the
Effective Time, are as set forth in the schedule included in Section
3.1(k)(v) of the Saratoga Disclosure Schedule. Except as set forth in
Section 3.1(k)(v) of the Saratoga Disclosure Schedule, none of such
payments will constitute an "excess parachute" payment within the meaning
of Code section 280G.
(l) Subsidiaries. Section 3.1(l) of the Saratoga Disclosure Schedule lists
all the Subsidiaries of Saratoga. Saratoga owns, directly or indirectly,
beneficially and of record 100% of the issued and outstanding voting securities
of each such Subsidiary. All of the shares of capital stock of each of the
Subsidiaries held by Saratoga or by another of its Subsidiaries are fully paid
and nonassessable and are owned by Saratoga or one of its Subsidiaries free and
clear of any lien, claim or other encumbrance. Neither Saratoga nor any of its
Subsidiaries owns any shares of capital stock or other equity securities of any
person (other than, in the case of Saratoga, the capital stock of its
Subsidiaries and, in the case of such Subsidiaries, shares or equity securities
acquired in satisfaction of debts previously contracted in good faith in the
ordinary course of their banking business).
(m) Agreements with Bank or Other Regulators. Except as set forth in
Section 3.1(m) of the Saratoga Disclosure Schedule, neither Saratoga nor any
Subsidiary of Saratoga is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board resolutions at
the request of, any Bank Regulator which restricts materially the conduct by
Saratoga or its Subsidiaries of their businesses, or in any manner relates to
their capital adequacy, credit policies, community reinvestment, loan
underwriting or documentation or management, nor has Saratoga or any such
Subsidiary been advised by any Bank Regulator that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, or any such board
resolutions.
(n) Absence of Certain Changes or Events. Except as set forth in Section
3.1(n) of the Saratoga Disclosure Schedule, since December 31, 1998, (i) there
has not been any change, or any event involving a prospective change, in the
business, financial condition or results of operations or prospects of Saratoga
or any of its Subsidiaries which has had, or would be reasonably likely to have,
a material adverse effect on Saratoga, and (ii) Saratoga and each of its
Subsidiaries have conducted their respective businesses in the ordinary course
consistent with their past practices and neither Saratoga nor any of its
Subsidiaries has taken any action or entered into any transaction, and no event
has occurred, that would have required SJNB's consent pursuant to Section 4.1 of
this Agreement if such action had been taken, transaction entered into or event
had occurred, in each case, after the date of this Agreement, nor has Saratoga
or any of its Subsidiaries entered into any agreement, plan or arrangement to do
any of the foregoing.
(o) Undisclosed Liabilities. Except as set forth in Section 3.1(o) of the
Saratoga Disclosure Schedule, and except (i) for those liabilities or
obligations that are fully reflected or reserved against in the consolidated
statement of financial condition at December 31, 1998 of Saratoga referred to in
Section 3.1(d) or (ii) for liabilities or obligations incurred in the ordinary
course of business consistent with past practice since December 31, 1998 and
which are not material to Saratoga and its Subsidiaries taken as a whole, none
of Saratoga or any of its Subsidiaries has incurred any liability or obligation
of any nature whatsoever (whether absolute, accrued or contingent or otherwise
and whether due or to become due) that, either alone or when combined with all
similar liabilities or obligations, has had, or would have, a material adverse
effect on Saratoga. No agreement pursuant to which any loans or other assets
have been or will be sold by Saratoga or any Subsidiary entitle the buyer of
such loans or other assets, unless there is material breach of a representation
or covenant by Saratoga or its Subsidiaries not relating to the payment or other
performance by an obligor of such loan or other asset of its obligations
thereunder, to cause Saratoga or its Subsidiaries to repurchase such loan or
other asset or the buyer to pursue any other form of recourse against Saratoga
or its Subsidiaries.
(p) Governmental Reports. Saratoga and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1995 with any Governmental Entity and have paid all fees
and assessments due and payable in connection therewith. Except as set forth in
Section 3.1(p) of the Saratoga Disclosure Schedule and except for normal
examinations conducted by a Governmental Entity in the regular course of
business of Saratoga and its Subsidiaries, no Governmental Entity has initiated
any proceeding or, to the best knowledge of Saratoga, investigation into the
business or operations of Saratoga or any of its Subsidiaries since January 1,
1995. Except as set forth in Section 3.1(p) of the Saratoga Disclosure Schedule,
there is no material unresolved violation, criticism or exception by any
Governmental Entity with respect to any report or statement relating to any
examinations of Saratoga or any of its Subsidiaries.
(q) Environmental Liability. (i) Except as set forth in Section 3.1(q) of
the Saratoga Disclosure Schedule, to the best knowledge of Saratoga, there are
no pending or threatened claims, actions or proceedings against Saratoga or SNB
relating to:
(A) any asserted liability of Saratoga or any of its Affiliates or any
current or prior owner, operator, occupier or user of any Real Property (as
defined herein) under any Environmental Law (as defined herein), including
without limitation, the terms and conditions of any permit, license,
authority, settlement or other obligation arising under any Environmental
Law;
(B) any handling, storage, use or disposal of Hazardous Substances (as
defined herein) on, under or within any Real Property or any transportation
or removal of Hazardous Substances to or from any Real Property;
(C) any actual or threatened discharge, release or emission of
Hazardous Substances from, on, under or within any Real Property into the
air, water, surface water, groundwater, land surface or subsurface strata;
or
(D) any actual or asserted claims for personal injuries, illness or
damage to real or personal property related to or arising out of exposure
to Hazardous Substances discharged, released or emitted from, on, under,
within or into, or transported from or to, any Real Property.
(ii) Except as set forth in Section 3.1(q) of the Saratoga Disclosure
Schedule, to the best knowledge of Saratoga, no Hazardous Substances are present
on, under or within any Real Property (except those Hazardous Substances used in
the normal course of operating or maintaining the business of Saratoga or any
Subsidiary of Saratoga) and, except as set forth in Section 3.1(q) of the
Saratoga Disclosure Schedule, the presence of these Hazardous Substances does
not violate any Environmental Law. Except as set forth in Section 3.1(q) of the
Saratoga Disclosure Schedule, to the best knowledge of Saratoga, there are no
storage tanks underground or otherwise present on any Real Property and all such
tanks set forth in Section 3.1(q) of the Saratoga Disclosure Schedule comply in
all material respects with applicable law, all permits in respect thereof are in
full force and effect and there have been no releases or discharges of Hazardous
Substances from such tanks to the environment.
(iii) To the best knowledge of Saratoga, except as set forth in Section
3.1(q) of the Saratoga Disclosure Schedule, no Hazardous Substances have been,
or have been threatened to be, discharged, released or emitted in a Reportable
Quantity (as defined herein) into the air, water, surface water, groundwater,
land surface or subsurface strata or transported to or from the Real Property
except in accordance with Environmental Laws (in particular, but without
limitation, in accordance with any permits issued pursuant thereto). To the best
knowledge of Saratoga, all notifications, remediation, removal or other response
actions of any kind whatsoever, in respect of such discharges, releases and
emissions which are required by Environmental Laws, and by applicable agreements
with third parties, have been made within the time limits prescribed by such
Environmental Laws and such third party agreements. Copies of all such
notifications or documents relating to any remediation, removal or response
action have previously been provided to SJNB.
(iv) To the best knowledge of Saratoga, except as set forth in Section
3.1(q) of the Saratoga Disclosure Schedule, Saratoga and its Affiliates are in
compliance, in all material respects, with all Environmental Laws related to the
ownership, operation, use and occupation of the Real Property.
(v) To the best knowledge of Saratoga, except as set forth in Section
3.1(q) of the Saratoga Disclosure Schedule, no part of any Real Property is
listed on CERCLIS or the National Priorities List created pursuant to the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, as a site containing Hazardous Substances.
(vi) Saratoga has provided SJNB with copies of all material notices posted
by it under any Environmental Law with respect to the Real Property at which the
business of Saratoga or its Subsidiaries is conducted, including without
limitation, notices required under California Health & Safety Code section
25359.7.
(vii) All properties held by Saratoga or its Subsidiaries under leases are
held by them under valid, binding and enforceable leases, with such exceptions
as are not material and do not interfere with the conduct of the business of
Saratoga, and Saratoga enjoys quiet and peaceful possession of such leased
property. Saratoga and its Subsidiaries are not in default in any material
respect under any material lease, agreement or obligation regarding their
properties to which they are a party or by which they are bound.
(viii) Except as set forth in Section 3.1(q) of the Saratoga Disclosure
Schedule, all of Saratoga's and its Subsidiaries' rights and obligations under
the leases referred to in Section 3.1(q)(vii) above do not require the consent
of any other party to the transactions contemplated by this Agreement.
(ix) For purposes of this Section 3.1(q) and Section 3.2(q) only, the
following terms shall have the indicated meaning:
"Business" means the business conducted at any Real Property (as
defined below).
"Environmental Law" means any and all applicable federal, state and
local laws (whether under common law, statute, rule, regulation or
otherwise), requirements under permits issued with respect thereto, and
other orders, decrees, judgments, directives or other requirements of any
governmental authority relating to the environment, or to any Hazardous
Substances.
"Hazardous Substances" means any chemical, compound, material,
mixture, living organism or substance that is now defined or listed in, or
otherwise classified or regulated in any way pursuant to, any Environmental
Laws as a "hazardous waste," "hazardous substance," "hazardous material,"
"extremely hazardous waste," "infectious waste," "toxic substance," or
"toxic pollutants," such materials, including without limitation, oil,
waste oil, petroleum, waste petroleum, polychlorinated biphenyls ("PCBs"),
asbestos, radon, natural gas, natural gas liquids, liquefied natural gas,
or synthetic gas usable for fuel (or mixtures of natural gas and such
synthetic gas).
"Real Property" means all interests in real property of Saratoga or
its Subsidiaries (with respect to Section 3.1) or SJNB or its Subsidiaries
(with respect to Section 3.2), including without limitation, interests in
fee, leasehold, interest as mortgagee or secured party, or option or
contract to purchase or acquire.
"Reportable Quantity" means the quantity set forth in 40 C.F.R. Part
302 as it is in effect on the effective date of this Agreement for the
particular Hazardous Substances set forth therein. With respect to
Hazardous Substances not listed in that part, if any, "reportable quantity"
means that quantity which, if released, would be required to be reported to
a Governmental Entity pursuant to applicable Environmental Law. "Reportable
Quantity" shall be determined based on a single release or series of
related releases or threatened releases.
(r) Properties. Except as set forth in Section 3.1(r) of the Saratoga
Disclosure Schedule, Saratoga or its Subsidiaries (i) has good and marketable
title to all Real Property owned in fee, and good title to all other properties
and assets reflected in the Saratoga Consolidated Financial Statements as being
owned by Saratoga or its Subsidiaries or acquired after the date thereof which
are material to the business of Saratoga on a consolidated basis (except
properties sold or otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of all claims, liens, charges, security
interests or encumbrances of any nature whatsoever except (A) statutory liens
securing payments not yet delinquent, (B) liens on assets of SNB securing
deposits incurred in the ordinary course of its banking business and (C) such
imperfections or irregularities of title, claims, liens, charges, security
interests or encumbrances as do not materially affect the use of the properties
or assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties and (ii) is the lessee of all leasehold
estates reflected in the Saratoga Consolidated Financial Statements or acquired
after the date thereof which are material to its business on a consolidated
basis (except for leases that have expired by their terms since the date
thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without material default thereunder by
the lessee or, to the best knowledge of Saratoga, the lessor. Except as set
forth in Section 3.1(r) of the Saratoga Disclosure Schedule, all real properties
owned by Saratoga or its Subsidiaries are owned in accordance in all material
respects with all requirements of applicable rules, regulations and policies of
the Bank Regulators.
(s) Transactions with Affiliates. Except as set forth in Section 3.1(s) of
the Saratoga Disclosure Schedule and except for those arrangements, contracts,
agreements or transactions which were entered into in the ordinary course of
business, since December 31, 1998, neither Saratoga nor SNB has extended credit,
committed to extend credit or transferred any asset to or assumed or guaranteed
any liability of or entered into any other transactions with the employees or
directors of Saratoga or SNB, or any spouse or child of any of them, or to any
of their "affiliates" or "associates" as such terms are defined in Rule 405
under the Securities Act. Any such transactions, including those in the ordinary
course of business, have been on terms no less favorable than those which would
prevail in an arm's-length transaction with an independent third party.
(t) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, except for First Security Van
Kasper whose fees and expenses will be paid by Saratoga in accordance with
Saratoga's agreement with such firm (a copy of which agreement has been
delivered to SJNB prior to the date of this Agreement).
(u) Intellectual Property. Except as set forth in Section 3.1(u) of the
Saratoga Disclosure Schedule, Saratoga and its Subsidiaries own or have a valid
license to use all trademarks, service marks and trade names (including any
registrations or applications for registration of any of the foregoing)
(collectively, the "Saratoga Intellectual Property") necessary to carry on their
business substantially as currently conducted, except for such
Saratoga Intellectual Property the failure of which to own or validly license,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Saratoga. Neither Saratoga nor any such Subsidiary
has received any notice of infringement of or conflict with, and, to the best
knowledge of Saratoga, there are no infringements of or conflicts with, the
rights of others with respect to the use of any Saratoga Intellectual Property
that, individually or in the aggregate, in either such case, would reasonably be
expected to have a material adverse effect on Saratoga.
(v) Pooling of Interests. Except as set forth in Section 3.1(v) of the
Saratoga Disclosure Schedule, as of the date of this Agreement, Saratoga has no
reason (in respect to matters pertaining to Saratoga existing as of the date
hereof or expected to exist as of the Closing Date) to believe that Saratoga
will not qualify for pooling of interests treatment for accounting purposes
under GAAP as presently in effect.
(w) Opinion of Financial Advisor. Saratoga has received the written opinion
of First Security Van Kasper dated the date hereof, to the effect that, as of
such date, subject to the limitations and conditions contained therein, the
consideration to be received by the holders of Saratoga Common Stock pursuant to
the Merger is fair to such holders from a financial point of view.
(x) Community Reinvestment Act Compliance. SNB is in substantial compliance
with the applicable provisions of the Community Reinvestment Act of 1977 and the
regulations promulgated thereunder (collectively, the "CRA") and has received a
CRA rating of "satisfactory" from the OCC in its most recent examination, and
neither Saratoga nor SNB has any knowledge of the existence of any fact or
circumstance or set of facts or circumstances which could be reasonably expected
to result in SNB failing to be in substantial compliance with such provisions or
having its current rating lowered.
(y) Year 2000 Readiness. Saratoga and its Subsidiaries have a plan and
organization in place to minimize any material adverse effect caused by the
failure of any system, equipment or product which is material to their
respective operations or financial condition to be Year 2000 Ready (as defined
below). Such plan addresses, at a minimum, the issues set forth in the
statements of the Federal Financial Institutions Examination Council ("FFIEC"),
dated May 5, 1997, entitled "Year 2000 Project Management Awareness," and
December 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk," as well as any other statements of the FFIEC related to the
Year 2000, as such issues might affect Saratoga and its Subsidiaries. Saratoga
has provided to SJNB a complete and accurate copy of the plan, which includes
Saratoga's Year 2000 organization and an estimate of anticipated associated
costs. Saratoga is using its best efforts to implement such plan, which includes
seeking assurances from its vendors and suppliers that such vendors' and
suppliers' products and services which are material to its operations are Year
2000 Ready, replacing any material products and services supplied by such
vendors or suppliers which are not Year 2000 Ready with new products and
services which are Year 2000 Ready, and/or working with such vendors and
suppliers to achieve Year 2000 Readiness with respect to such material products
and services. Such plan shall also establish procedures to evaluate, manage and
mitigate Year 2000-related risks to Saratoga posed by material customers of
Saratoga or any of its Subsidiaries who may not themselves be Year 2000 Ready.
Neither Saratoga nor its Subsidiaries have received, or expect to receive, a
"Year 2000 Deficiency Notification Letter" (as such term is employed in the
Federal Reserve's Supervision and Regulation Letter No. SR 98-3 (SUP), dated
March 4, 1998). As used herein, the term "Year 2000 Ready" shall mean that the
functionality and the performance of any system or piece of equipment will not
be materially adversely affected as a result of the date change for any date on
or after January 1, 2000, including leap year calculations, and that, to the
extent applicable to normal operating specifications, the system or equipment
will in all material respects accurately accept, store, retrieve, calculate,
compare and otherwise process dates of January 1, 2000 and later.
(z) Insurance. Saratoga has previously delivered to SJNB a list identifying
all insurance policies maintained on behalf of Saratoga and its Subsidiaries
(other than mortgage, title and other similar policies for the benefit of
Saratoga or its Subsidiaries as mortgagees under residential mortgage loans).
All of the material insurance policies and bonds maintained by or for the
benefit of Saratoga and its Subsidiaries are in full force and effect, to the
best knowledge of Saratoga, Saratoga and its Subsidiaries are not in default
thereunder, and all material claims thereunder have been filed in due and timely
fashion, and neither Saratoga nor any of its Subsidiaries has received notice
that any of such material claims have been or will be denied. The insurance
policies and bonds maintained by Saratoga and its Subsidiaries are written by
reputable insurers and are in such amounts, cover such risks and have such other
terms as is customary for banks and bank holding companies comparable in size
and operations to Saratoga and its Subsidiaries. Since December 31, 1998, there
has not been any damage to, destruction of, or loss of any assets of Saratoga
and its Subsidiaries (whether or not covered by insurance) that could have a
material adverse effect on Saratoga. Neither Saratoga nor any of its
Subsidiaries has received any notice of a premium increase or cancellation with
respect to any of its insurance policies or bonds, and within the last three
years, neither Saratoga nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for, and Saratoga has no reason to believe
that existing insurance coverage cannot be renewed as and when the same shall
expire, upon terms and conditions as favorable as those presently in effect,
other than possible increases in premiums or unavailability in coverage that
have not resulted from an extraordinary loss experience of Saratoga or any
Saratoga Subsidiary.
(aa) Loans and Other Assets.
(i) Saratoga has disclosed to SJNB prior to the date hereof the amounts of
all loans, leases, other extensions of credit, commitments or other
interest-bearing assets presently owned by Saratoga or any of its Subsidiaries
that have been classified by any Bank Regulator, Saratoga's independent
auditors, or the management of Saratoga or any Subsidiary of Saratoga as "Other
Loans Especially Mentioned," "Substandard," "Doubtful," or "Loss", or classified
using categories with similar import, and will have disclosed promptly to SJNB
prior to the Closing Date all such items which will be so classified hereafter
and prior to the Closing Date. All such assets or portions thereof classified
"Loss", or which are subsequently so classified, have been (or will be) charged
off on a timely basis in full, collected or otherwise placed in a bankable
condition. Saratoga regularly reviews and appropriately classifies its and its
Subsidiaries' loans and other assets in accordance in all material respects with
all applicable legal and regulatory requirements and GAAP. Saratoga has
disclosed to SJNB the amounts and identities of all other real estate owned
("OREO") that has been classified as such as of the date hereof by Saratoga's
independent auditors, management of Saratoga or any Bank Regulator and will have
promptly disclosed to SJNB prior to the Closing Date all such assets which will
be so classified hereafter and prior to the Closing Date. As of the date hereof
and the Closing Date, the recorded values of all OREO on the books of Saratoga
and its Subsidiaries accurately reflect and will reflect the net realizable
values of each OREO parcel thereof in compliance with GAAP. Saratoga and its
Subsidiaries have recorded on a timely basis all expenses associated with or
incidental to its OREO, including but not limited to taxes, maintenance and
repairs as required by GAAP.
(ii) All loans, leases, other extensions of credit, commitments or other
interest-bearing assets and investments of Saratoga and its Subsidiaries are
legal, valid and binding obligations enforceable in accordance with their
respective terms and are not subject to any setoffs, counterclaims or disputes
known to Saratoga (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general applicability), except as previously disclosed
to SJNB in Section 3.1(aa)(ii) of the Saratoga Disclosure Schedule or reserved
for in the consolidated statement of financial condition of Saratoga as of
December 31, 1998 referred to in Section 3.1(d) in accordance with GAAP, and
were duly authorized under and made in compliance with applicable federal and
state laws and regulations. Saratoga and its Subsidiaries do not have any
extensions or letters of credit, investments, guarantees, indemnification
agreements or commitments for the same (including without limitation commitments
to issue letters of credit, to create acceptances, or to repurchase securities,
federal funds or other assets) other than those documented on the books and
records of Saratoga and its Subsidiaries.
(ab) Restrictions on Investments. Except for pledges to secure public and
trust deposits and repurchase agreements in the ordinary course of business and
except as described in Section 3.1(ab) of the Saratoga Disclosure Schedule, none
of the investments reflected in the consolidated statement of financial
condition of Saratoga as of December 31, 1998 referred to in Section 3.1(d), and
none of the investments made by Saratoga and its Subsidiaries since December 31,
1998, is subject to any restriction, whether contractual or statutory, which
materially impairs the ability of Saratoga or its Subsidiaries freely to dispose
of such investment at any time.
(ac) No Brokered Deposits. Except as described in Section 3.1(ac) of the
Saratoga Disclosure Schedule, as of the date hereof, neither Saratoga nor any of
its Subsidiaries now has any "brokered deposits" as such deposits are defined by
applicable regulations of the OCC as of the date hereof.
(ad) Derivatives Contracts; Structured Notes; Etc. Except as set forth in
Section 3.1(ad) of the Saratoga Disclosure Schedule, neither Saratoga nor any
Subsidiary is a party to or has agreed to enter into an exchange traded or
over-the-counter equity, interest rate, foreign exchange or other swap, forward,
future, option, cap, floor or collar or any other contract that is not included
on the balance sheet and is a derivatives contract (including various
combinations thereof) (each, a "Derivatives Contract") or owns securities that
(1)are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate mortgage
derivatives" or (2) are likely to have changes in value as a result of interest
or exchange rate changes that significantly exceed normal changes in value
attributable to interest or exchange rate changes, except for those Derivatives
Contracts and other instruments legally purchased or entered into in the
ordinary course of their banking business, consistent with safe and sound
banking practices and regulatory guidance, and with counterparties reasonably
believed by Saratoga to be financially responsible. All of such Derivatives
Contracts or other instruments are legal, valid and binding obligations of
Saratoga or one of its Subsidiaries and, to the best knowledge of Saratoga, each
of the other counterparties thereto, enforceable in accordance with their terms
(except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally), and are in
full force and effect. Saratoga and each of its Subsidiaries and, to the best
knowledge of Saratoga, each of the other counterparties thereto, have duly
performed in all material respects all of their material obligations thereunder
to the extent that such obligations to perform have accrued; and there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder which would have or would reasonably be expected to have a
material adverse effect on Saratoga.
(ae) Labor Matters. Neither Saratoga nor any of its Subsidiaries is a party
to, or is bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel it or such Subsidiary to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to the best of its knowledge, threatened, nor is it
aware of any activity involving it or any of its Subsidiaries' employees seeking
to certify a collective bargaining unit or engaging in any other organization
activity.
3.2 Representations and Warranties of SJNB. SJNB represents and warrants to
Saratoga as follows:
(a) Organization, Standing and Power. SJNB is a bank holding company
registered under the BHC Act. The deposit accounts of SJNB's bank Subsidiaries
are insured by the BIF of the FDIC to the fullest extent permitted by law, and
all premiums and assessments required in connection therewith have been paid
when due. SJNB and each of its Subsidiaries is a bank or corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not, either individually or
in the aggregate, have a material adverse effect on SJNB. The Articles
of Incorporation or Association and By-laws of each of SJNB, and each Subsidiary
of SJNB, copies of which were previously made available to Saratoga, are true,
complete and correct. The minute books of SJNB and its Subsidiaries which have
been made available to Saratoga contain a complete (except for certain portions
thereof relating to the Merger and the transactions contemplated hereby) and
accurate record of all meetings of the respective Boards of Directors (and
committees thereof) and shareholders.
(b) Capital Structure; Ownership of SJNB Common Stock.
(i) The authorized capital stock of SJNB consists of 20,000,000 shares
of SJNB Common Stock and 5,000,000 shares of preferred stock, no par value
(the "SJNB Preferred Stock"), of which (A) as of August 25, 1999, 2,350,118
shares of SJNB Common Stock were outstanding (none having been issued
thereafter except from the exercise of SJNB Options) and (B) as of the date
hereof, no shares of SJNB Preferred Stock are outstanding. All outstanding
shares of SJNB Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable and not subject to preemptive rights.
At the Effective Time, the SJNB Common Stock to be issued hereunder will
be, when issued in accordance with the terms hereof, duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights.
(ii) Except for this Agreement and except as set forth in Section
3.2(b)(ii) of the disclosure schedule of SJNB delivered to Saratoga on the
date hereof (the "SJNB Disclosure Schedule"), (A) there are no options,
warrants, calls, rights, commitments or agreements of any character to
which SJNB or any of its Subsidiaries or Affiliates is a party or by which
any of the foregoing are bound obligating SJNB or any of its Subsidiaries
or Affiliates to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of SJNB or any of its
Subsidiaries or obligating SJNB or any of its Subsidiaries or Affiliates to
grant, extend or enter into any such option, warrant, call, right,
commitment or agreement, (B) there are no outstanding contractual
obligations of SJNB or any of its Subsidiaries or Affiliates to repurchase,
redeem or otherwise acquire any shares of capital stock of SJNB or any of
its Subsidiaries and (C) there are no outstanding securities of any kind
convertible into or exchangeable for the capital stock of SJNB or any of
its Subsidiaries (or any interest therein). Except as set forth in Section
3.2(b)(ii) of the SJNB Disclosure Schedule, there is no agreement of any
kind to which SJNB is a party and, to the knowledge of SJNB (without
inquiry), no other agreement of any kind, in each case that gives any
person any right to participate in the equity, value or income of, or to
vote (x) in the election of directors or officers of, or (y) otherwise with
respect to the affairs of, SJNB or any of its Subsidiaries.
(iii) Neither SJNB nor any of its Subsidiaries or, to the best
knowledge of SJNB, its Affiliates, beneficially owns, directly or
indirectly, any shares of capital stock of SJNB, securities of SJNB
convertible into, or exchangeable for, such shares, or options, warrants or
other rights to acquire such shares (regardless of whether such securities,
options, warrants or other rights are then exercisable or convertible), nor
is SJNB or any of such Subsidiaries or Affiliates a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of shares of capital stock of SJNB or any such other
securities, options, warrants or other rights.
(iv) No shares of SJNB Common Stock held directly or indirectly by
SJNB are Trust Account Shares or DPC Shares.
(c) Authority; No Violation.
(i) SJNB has all requisite corporate power and authority to enter into
this Agreement and the other Transaction Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of SJNB, other than the
approval of this Agreement and the Agreement of Merger by the holders of a
majority of the outstanding shares of SJNB Common Stock (the "SJNB
Shareholder Approval"). The SJNB Shareholder Approval is the only vote of
any class or series of SJNB capital stock necessary to approve this
Agreement and the other Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the other
Transaction Agreements have been duly executed and delivered by SJNB and
(assuming due authorization, execution and delivery by Saratoga and
SNB) constitute the valid and binding obligation of SJNB enforceable
against SJNB in accordance with their terms, subject, as to enforceability,
to bankruptcy, insolvency and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles. San
Jose National Bank has full corporate power and authority to consummate the
Bank Merger.
(ii) Except as set forth in Section 3.2(c)(ii) of the SJNB Disclosure
Schedule, the execution and delivery by SJNB of this Agreement and the
other Transaction Agreements does not or will not when delivered, and the
consummation of the transactions contemplated hereby and thereby will not,
result in any Violation pursuant to, (x) any provision of the articles of
incorporation or association or by-laws or comparable organizational
documents of SJNB or any Subsidiary of SJNB, or (y) subject to obtaining or
making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, indenture, lease, SJNB Benefit Plan (as
defined in Section 3.2(k)) or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to SJNB or any Subsidiary of
SJNB or its properties or assets, which Violation, in the case of clause
(y), individually or in the aggregate, would have a material adverse effect
on SJNB.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to SJNB or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the other
Transaction Agreements or the consummation by SJNB of the transactions
contemplated hereby or thereby, which, if not made or obtained, would have
a material adverse effect on SJNB or on the ability of SJNB to perform its
obligations hereunder or thereunder on a timely basis, or on SJNB's ability
to own, possess or exercise the rights of an owner with respect to the
business and assets of Saratoga and its Subsidiaries, except for (A) the
filing of applications and notices with the Federal Reserve under the BHC
Act and approval of same, (B) the filing by Saratoga and SJNB with the SEC
of the Proxy Statement in definitive form relating to the meetings of the
shareholders of Saratoga and SJNB to be held to approve and adopt this
Agreement and the transactions contemplated hereby, (C) the filing by SJNB
with the SEC of a registration statement on Form S-4 (the "S-4") with
respect to the SJNB Common Stock issuable pursuant hereto, (D) approval for
listing upon official notice of issuance on the NASDAQ National Market of
the SJNB Common Stock issuable pursuant hereto, (E) compliance with
applicable state blue sky laws, and (F) the filing with the Secretary of
State of the State of California of the Agreement of Merger.
(d) Financial Statements. SJNB has previously delivered to Saratoga copies
of (a) the consolidated statements of financial condition of SJNB and its
Subsidiaries, as of December 31, for the fiscal years 1997 and 1998, and the
related consolidated statements of income, shareholders' equity and cash flows
for the fiscal years 1996 through 1998, inclusive, as reported in SJNB's Annual
Reports on Form 10-K for the relevant fiscal years filed with the SEC under the
Exchange Act, in each case accompanied by the report of KPMG LLP, independent
auditors with respect to SJNB (the consolidated financial statements of SJNB and
its Subsidiaries referred to in this sentence being hereinafter sometimes
referred to as the "SJNB Consolidated Financial Statements"). Each of the
financial statements referred to in this Section 3.2(d) (including the related
notes, where applicable) fairly present, and the consolidated financial
statements referred to in Section 5.14 hereof will fairly present (subject in
the cases of the unaudited statements, to normal recurring and year-end audit
adjustments, none of which are expected to be material in nature or amount), the
results of the consolidated operations and changes in shareholders' equity and
consolidated financial condition of SJNB and its Subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth. Each of such
statements (including the related notes, where applicable) complies, and the
financial statements referred to in Section 5.14 hereof will comply, in all
material respects, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto and each of such
statements (including the related notes, where applicable) has been, and the
financial statements referred to in Section 5.14 will be, prepared, in all
material respects, in accordance with GAAP consistently applied during the
periods involved, except in each case as indicated in such statements or in the
notes thereto or, in the case of the unaudited statements (subject to normal
recurring and year-end audit adjustments), as permitted by Form 10-Q. The books
and records of SJNB and its Subsidiaries have been, and are being, maintained
where required in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and, where such books and records
purport to reflect any transactions, the transactions so reflected are actual
transactions.
(e) SJNB SEC Documents. SJNB has made available to Saratoga a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by SJNB with the SEC pursuant to the Securities Act or the
Exchange Act (other than reports filed pursuant to section 13(g) of the Exchange
Act), since December 31, 1997 (as such documents have since the time of their
filing been amended, the "SJNB SEC Reports"), which are all the documents (other
than preliminary material and reports required pursuant to section 13(g) of the
Exchange Act) that SJNB was required to file with the SEC since such date. As of
their respective dates of filing with the SEC, the SJNB SEC Reports complied as
to form in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SJNB SEC Reports, and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of SJNB included in the SJNB SEC Reports (including any related notes
and schedules thereto) complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared, in all material respects, in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements (subject to normal recurring and year-end audit adjustments), as
permitted by Form 10-Q of the SEC) and fairly present in all material respects
the consolidated financial position of SJNB and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of operations, changes in
shareholders' equity and cash flows of such companies for the periods then
ended.
(f) SJNB Information Supplied. None of the information supplied or to be
supplied by SJNB for inclusion or incorporation by reference in the Proxy
Statement relating to the meeting of shareholders of SJNB (the "SJNB
Shareholders' Meeting") at which the SJNB Shareholder Approval will be sought or
for inclusion in the S-4 will, at the date of mailing to shareholders of SJNB
and at the time of the SJNB Shareholders' Meeting, (i) contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading or (ii) at the time
and in the light of the circumstances under which it is made, 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 not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of a proxy for the SJNB Shareholders' Meeting which has become
false or misleading.
(g) Compliance with Applicable Laws. SJNB and its Subsidiaries hold, and at
all relevant times have held, all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities which are material to the
operation of the businesses of SJNB and its Subsidiaries, taken as a whole (the
"SJNB Permits"). SJNB and its Subsidiaries are in compliance and have complied
with the terms of the SJNB Permits, except where the failure so to comply,
individually or in the aggregate, would not have a material adverse effect on
SJNB. The businesses of SJNB and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for possible violations which, individually or in the aggregate, do not, and,
insofar as reasonably can be foreseen, in the future will not, have a material
adverse effect on SJNB. Except for routine examinations by Bank Regulators, no
investigation by any Governmental Entity with respect to SJNB or any of its
Subsidiaries is pending or threatened, and no proceedings by any Bank Regulator
are pending or threatened which seek to revoke or materially limit any of the
SJNB Permits. SJNB and its Subsidiaries do not offer or sell insurance and/or
securities products, including but not limited to annuity products, for their
own account or the account of others.
(h) Litigation. Except as set forth in Section 3.2(h) of the SJNB
Disclosure Schedule, to the best knowledge of SJNB, there is no Litigation
pending to which SJNB or any Subsidiary of SJNB is a party or by which any of
such persons or their respective assets may be bound or, to the best knowledge
of SJNB, threatened against or affecting SJNB or any Subsidiary of SJNB, or
challenging the validity or propriety of the transactions contemplated hereby
which, if adversely determined, would, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on SJNB or on the
ability of SJNB to perform its obligations under this Agreement in a timely
manner, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against SJNB or any Subsidiary of
SJNB.
(i) Taxes. SJNB and each of its Subsidiaries have timely filed all tax
returns required to be filed by any of them and all such tax returns were, when
filed, correct and complete in all material respects. SJNB and each of its
Subsidiaries have timely paid (or SJNB has paid on their behalf), or have set up
an adequate reserve for the payment of, all taxes required to be paid (whether
or not shown as due on such returns), and the most recent financial statements
that have been delivered to Saratoga reflect an adequate reserve (other than
reserves for deferred taxes established to reflect differences between tax and
book basis of assets and liabilities) for all taxes accrued but not yet due and
owing, by SJNB and its Subsidiaries accrued through the date of such financial
statements. SJNB and its Subsidiaries file tax returns in all jurisdictions
where required to file tax returns. No material deficiencies for any taxes have
been asserted or assessed against SJNB or any of its Subsidiaries that are not
adequately reserved for (other than reserves for deferred taxes established to
reflect differences between tax and book basis of assets and liabilities).
Except as set forth in Section 3.2(i) of the SJNB Disclosure Schedule: (i) there
are no liens with respect to taxes upon any of the assets or properties of SJNB
and its Subsidiaries, other than with respect to taxes not yet due and payable,
(ii) no material issue relating to taxes of SJNB and its Subsidiaries has been
raised in writing by any taxing authority in any audit or examination which can
result in a proposed adjustment or assessment by a governmental authority in a
taxable period (or portion thereof) ending on or before the Closing Date nor, to
the best knowledge of SJNB, does any basis exist for the raising of any such
issue, (iii) SJNB and its Subsidiaries have duly and timely withheld from all
payments (including employee salaries, wages and other compensation) and paid
over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for all periods for which the statute of limitations has
not expired under all applicable laws and regulations, (iv) as of the Closing
Date, none of SJNB nor any of its Subsidiaries shall be a party to, be bound by
or have any obligation under, any tax sharing agreement or similar contract or
arrangement or any agreement that obligates any of them to make any payment
computed by reference to the taxes, taxable income or taxable losses of any
other person, (v) except as set forth on Section 3.2(i) of the SJNB Disclosure
Schedule, there is no contract or agreement, plan or arrangement by SJNB or any
of its Subsidiaries covering any person that, individually or collectively,
could give rise to the payment of any amount that would not be deductible by
SJNB or any of its Subsidiaries by reason of section 280G of the Code, (vi) SJNB
and its Subsidiaries have collected all material sales and use taxes required to
be collected, and have remitted, or will remit on a timely basis, such amounts
to the appropriate governmental authorities, or have been furnished properly
completed exemption certificates and have maintained all such records and
supporting documents in all material respects in the manner required by all
applicable sales and use tax statutes and regulations for all periods for which
the statute of limitations has not expired, (vii) neither SJNB nor any of its
Subsidiaries has been a United States real property holding corporation within
the meaning of section 897(c)(2) of the Code during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code, and (viii) none of SJNB nor
any of its Subsidiaries (A) has been a member of an affiliated group (other than
the group to which they are currently members) filing a consolidated federal
income tax return or (B) has any liability for the taxes of any person (other
than the members of such current group) under Treasury Regulation section
1.1502-6(a) (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise. None of SJNB nor any of its
Subsidiaries has filed a consent to the application of section 341(f) of the
Code.
(j) Certain Agreements. Section 3.2(j) of the SJNB Disclosure Schedule sets
forth a listing of all of the following contracts and other agreements, oral or
written (which are currently in force or which may in the future be operative in
any respect) to which SJNB or any of its Subsidiaries is a party or by or to
which SJNB or any of its Subsidiaries or any of their respective assets or
properties are bound or subject: (i) consulting agreements not terminable on six
months or less notice involving the payment of more than $25,000 per annum, or
union, guild or collective bargaining agreements covering any employees in the
United States, (ii) agreements with any officer or other key employee of SJNB or
any of its Subsidiaries (x) providing any term of employment or (y) the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving SJNB of the nature contemplated by this
Agreement, (iii) any agreement or plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, (iv) contracts and other
agreements for the sale or lease (other than where SJNB or any of its
Subsidiaries is a lessor) of any assets or properties (other than in the
ordinary course of business) or for the grant to any person (other than to SJNB
or any of its Subsidiaries) of any preferential rights to purchase any assets or
properties, (v) contracts and other agreements relating to the acquisition by
SJNB or any of its Subsidiaries of any operating business or entity or any
interest therein, (vi) contracts or other agreements under which SJNB or any of
its Subsidiaries agrees to indemnify any party, other than in the ordinary
course of business, consistent with past practice, or to share a tax liability
of any party, (vii) contracts and other agreements containing covenants
restricting SJNB or any of its Subsidiaries from competing in any line of
business or with any person in any geographical area or requiring SJNB or any of
its Subsidiaries to engage in any line of business, (viii) contracts or other
agreements (other than contracts in the ordinary course of their banking
business) relating to the borrowing of money by SJNB or any of its Subsidiaries,
or the direct or indirect guaranty by SJNB or any of its Subsidiaries of any
obligation for, or an agreement by SJNB or any of its Subsidiaries to service,
the repayment of borrowed money, or any other contingent obligations of SJNB or
any of its Subsidiaries in respect of indebtedness of any other person, and (ix)
any other material contract or other agreement whether or not made in the
ordinary course of business, including any contract required to be filed by SJNB
pursuant to Item 601(b)(10) of Regulation S-K of the SEC. There have been
delivered or made available to Saratoga true and complete copies of all of the
contracts and other agreements set forth in Section 3.2(j) of the SJNB
Disclosure Schedule and in any other Section of the SJNB Disclosure Schedule.
Except as set forth in Section 3.2(j) of the SJNB Disclosure Schedule, each such
contract and other agreement is in full force and effect and constitutes a
legal, valid and binding obligation of SJNB or its Subsidiaries, as the case may
be, and to the best knowledge of SJNB, each other party thereto, enforceable in
accordance with its terms subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Neither SJNB nor any
Subsidiary of SJNB has received any notice, whether written or oral, of
termination or intention to terminate from any other party to such contract or
agreement. None of SJNB or any of its Subsidiaries or (to the best knowledge of
SJNB) any other party to any such contract or agreement is in violation or
breach of or default under any such contract or agreement (or with or without
notice or lapse of time or both, would be in violation or breach of or default
under any such contract or agreement), which violation, breach or default has
had or would have, individually or in the aggregate, a material adverse effect
on SJNB.
(k) Benefit Plans.
(i) Section 3.2(k) of the SJNB Disclosure Schedule contains a true and
complete list of each Benefit Plan that is sponsored or is being maintained
or contributed to, or required to be contributed to, by SJNB or any of its
Subsidiaries (the "SJNB Benefit Plans"). No SJNB Benefit Plan is a
multiemployer plan or is subject to a collective bargaining agreement.
(ii) With respect to each SJNB Benefit Plan, SJNB has delivered to
Saratoga a current, accurate and complete copy (or, to the extent no such
copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement or other funding instrument;
(B) the most recent determination letter; (C) any summary plan description
and other written communications (or a description of any oral
communications) by SJNB or any of its Subsidiaries to any of their
respective employees concerning the extent of the benefits provided under
any SJNB Benefit Plan; and (D) except as described in Section 3.2(k)(ii) of
the SJNB Disclosure Schedule, for the two most recent years (I) the Form
5500 and attached schedules; (II) audited financial statements; and
(III) actuarial valuation reports.
(iii) Except as set forth in Section 3.2(k) of the SJNB Disclosure
Schedule, (A) each SJNB Benefit Plan has been established and administered
in accordance with its terms, and in compliance in all material respects
with the applicable provisions of ERISA, the Code and other applicable
laws, rules and regulations; (B) each SJNB Benefit Plan which is intended
to be qualified within the meaning of Code section 401(a) is so qualified
and has received a favorable determination letter as to its qualification
and nothing has occurred, whether by action or failure to act, which would
cause the loss of such qualification; (C) with respect to any SJNB Benefit
Plan, no audits, actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or threatened, and no facts or
circumstances exist which could give rise to any such audits, actions,
suits or claims; (D) neither SJNB nor any other party has engaged in a
prohibited transaction which could subject SJNB or any of its Subsidiaries,
or the Surviving Corporation, to any taxes, penalties or other liabilities
under Code section 4975 or ERISA sections 409 or 502(i); (E) no event has
occurred and no condition exists that could subject SJNB or any of its
Subsidiaries, or the Surviving Corporation, either directly or by reason of
any such entity's affiliation with any member of any such entity's
Controlled Group (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code sections
414(b), (c), (m) or (o)), to any tax, fine, liability or penalty imposed by
ERISA, the Code or other applicable laws, rules and regulations; (F) all
insurance and PBGC premiums required to be paid with respect to SJNB
Benefit Plans through the Closing Date have been or will be paid prior
thereto and adequate reserves will have been provided for on SJNB's
consolidated statement of financial condition as of the month end
immediately prior to the Closing Date for any premiums (or portions
thereof) attributable to service on or prior to the Closing Date; (G) all
contributions required to be made prior to the Closing Date under the terms
of each SJNB Benefit Plan, the Code, ERISA or other applicable laws, rules
and regulations have been or will be timely made and adequate reserves will
have been provided for on SJNB's consolidated statement of financial
condition as of the month end immediately prior to the Closing Date for all
benefits attributable to service on or prior to the Closing Date; (H) no
SJNB Benefit Plan has incurred any "accumulated funding deficiency" as such
term is defined in ERISA section 302 and (including, but not limited to the
voting of any securities held pursuant to an SJNB Benefit Plan) Code
section 412 (whether or not waived); (I) the consummation of this Agreement
will not result in a nonexempt prohibited transaction or a breach of
fiduciary duty under ERISA; and (J) no SJNB Benefit Plan provides health
coverage beyond the termination of employment except as provided under Code
section 4980B.
(iv) Except as set forth in Section 3.2(k)(iv) of the SJNB Disclosure
Schedule, with respect to each of the SJNB Benefit Plans which is subject
to Title IV of ERISA, as of the Closing Date, the assets of each such Plan
shall be at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Plan on a
termination and projected basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
(v) Except as set forth on Section 3.2(k)(v) of the SJNB Disclosure
Schedule, no SJNB Benefit Plan exists which provides for an increase in
benefits on or after the Closing Date or could result in the payment to any
employee of SJNB or any of its Subsidiaries of any money or other property
or rights or accelerate or provide any other rights or benefits to any such
employee as a result of the transactions contemplated by this Agreement.
The aggregate amount of payments due from SJNB under all such contracts and
the amount due under each such contract, at the Effective Time, are as set
forth in the schedule included in Section 3.2(k)(v) of the SJNB Disclosure
Schedule. Except as set forth in Section 3.2(k)(v) of the SJNB Disclosure
Schedule, none of such payments will constitute an "excess parachute"
payment within the meaning of Code section 280G.
(l) Subsidiaries. Section 3.2(1) of the SJNB Disclosure Schedule lists all
the Subsidiaries of SJNB. SJNB owns, directly or indirectly, beneficially and of
record 100% of the issued and outstanding voting securities of each such
Subsidiary. All of the shares of capital stock of each of the Subsidiaries held
by SJNB or by another of its Subsidiaries are fully paid and nonassessable and
are owned by SJNB or one of its Subsidiaries free and clear of any lien, claim
or other encumbrance. Neither SJNB nor any of its Subsidiaries owns any shares
of capital stock or other equity securities of any person (other than, in the
case of SJNB, the capital stock of its Subsidiaries and, in the case of such
Subsidiaries, shares or equity securities acquired in satisfaction of debts
previously contracted in good faith in the ordinary course of their banking
business).
(m) Agreements with Bank or Other Regulators. Except as set forth in
Section 3.2(m) of the SJNB Disclosure Schedule, neither SJNB nor any Subsidiary
of SJNB is a party to any written agreement or memorandum of understanding with,
or a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of, any Bank
Regulator which restricts materially the conduct by SJNB or its Subsidiaries of
their businesses, or in any manner relates to their capital adequacy, credit
policies, community reinvestment, loan underwriting or documentation or
management, nor has SJNB or any such Subsidiary been advised by any Bank
Regulator that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, extraordinary supervisory letter, commitment letter
or similar submission, or any such board resolutions.
(n) Absence of Certain Changes or Events. Except as set forth in Section
3.2(n) of the SJNB Disclosure Schedule, since December 31, 1998, (i) there has
not been any change, or any event involving a prospective change, in the
business, financial condition or results of operations or prospects of SJNB or
any of its Subsidiaries which has had, or would be reasonably likely to have, a
material adverse effect on SJNB, and (ii) SJNB and each of its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices and neither SJNB nor any of its Subsidiaries has taken any
action or entered into any transaction, and no event has occurred, that would
have required Saratoga's consent pursuant to Section 4.2 of this Agreement if
such action had been taken, transaction entered into or event had occurred, in
each case, after the date of this Agreement, nor has SJNB or any of its
Subsidiaries entered into any agreement, plan or arrangement to do any of the
foregoing.
(o) Undisclosed Liabilities. Except as set forth in Section 3.2(o) of the
SJNB Disclosure Schedule, and except (i) for those liabilities or obligations
that are fully reflected or reserved against in the consolidated statement of
financial condition at December 31, 1998 of SJNB referred to in Section 3.2(d)
or (ii) for liabilities or obligations incurred in the ordinary course of
business consistent with past practice since December 31, 1998 and which are not
material to SJNB and its Subsidiaries taken as a whole, none of SJNB or any of
its Subsidiaries has incurred any liability or obligation of any nature
whatsoever (whether absolute, accrued or contingent or otherwise and whether due
or to become due) that, either alone or when combined with all similar
liabilities or obligations, has had, or would have, a material adverse effect on
SJNB. No agreement pursuant to which any loans or other assets have been or will
be sold by SJNB or any Subsidiary entitle the buyer of such loans or other
assets, unless there is material breach of a representation or covenant by SJNB
or its Subsidiaries not relating to the payment or other performance by an
obligor of such loan or other asset of its obligations thereunder, to cause SJNB
or its Subsidiaries to repurchase such loan or other asset or the buyer to
pursue any other form of recourse against SJNB or its Subsidiaries.
(p) Governmental Reports. SJNB and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1995 with any Governmental Entity and have paid all fees
and assessments due and payable in connection therewith. Except as set forth in
Section 3.2(p) of the SJNB Disclosure Schedule and except for normal
examinations conducted by a Governmental Entity in the regular course of
business of SJNB and its Subsidiaries, no Governmental Entity has initiated any
proceeding or, to the best knowledge of SJNB, investigation into the business or
operations of SJNB or any of its Subsidiaries since January 1, 1995. Except as
set forth in Section 3.2(p) of the SJNB Disclosure Schedule, there is no
material unresolved violation, criticism or exception by any Governmental Entity
with respect to any report or statement relating to any examinations of SJNB or
any of its Subsidiaries.
(q) Environmental Liability. (i) Except as set forth in Section 3.2(q) of
the SJNB Disclosure Schedule, to the best knowledge of SJNB, there are no
pending or threatened claims, actions or proceedings against SJNB relating to:
(A) any asserted liability of SJNB or any of its Affiliates or any
current or prior owner, operator, occupier or user of any Real Property
under any Environmental Law, including without limitation, the terms and
conditions of any permit, license, authority, settlement or other
obligation arising under any Environmental Law;
(B) any handling, storage, use or disposal of Hazardous Substances on,
under or within any Real Property or any transportation or removal of
Hazardous Substances to or from any Real Property;
(C) any actual or threatened discharge, release or emission of
Hazardous Substances from, on, under or within any Real Property into the
air, water, surface water, groundwater, land surface or subsurface strata;
or
(D) any actual or asserted claims for personal injuries, illness or
damage to real or personal property related to or arising out of exposure
to Hazardous Substances discharged, released or emitted from, on, under,
within or into, or transported from or to, any Real Property.
(ii) Except as set forth in Section 3.2(q) of the SJNB Disclosure Schedule,
to the best knowledge of SJNB, no Hazardous Substances are present on, under or
within any Real Property (except those Hazardous Substances used in the normal
course of operating or maintaining the business of SJNB or any Subsidiary of
SJNB) and, except as set forth in Section 3.2(q) of the SJNB Disclosure
Schedule, the presence of these Hazardous Substances does not violate any
Environmental Law. Except as set forth in Section 3.2(q) of the SJNB Disclosure
Schedule, to the best knowledge of SJNB, there are no storage tanks underground
or otherwise present on any Real Property and all such tanks set forth in
Section 3.2(q) of the SJNB Disclosure Schedule comply in all material respects
with applicable law, all permits in respect thereof are in full force and effect
and there have been no releases or discharges of Hazardous Substances from such
tanks to the environment.
(iii) To the best knowledge of SJNB, except as set forth in Section 3.2(q)
of the SJNB Disclosure Schedule, no Hazardous Substances have been, or have been
threatened to be, discharged, released or emitted in a Reportable Quantity into
the air, water, surface water, groundwater, land surface or subsurface strata or
transported to or from the Real Property except in accordance with Environmental
Laws (in particular, but without limitation, in accordance with any permits
issued pursuant thereto). To the best knowledge of SJNB, all notifications,
remediation, removal or other response actions of any kind whatsoever, in
respect of such discharges, releases and emissions which are required by
Environmental Laws, and by applicable agreements with third parties, have been
made within the time limits prescribed by such Environmental Laws and such third
party agreements. Copies of all such notifications or documents relating to any
remediation, removal or response action have previously been provided to SJNB.
(iv) To the best knowledge of SJNB, except as set forth in Section 3.2(q)
of the SJNB Disclosure Schedule, SJNB and its Affiliates are in compliance, in
all material respects, with all Environmental Laws related to the ownership,
operation, use and occupation of the Real Property.
(v) To the best knowledge of SJNB, except as set forth in Section 3.2(q) of
the SJNB Disclosure Schedule, no part of any Real Property is listed on CERCLIS
or the National Priorities List created pursuant to the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, as a
site containing Hazardous Substances.
(vi) SJNB has provided Saratoga with copies of all material notices posted
by it under any Environmental Law with respect to the Real Property at which the
business of SJNB or its Subsidiaries is conducted, including without limitation,
notices required under California Health & Safety Code section 25359.7.
(vii) All properties held by SJNB or its Subsidiaries under leases are held
by them under valid, binding and enforceable leases, with such exceptions as are
not material and do not interfere with the conduct of the business of SJNB, and
SJNB enjoys quiet and peaceful possession of such leased property. SJNB and its
Subsidiaries are not in default in any material respect under any material
lease, agreement or obligation regarding their properties to which they are a
party or by which they are bound.
(viii) Except as set forth in Section 3.2(q) of the SJNB Disclosure
Schedule, all of SJNB's and its Subsidiaries' rights and obligations under the
leases referred to in Section 3.2(q)(vii) above do not require the consent of
any other party to the transactions contemplated by this Agreement.
(r) Properties. Except as set forth in Section 3.2(r) of the SJNB
Disclosure Schedule, SJNB or its Subsidiaries (i) has good and marketable title
to all Real Property owned in fee, and good title to all other properties and
assets reflected in the SJNB Consolidated Financial Statements as being owned by
SJNB or its Subsidiaries or acquired after the date thereof which are material
to the business of SJNB on a consolidated basis (except properties sold or
otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all claims, liens, charges, security interests or
encumbrances of any nature whatsoever except (A) statutory liens securing
payments not yet delinquent, (B) liens on assets of San Jose National Bank
securing deposits incurred in the ordinary course of its banking business and
(C) such imperfections or irregularities of title, claims, liens, charges,
security interests or encumbrances as do not materially affect the use of the
properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties and (ii) is the lessee of all
leasehold estates reflected in the SJNB Consolidated Financial Statements or
acquired after the date thereof which are material to its business on a
consolidated basis (except for leases that have expired by their terms since the
date thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without material default thereunder by
the lessee or, to the best knowledge of SJNB, the lessor. Except as set forth in
Section 3.2(r) of the SJNB Disclosure Schedule, all real properties owned by
SJNB or its Subsidiaries are owned in accordance in all material respects with
all requirements of applicable rules, regulations and policies of the Bank
Regulators.
(s) Transactions with Affiliates. Except as set forth in Section 3.2(s) of
the SJNB Disclosure Schedule and except for those arrangements, contracts,
agreements or transactions which were entered into in the ordinary course of
business, since December 31, 1998, SJNB has not extended credit, committed to
extend credit or transferred any asset to or assumed or guaranteed any liability
of or entered into any other transactions with the employees or directors of
SJNB, or any spouse or child of any of them, or to any of their "affiliates" or
"associates" as such terms are defined in Rule 405 under the Securities Act. Any
such transactions, including those in the ordinary course of business, have been
on terms no less favorable than those which would prevail in an arm's-length
transaction with an independent third party.
(t) No Broker or Finder. No agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement
(u) Intellectual Property. Except as set forth in Section 3.2(u) of the
SJNB Disclosure Schedule, SJNB and its Subsidiaries own or have a valid license
to use all trademarks, service marks and trade names (including any
registrations or applications for registration of any of the foregoing)
(collectively, the "SJNB Intellectual Property") necessary to carry on their
business substantially as currently conducted, except for such SJNB Intellectual
Property the failure of which to own or validly license, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect on
SJNB. Neither SJNB nor any such Subsidiary has received any notice of
infringement of or conflict with, and, to the best knowledge of SJNB, there are
no infringements of or conflicts with, the rights of others with respect to the
use of any SJNB Intellectual Property that, individually or in the aggregate, in
either such case, would reasonably be expected to have a material adverse effect
on SJNB.
(v) Pooling of Interests. Except as set forth in Section 3.2(v) of the SJNB
Disclosure Schedule, as of the date of this Agreement, SJNB has no reason (in
respect to matters pertaining to SJNB existing as of the date hereof or expected
to exist as of the Closing Date) to believe that SJNB will not qualify for
pooling of interests treatment for accounting purposes under GAAP as presently
in effect.
(w) Community Reinvestment Act Compliance. San Jose National Bank is in
substantial compliance with the applicable provisions of the CRA and has
received a CRA rating of "satisfactory" from the OCC in its most recent
examination, and SJNB has no knowledge of the existence of any fact or
circumstance or set of facts or circumstances which could be reasonably expected
to result in San Jose National Bank failing to be in substantial compliance with
such provisions or having its current rating lowered.
(x) Year 2000 Readiness. SJNB and its Subsidiaries have a plan and
organization in place to minimize any material adverse effect caused by the
failure of any system, equipment or product which is material to their
respective operations or financial condition to be Year 2000 Ready. Such plan
addresses, at a minimum, the issues set forth in the statements of the FFIEC,
dated May 5, 1997, entitled "Year 2000 Project Management Awareness," and
December 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk," as well as any other statements of the FFIEC related to the
Year 2000, as such issues might affect SJNB and its Subsidiaries. SJNB has
provided to Saratoga a complete and accurate copy of the plan, which includes
SJNB's Year 2000 organization and an estimate of anticipated associated costs.
SJNB is using its best efforts to implement such plan, which includes seeking
assurances from its vendors and suppliers that such vendors' and suppliers'
products and services which are material to its operations are Year 2000 Ready,
replacing any material products and services supplied by such vendors or
suppliers which are not Year 2000 Ready with new products and services which are
Year 2000 Ready, and/or working with such vendors and suppliers to achieve Year
2000 Readiness with respect to such material products and services. Such plan
shall also establish procedures to evaluate, manage and mitigate Year
2000-related risks to SJNB posed by material customers of SJNB or any of its
Subsidiaries who may not themselves be Year 2000 Ready. Neither SJNB nor its
Subsidiaries have received, or expect to receive, a "Year 2000 Deficiency
Notification Letter" (as such term is employed in the Federal Reserve's
Supervision and Regulation Letter No. SR 98-3 (SUP), dated March 4, 1998).
(y) Insurance. SJNB has previously delivered to Saratoga a list identifying
all insurance policies maintained on behalf of SJNB and its Subsidiaries (other
than mortgage, title and other similar policies for the benefit of SJNB or its
Subsidiaries as mortgagees under residential mortgage loans). All of the
material insurance policies and bonds maintained by or for the benefit of SJNB
and its Subsidiaries are in full force and effect, to the best knowledge of
SJNB, SJNB and its Subsidiaries are not in default thereunder, and all material
claims thereunder have been filed in due and timely fashion, and neither SJNB
nor any of its Subsidiaries has received notice that any of such material claims
have been or will be denied. The insurance policies and bonds maintained by SJNB
and its Subsidiaries are written by reputable insurers and are in such amounts,
cover such risks and have such other terms as is customary for banks and bank
holding companies comparable in size and operations to SJNB and its
Subsidiaries. Since December 31, 1998, there has not been any damage to,
destruction of, or loss of any assets of SJNB and its Subsidiaries (whether or
not covered by insurance) that could have a material adverse effect on SJNB.
Neither SJNB nor any of its Subsidiaries has received any notice of a premium
increase or cancellation with respect to any of its insurance policies or bonds,
and within the last three years, neither SJNB nor any of its Subsidiaries has
been refused any insurance coverage sought or applied for, and SJNB has no
reason to believe that existing insurance coverage cannot be renewed as and when
the same shall expire, upon terms and conditions as favorable as those presently
in effect, other than possible increases in premiums or unavailability in
coverage that have not resulted from an extraordinary loss experience of SJNB or
any SJNB Subsidiary.
(z) Loans and Other Assets.
(i) SJNB has disclosed to Saratoga prior to the date hereof the amounts of
all loans, leases, other extensions of credit, commitments or other
interest-bearing assets presently owned by SJNB or any of its Subsidiaries that
have been classified by any Bank Regulator, SJNB's independent auditors, or the
management of SJNB or any Subsidiary of SJNB as "Other Loans Especially
Mentioned," "Substandard," "Doubtful," or "Loss," or classified using categories
with similar import, and will have disclosed promptly to Saratoga prior to the
Closing Date all such items which will be so classified hereafter and prior to
the Closing Date. All such assets or portions thereof classified "Loss", or
which are subsequently so classified, have been (or will be) charged off on a
timely basis in full, collected or otherwise placed in a bankable condition.
SJNB regularly reviews and appropriately classifies its and its Subsidiaries'
loans and other assets in accordance in all material respects with all
applicable legal and regulatory requirements and GAAP. SJNB has disclosed to
Saratoga the amounts and identities of all OREO that has been classified as such
as of the date hereof by SJNB's independent auditors, management of SJNB or any
Bank Regulator and will have promptly disclosed to Saratoga prior to the Closing
Date all such assets which will be so classified hereafter and prior to the
Closing Date. As of the date hereof and the Closing Date, the recorded values of
all OREO on the books of SJNB and its Subsidiaries accurately reflect and will
reflect the net realizable values of each OREO parcel thereof in compliance with
GAAP. SJNB and its Subsidiaries have recorded on a timely basis all expenses
associated with or incidental to its OREO, including but not limited to taxes,
maintenance and repairs as required by GAAP.
(ii) All loans, leases, other extensions of credit, commitments or other
interest-bearing assets and investments of SJNB and its Subsidiaries are legal,
valid and binding obligations enforceable in accordance with their respective
terms and are not subject to any setoffs, counterclaims or disputes known to
SJNB (subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to equitable
principles of general applicability), except as previously disclosed to Saratoga
in Section 3.2(z)(ii) of the SJNB Disclosure Schedule or reserved for in the
consolidated statement of financial condition of SJNB as of December 31, 1998
referred to in Section 3.2(d) in accordance with GAAP, and were duly authorized
under and made in compliance with applicable federal and state laws and
regulations. SJNB and its Subsidiaries do not have any extensions or letters of
credit, investments, guarantees, indemnification agreements or commitments for
the same (including without limitation commitments to issue letters of credit,
to create acceptances, or to repurchase securities, federal funds or other
assets) other than those documented on the books and records of SJNB and its
Subsidiaries.
(aa) Derivatives Contracts; Structured Notes; Etc. Except as set forth in
Section 3.2(aa) of the SJNB Disclosure Schedule, neither SJNB nor any Subsidiary
is a party to or has agreed to enter into a Derivatives Contract or owns
securities that (1) are referred to generically as "structured notes," "high
risk mortgage derivatives," "capped floating rate notes" or "capped floating
rate mortgage derivatives" or (2) are likely to have changes in value as a
result of interest or exchange rate changes that significantly exceed normal
changes in value attributable to interest or exchange rate changes, except for
those Derivatives Contracts and other instruments legally purchased or entered
into in the ordinary course of their banking business, consistent with safe and
sound banking practices and regulatory guidance, and with counterparties
reasonably believed by SJNB to be financially responsible. All of such
Derivatives Contracts or other instruments are legal, valid and binding
obligations of SJNB or one of its Subsidiaries and, to the best knowledge of
SJNB, each of the other counterparties thereto, enforceable in accordance with
their terms (except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally),
and are in full force and effect. SJNB and each of its Subsidiaries and, to the
best knowledge of SJNB, each of the other counterparties thereto, have duly
performed in all material respects all of their material obligations thereunder
to the extent that such obligations to perform have accrued; and there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder which would have or would reasonably be expected to have a
material adverse effect on SJNB.
(ab) Labor Matters. Neither SJNB nor any of its Subsidiaries is a party to,
or is bound by, any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor is it or any of
its Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel it or such Subsidiary to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to the best of its knowledge, threatened, nor is it
aware of any activity involving it or any of its Subsidiaries' employees seeking
to certify a collective bargaining unit or engaging in any other organization
activity.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Saratoga. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that SJNB shall
otherwise consent in writing, which consent shall not be unreasonably withheld)
Saratoga agrees that it will and will cause each of its Subsidiaries to carry on
the business of Saratoga and each of its Subsidiaries in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and use
all reasonable efforts to preserve intact the present business organizations of
Saratoga and each of its Subsidiaries, maintain the rights and franchises of,
and preserve the relationships with customers, suppliers and others having
business dealings with, Saratoga and each of its Subsidiaries to the end that
their goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time,
Saratoga shall not, and shall not permit any of its Subsidiaries to, without the
prior consent of SJNB in writing:
(a) (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, except for cash dividends in an amount
per share not greater than, and consistent with the manner and frequency
of, dividends paid by Saratoga in the past 12 months and dividends by a
wholly owned Subsidiary of Saratoga to Saratoga, (ii) set any record or
payment dates for the payment of any dividends or distribution on its
capital stock except in the ordinary course of business consistent with
past practice, (iii) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock
or (iv) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any shares of its capital stock or the
capital stock of any other Subsidiary of Saratoga or any securities
convertible into or exercisable for any shares of such capital stock;
(b) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class, any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, other than issuances of Saratoga Common
Stock pursuant to the exercise of Saratoga Options;
(c) except as required to perform its obligations under this
Agreement, amend or propose to amend its Articles of Incorporation or its
By-laws or other organizational documents or that of any Subsidiary;
(d) (i) enter into any new material line of business, (ii) change its
lending, investment, liability management and other material banking
policies in any respect which is material to Saratoga, except as required
by law or by policies imposed by a Bank Regulator, or (iii) except as set
forth in Section 4.1(d) of the Saratoga Disclosure Schedule, incur or
commit to any capital expenditures or any obligations or liabilities in
connection therewith other than capital expenditures and obligations or
liabilities incurred or committed to in the ordinary course of business
consistent with past practice but in no event for more than $10,000 as to
any one such item or $50,000 as to all such items in the aggregate;
(e) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other means, any business or any corporation,
partnership, association or other business organization or division
thereof; provided, however, that the foregoing shall not prohibit
foreclosures and other debt-previously-contracted acquisitions in the
ordinary course of business consistent with past practice;
(f) sell, lease, encumber or otherwise dispose of, or agree to sell,
lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries of Saratoga), which are material,
individually or in the aggregate, to Saratoga, other than in the ordinary
course of business consistent with past practice;
(g) incur any long-term indebtedness for borrowed money or guarantee
any such long-term indebtedness or issue or sell any long-term debt
securities or warrants or rights to acquire any long-term debt securities
of Saratoga or any of its Subsidiaries or guarantee any long-term debt
securities of others other than (i) indebtedness of any Subsidiary of
Saratoga to Saratoga or to another Subsidiary of Saratoga, (ii) deposits
taken in the ordinary course of business consistent with past practice, or
(iii) renewals or extensions of existing long-term indebtedness without any
change in the material terms thereof;
(h) intentionally take or fail to take any action that would, or
reasonably might be expected to, result in any of the representations and
warranties set forth in this Agreement being or becoming untrue in any
material respect, or in any of the conditions to the Closing set forth in
Article VI (including without limitation the conditions set forth in
Sections 6.1(f) and 6.3(d)) not being satisfied, or (unless such action is
required by applicable law or sound banking practice) which would adversely
affect the ability of SJNB or Saratoga to obtain any of the Requisite
Regulatory Approvals without imposition of a condition or restriction of
the type referred to in Section 6.1(g);
(i) change the methods of accounting of Saratoga or any of its
Subsidiaries, except as required by changes in GAAP as concurred in by such
party's independent auditors;
(j) (i) enter into, adopt, amend (except for technical amendments and
such amendments as may be required by law) or terminate any Saratoga
Benefit Plan or any other Benefit Plan or any agreement, arrangement, plan
or policy between Saratoga or any of its Subsidiaries and one or more of
its directors or officers, increase in any manner the compensation or
fringe benefits of any director, officer or employee of Saratoga or any of
its Subsidiaries (provided, that Saratoga or any of its Subsidiaries may
increase the compensation of any such director, officer or employee in a
manner consistent with Saratoga's present policies, procedures and plans in
effect for the calendar year 1999, all of which policies, procedures and
plans have been previously provided to SJNB and, in connection with any
increase in compensation of officers, said increases shall be deemed
consistent with Saratoga's present policies so long as the annual increase
for each officer is four percent (4%) or less; provided, however that,
notwithstanding the foregoing, Saratoga or its Subsidiaries shall not
increase the compensation or fringe benefits of any director, officer or
employee of Saratoga or any of its Subsidiaries with an annual base salary
in excess of $40,000 (except for annual compensation increases for officers
of four percent (4%) or less) without obtaining the prior written consent
of SJNB (which consent shall not be unreasonably withheld)) or pay or grant
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock options,
stock appreciation rights, restricted stock, restricted stock units or
performance units or shares or any similar awards) or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing,
(ii) enter into or renew any contract, agreement, commitment or arrangement
providing for the payment to any director, officer or employee of Saratoga
or any of its Subsidiaries of compensation or benefits contingent, or the
terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement, or (iii) with respect to any
Saratoga Benefit Plan which is a defined benefit or defined contribution
pension plan, permit or cause (A) a consolidation or merger of any such
Saratoga Benefit Plan, (B) a spin-off involving any such Saratoga Benefit
Plan, (C) a transfer of assets and/or liabilities from or to any such
Saratoga Benefit Plan, or (D) any similar transaction involving any such
Saratoga Benefit Plan;
(k) enter into any contract that would be required to be disclosed on
Section 3.1(j) of the Saratoga Disclosure Schedule or renew or terminate
any contract listed in Section 3.1(j) of the Saratoga Disclosure Schedule
through any volitional conduct, other than renewals of contracts or leases
for a term of one year or less without material adverse changes to the
terms thereof;
(l) commit to or renew any real estate secured or construction loan
with a principal amount exceeding $1,500,000 or any commercial loan with a
principal amount exceeding $500,000; provided, however, that if any new
loan commitment or loan renewal involves a loan to a borrower (or his
associates (as defined in Rule 405 under the Securities Act) and
Affiliates) who has (A) any other classified or criticized asset, (B) a
total lending relationship of $250,000 or more, or (C) a renewal involving
a classified or criticized asset, then the relevant loan amount subject to
this subsection shall be $250,000; provided, further, however, that any
such loan or renewal which is in excess of the applicable amount specified
in this subsection shall not be made or committed to be made unless
Saratoga shall have given SJNB at least one Business Day's advance written
notice of the proposal to make such loan commitment or renewal, which
written notice shall provide SJNB the same information provided to the
relevant loan committee (or loan officer, if no committee approval is
required) of Saratoga or the applicable Saratoga Subsidiary, and shall have
furnished SJNB with such other information as SJNB may reasonably have
requested;
(m) issue or agree to issue any letters of credit or otherwise
guarantee the obligations of any other persons except in the ordinary
course of business consistent with past practice;
(n) engage or participate in any material transaction or incur or
sustain any material obligation not in the ordinary course of business
consistent with past practice;
(o) settle any claim, action or proceeding involving money damages
involving a payment in excess of $50,000 as to any such matter, or settle
any other matter not involving money damages which is material to Saratoga;
(p) except as required by GAAP or applicable law or regulation, change
or make any tax elections, change any method of accounting with respect to
taxes, file any amended tax return, or settle or compromise any federal,
state, local or foreign material tax liability;
(q) except as set forth in Section 4.1(q) of the Saratoga Disclosure
Schedule, make an application for the opening, relocation or closing of, or
open, relocate or close any branch or loan production office;
(r) except as described in Section 4.1(r) of the Saratoga Disclosure
Schedule, enter into any securitization or similar transactions with
respect to any loans, leases or other assets of Saratoga or any of its
Subsidiaries; or
(s) agree to, or make any commitment to, take any of the actions
prohibited by this Section 4.1.
4.2 Covenants of SJNB.
(a) During the period from the date of this Agreement and continuing until
the Effective Time, SJNB agrees as to itself and its Subsidiaries that (except
as expressly contemplated or permitted by this Agreement or to the extent that
Saratoga shall otherwise consent in writing, which consent shall not be
unreasonably withheld), SJNB will and will cause each of its Subsidiaries to
carry on its respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all reasonable
efforts to preserve intact its present business organizations, maintain its
rights and franchises and preserve its relationships with customers, suppliers
and others having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, SJNB shall not,
and shall not permit any of its Subsidiaries to, without the prior consent of
Saratoga in writing:
(i) except as required to perform its obligations under this
Agreement, amend or propose to amend its Articles of Incorporation or its
By-laws in a manner that would materially and adversely affect its ability
to perform its obligations under this Agreement or consummate the
transactions contemplated hereunder, or otherwise materially and adversely
affect the rights, powers and privileges of the shares of SJNB Common Stock
to be issued in the Merger;
(ii) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, except for cash dividends in an amount
substantially equivalent to dividends paid in the year prior to the date
hereof and dividends by a wholly owned Subsidiary of SJNB to SJNB, (ii) set
any record or payment dates for the payment of any dividends or
distribution on its capital stock except in the ordinary course of business
consistent with past practice, (iii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares
of its capital stock or (iv) repurchase, redeem or otherwise acquire, or
permit any Subsidiary to purchase or otherwise acquire, any shares of its
capital stock or the capital stock of any other Subsidiary of SJNB or any
securities convertible into or exercisable for any shares of such capital
stock; provided, however, that nothing in this Agreement shall restrict
SJNB from taking actions involving the authorization, approval or adoption
of a shareholders' rights plan or taking any other action incidental
thereto;
(iii) change the methods of accounting of SJNB or any of its
Subsidiaries (including any changes in accounting with respect to taxes),
except as required by changes in GAAP as concurred in by such party's
independent auditors;
(iv) intentionally take or fail to take any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any
material respect, or in any of the conditions to the Closing set forth in
Article VI (including without limitation the conditions set forth in
Sections 6.1(f) and 6.2(d)) not being satisfied, or (unless such action is
required by applicable law or sound banking practice) which would adversely
affect the ability of SJNB or Saratoga to obtain any of the Requisite
Regulatory Approvals without imposition of a condition or restriction of
the type referred to in Section 6.1(g); or
(v) agree to, or make any commitment to, take any of the actions
prohibited by this Section 4.2(a).
(b) SJNB shall use all commercially reasonable efforts to publish as soon
as practicable after the end of the quarter in which there are at least thirty
(30) days of post-Merger combined operations, combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Release No. 135.
(c) During the period from the date of this Agreement and continuing until
the Effective Time, SJNB shall not accept any offer from or enter into any
agreement with any third party regarding a Takeover Proposal (as defined in
Section 5.4(a), however, references therein to Saratoga shall be deemed for
purposes of this Section 4.2(c) to refer to SJNB) of SJNB with any other entity
unless such offer or agreement is expressly conditioned upon the performance by
SJNB or its successor in interest of its obligations under this Agreement.
Notwithstanding the foregoing, the Board of Directors of SJNB, to the extent
required by its fiduciary obligations, as determined in good faith by the Board
of Directors of SJNB based on the advice of independent counsel, may (subject to
the following sentence) withdraw or modify its approval or recommendation of
this Agreement or the Merger, approve, recommend or enter into an agreement with
respect to any Takeover Proposal pursuant to Section 7.1(e)(ii), or terminate
this Agreement, in each case at any time after the third business day following
Saratoga's receipt of a written notice advising Saratoga that the Board of
Directors of SJNB has received such a Takeover Proposal, specifying the material
terms and conditions of such Takeover Proposal and identifying the Person making
such Takeover Proposal (it being understood that any amendment to such Takeover
Proposal shall necessitate an additional three business day period). If SJNB
proposes to enter into an agreement with respect to any Takeover Proposal
pursuant to Section 7.1(e)(ii), it shall concurrently with entering into such
agreement pay, or cause to be paid, to Saratoga the Termination Fee in
accordance with the provisions of Section 7.1(e)(ii).
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Regulatory Matters.
(a) Saratoga and SJNB shall promptly prepare and file with the SEC a Proxy
Statement, and SJNB shall promptly prepare and file with the SEC the S-4, in
which the Proxy Statement will be included as a prospectus, and one or more
registration statements or amendments to existing registration statements under
the Securities Act for the purpose of registering the maximum number of shares
of SJNB Common Stock to which the option holders of Saratoga may be entitled
pursuant to Section 2.6 at or after the Effective Time. Each of SJNB and
Saratoga shall use all reasonable efforts to have the S-4 declared effective
under the Securities Act as promptly as practicable after such filing, and
Saratoga and SJNB shall thereafter promptly mail the Proxy Statement to their
respective shareholders.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement and the other Transaction Agreements (including without limitation the
Merger and the Bank Merger). SJNB and Saratoga shall have the right to review in
advance and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to Saratoga or SJNB, as the case may be, and any of their
respective Subsidiaries which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement
(including without limitation the Merger) and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) SJNB and Saratoga shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement, the S-4 or any other statement, filing,
notice or application made by or on behalf of SJNB, Saratoga or any of their
respective Subsidiaries to any Governmental Entity in connection with the Merger
and the other transactions contemplated by this Agreement.
(d) SJNB and Saratoga shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval (as defined in Section 6.1(b)) will not be obtained or that
the receipt of any such approval will be materially delayed.
5.2 Access to Information. Upon reasonable notice, Saratoga and SJNB shall
(and shall cause each of their respective Subsidiaries to) afford to the other
and their representatives and advisors access, during normal business hours
during the period prior to the Closing Date, to all the properties, books,
contracts, commitments and records of Saratoga (in the case of Saratoga) and of
SJNB (in the case of SJNB) and, during such period, each of Saratoga and SJNB
shall (and shall cause each of their respective Subsidiaries to) make available
to the other and their representatives and advisors (a) a copy of each report,
schedule, registration statement and other document filed or received by
Saratoga or SJNB, as the case may be, during such period pursuant to the
requirements of Federal securities laws or Federal or state banking laws (other
than reports or documents which such party is not permitted to disclose under
applicable law or reports or documents which are subject to an attorney-client
privilege or which constitute attorney work product) and (b) all other
information concerning the business, properties and personnel of Saratoga or of
SJNB, as the case may be, as such other party may reasonably request. SJNB will
hold any such information with respect to Saratoga and its Subsidiaries which is
nonpublic in confidence to the extent required by, and in accordance with, the
provisions of the letter dated July 28, 1998, between Saratoga and SJNB (the
"Confidentiality Agreement"). Saratoga will hold all such information with
respect to SJNB and its Subsidiaries which is nonpublic in confidence and will
otherwise deal with such information to the extent required by, and in
accordance with, the provisions of the Confidentiality Agreement, deeming, for
purpose of this sentence, such information to be subject to the provisions of
the Confidentiality Agreement as if such provisions applied by their terms to
such information of SJNB and its Subsidiaries, as well as to such information of
Saratoga and its Subsidiaries. No investigation by either SJNB, on the one hand,
or Saratoga, on the other hand, shall affect the representations and warranties
of the other.
5.3 Shareholders' Meetings. (a) Saratoga shall call a meeting of its
shareholders to be held as promptly as practicable for the purpose of voting
upon the adoption of this Agreement. Saratoga will, through its Board of
Directors, recommend to its shareholders adoption of this Agreement unless the
Board of Directors of Saratoga determines in good faith, based upon the written
advice of outside counsel, that making such recommendation, or failing to
withdraw, modify or amend any previously made recommendation, would constitute a
breach of fiduciary duty by Saratoga's Board of Directors under applicable law.
In addition, nothing in this Section 5.3 or elsewhere in this Agreement shall
prohibit accurate disclosure by Saratoga of information that is required to be
disclosed in the Proxy Statement, or any other document required to be filed
with the SEC (including without limitation a Solicitation/Recommendation
Statement on Schedule 14D-9) or otherwise required to be disclosed by applicable
law or regulation or the rules of any securities exchange or automated quotation
system on which the securities of Saratoga may then be traded.
(b) SJNB shall call a meeting of its shareholders to be held as promptly as
practicable for the purpose of voting upon the adoption of this Agreement. SJNB
will, through its Board of Directors, recommend to its shareholders adoption of
this Agreement unless the Board of Directors of SJNB determines in good faith,
based upon the written advice of outside counsel, that making such
recommendation, or failing to withdraw, modify or amend any previously made
recommendation, would constitute a breach of fiduciary duty by SJNB's Board of
Directors under applicable law. In addition, nothing in this Section 5.3 or
elsewhere in this Agreement shall prohibit accurate disclosure by SJNB of
information that is required to be disclosed in the Proxy Statement, the S-4 or
any other document required to be filed with the SEC (including without
limitation a Solicitation/Recommendation Statement on Schedule 14D-9) or
otherwise required to be disclosed by applicable law or regulation or the rules
of any securities exchange or automated quotation system on which the securities
of SJNB may then be traded.
(c) Each of Saratoga and SJNB shall use all commercially reasonable efforts
to cause such meetings of their respective shareholders to take place on or
before November 12, 1999, or as soon thereafter as is reasonably practicable.
Saratoga and SJNB shall coordinate and cooperate with respect to the timing of
said meetings and the date on which the Saratoga Shareholders' Meeting shall be
held.
5.4 No Solicitations. (a) From the date hereof until the earlier of the
Effective Time or the termination of this Agreement, Saratoga agrees that
neither it, nor any of its Subsidiaries, Affiliates or agents shall, nor shall
it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or agent (collectively, "Representatives") retained by it or any
of its Subsidiaries, Affiliates or agents to, solicit, initiate or knowingly
encourage the submission of, or enter into discussions or negotiations with or
provide information to any person or group of persons (other than the respective
parties to this Agreement) concerning, any Takeover Proposal (as defined below)
or enter into any agreement with a third party relating to a Takeover Proposal
or assist, participate in, facilitate or encourage any effort or attempt by any
other person to do or seek to do any of the foregoing. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any director, officer or Affiliate of Saratoga or any
of its Subsidiaries or any investment banker, attorney or other advisor or
Representative of Saratoga or any of its Subsidiaries or Affiliates, whether or
not such Person is purporting to act on behalf of Saratoga or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section 5.4(a)
by Saratoga. As used in this Agreement, "Takeover Proposal" shall mean any
inquiry, proposal or offer to acquire in any manner 20% or more of any class of
equity securities of, or a merger, consolidation, business combination, sale,
recapitalization, liquidation, dissolution or other disposition or similar
transaction involving 20% or more of the assets of, Saratoga or any Significant
Subsidiary of Saratoga, or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of Saratoga or any Significant Subsidiary of Saratoga
(other than pursuant to the transactions contemplated by this Agreement and the
Stock Option Agreement). A "Significant Subsidiary" means any Subsidiary of a
person that would constitute a Significant Subsidiary of such person within the
meaning of Rule 1-02 of Regulation S-X of the Securities and Exchange Commission
(the "SEC").
(b) Except as set forth herein, neither the Board of Directors of Saratoga
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to SJNB, the approval or recommendation by the
Board of Directors of Saratoga or any such committee of this Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal, or (iii) enter into any agreement with respect to any
Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of
Saratoga, to the extent required by its fiduciary obligations, as determined in
good faith by the Board of Directors of Saratoga based on the advice of
independent counsel, may (subject to the following sentences) withdraw or modify
its approval or recommendation of this Agreement or the Merger, approve or
recommend any Superior Proposal (as defined herein), enter into an agreement
with respect to such Superior Proposal or terminate this Agreement, in each case
at any time after the third business day following SJNB's receipt of a written
notice advising SJNB that the Board of Directors of Saratoga has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the Person making such Superior Proposal (it being
understood that any amendment to a Superior Proposal shall necessitate an
additional three business day period). In addition, if Saratoga proposes to
enter into an agreement with respect to any Takeover Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid, to SJNB
the Termination Fee in accordance with the provisions of Section 5.4(d). For
purposes hereof, "Superior Proposal" shall mean any bona fide written Takeover
Proposal by a third party on terms determined in good faith by the Board of
Directors of Saratoga to be reasonably capable of being completed, taking into
account all legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal and (based on the advice of a financial advisor
of nationally recognized reputation), if consummated to be more favorable to the
shareholders of Saratoga from a financial point of view than the Merger.
(c) In addition to the obligation of Saratoga set forth in paragraph (b)
above, Saratoga promptly shall advise SJNB orally and in writing of any request
for information or of any Takeover Proposal, or any inquiry with respect to or
which could lead to any Takeover Proposal, the material terms and conditions of
such request, Takeover Proposal or inquiry and the identity of the Person making
any such request, Takeover Proposal or inquiry. Saratoga shall keep SJNB fully
informed of the status and details (including amendments or proposed amendments)
of any such request, Takeover Proposal or inquiry.
(d) If this Agreement is terminated pursuant to its terms other than by
SJNB or Saratoga pursuant to Section 7.1(a), 7.1(b)(i) or 7.1(b)(ii), 7.1(c),
7.1(e)(ii), 7.1(f)(i)(2) or 7.1(f)(i)(3), 7.1(g), 7.1(i)(1) or 7.1(i)(2), or
other than by Saratoga pursuant to Section 7.1(e)(i), 7.1(f)(ii)(1) or
7.1(f)(ii)(2), or 7.1(h) (in the event that SJNB elects not to adjust the
Exchange Ratio as provided in Section 7.1(h)), and an Acquisition Event (as
defined herein) shall occur after the date hereof and within 18 months after the
date of such termination, Saratoga shall pay promptly, but in no event later
than two Business Days after the occurrence of such Acquisition Event, by wire
transfer of immediately available Federal Funds to such account as SJNB shall
designate, $1.3 million (the "Termination Fee") as liquidated damages to SJNB
for such breach (but only if a Termination Fee shall not theretofore have been
paid pursuant to Section 5.4(b) hereof, and provided, further that if Actual
Expenses have been paid by Saratoga pursuant to the penultimate sentence of
Section 5.9, the Termination Fee payable shall be reduced by the amount of such
Actual Expenses paid). For purposes hereof, "Acquisition Event" shall mean any
of the following: (i) any Person (other than SJNB or any Subsidiary thereof)
shall have acquired pursuant to a tender offer or otherwise beneficial ownership
of 20% or more of the outstanding shares of Saratoga Common Stock; (ii) Saratoga
or SNB shall have authorized, recommended, proposed or publicly announced an
intention to authorize, recommend or propose, or entered into, an agreement with
any Person (other than SJNB or a Subsidiary thereof) to (A) effect a merger,
consolidation or similar transaction (or series of unrelated and non-integrated
mergers, consolidations or similar transactions) involving Saratoga or SNB
(other than a merger, consolidation or similar transaction in which those
holders of Saratoga Common Stock outstanding immediately prior to each such
transaction continue to own at least 80% of the Saratoga Common Stock
outstanding immediately after such transaction), (B) sell, lease or otherwise
dispose of assets of Saratoga or its Subsidiaries representing 20% or more of
the consolidated assets of Saratoga and its Subsidiaries, or (C) issue, sell or
otherwise dispose of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 20% or more of the voting
power of Saratoga or its Subsidiaries (but excluding a series of unrelated and
non-integrated issues, sales or other dispositions).
(e) Notwithstanding anything to the contrary contained herein, the
aggregate amount of gain realized by SJNB pursuant to the Stock Option
Agreement, when added to the Termination Fee, if any, received by SJNB, shall
not in the aggregate exceed $2,200,000 as liquidated damages, and, in the event
SJNB realizes gain in excess of such amount under the Stock Option Agreement
when added to the Termination Fee, if any, from Saratoga, SJNB undertakes
promptly to pay back to Saratoga, by wire transfer of immediately available
funds, the amount of such excess.
5.5 Legal Conditions.
(a) Each of Saratoga and SJNB shall, and shall cause its respective
Subsidiaries to, use all reasonable efforts (i) to take, or cause to be taken,
all actions necessary to comply promptly with all legal requirements which may
be imposed on such party or its Subsidiaries with respect to the transactions
contemplated by this Agreement and as promptly as practicable, (ii) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity and or any
other public or private third party which is required to be obtained or made by
such party or any of its Subsidiaries in connection with the Merger and the
other transactions contemplated by this Agreement. Each of Saratoga and SJNB
will promptly cooperate with and furnish information to the other in connection
with any such burden suffered by, or requirement imposed upon, any of them or
any of their Subsidiaries in connection with the foregoing.
(b) Each of Saratoga and SJNB agrees to use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary and proper or advisable to consummate, as soon as practicable
after the date of this Agreement, the transactions contemplated hereby,
including, without limitation, using all reasonable best efforts to (i) lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
(ii) defend any Litigation seeking to enjoin, prevent or delay the consummation
of the transactions contemplated hereby or seeking material damages,
(iii) provide to counsel to the other party hereto representations and
certifications as to such matters as such counsel may reasonably request in
order to render the opinions referred to in Sections 6.2(d) and 6.3(c), and
(iv) to obtain the letters of the independent accountants referred to in Section
6.1(f).
5.6 Employee Benefit Plans.
(a) For purposes of all employee benefit plans of SJNB or its Subsidiaries
in which the employees of Saratoga who shall remain in the employment of SJNB or
its Subsidiaries after the Closing Date shall participate from and after such
date (including all policies and employee fringe benefit programs, including
vacation policies), and under which an employee's benefit depends, in whole or
in part, on length of service, credit will be given to employees of Saratoga for
vesting and eligibility purposes only for service previously credited with
Saratoga or its Subsidiaries prior to the Effective Time to the extent that such
crediting of service does not result in duplication of benefits; provided,
however, that SJNB shall determine each employee's length of service in a manner
consistent with the customary practice with respect to the employees of the SJNB
Subsidiary by which they shall be employed. SJNB shall also cause each employee
benefit plan in which employees of Saratoga participate from and after the
Effective Time to waive (i) any preexisting condition restriction which was
waived under the terms of any analogous Benefit Plan immediately prior to the
Effective Time or (ii) any waiting period limitation which would otherwise be
applicable to an employee of Saratoga on or after the Effective Time to the
extent such employee of Saratoga had satisfied any similar waiting period
limitation under an analogous Benefit Plan prior to the Effective Time.
(b) Notwithstanding the foregoing, except as otherwise expressly provided
in this Agreement, SJNB shall, and shall cause its Subsidiaries to, honor in
accordance with their terms all Benefit Plans, each as amended to the date
hereof and as otherwise amended prior to the Closing Date in accordance with the
terms of paragraph (e) hereof, and other contracts, arrangements, commitments or
understandings described in the Saratoga Disclosure Schedule; provided, however,
that this paragraph (b) shall be subject to the provisions of paragraph (d)
hereof. SJNB and Saratoga hereby acknowledge that consummation of the Merger
will constitute a "Change in Control" for purposes of all Benefit Plans,
contracts, arrangements and commitments of Saratoga identified pursuant to
Section 3.1(k) that contain change in control provisions.
(c) Saratoga and its Subsidiaries shall take all action necessary to ensure
that no further mortgage loans will be made to employees and to amend any
retiree medical plans so that no additional retirees shall become entitled to
continuing medical insurance benefits thereunder.
(d) Except as otherwise provided herein, nothing in this Section 5.6 shall
be interpreted as preventing SJNB or its Subsidiaries after the Effective Time
from amending, modifying or terminating any of the Plans, or other contracts,
arrangements, commitments or understandings, in accordance with their terms and
applicable law.
(e) Saratoga agrees that the Saratoga Bank Savings Plan or any other 401(k)
plans may be terminated, frozen, modified or merged into the appropriate SJNB
qualified plans before or after the Effective Time, as determined by SJNB in its
sole discretion; provided, however, that Saratoga shall not be required to take
any such action prior to the Effective Time unless and until SJNB acknowledges
that all material conditions to its obligation to consummate the Merger herein
have been satisfied or waived and SJNB reasonably believes the Merger will
close.
5.7 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless each person who is as of the date hereof or
who becomes prior to the Effective Time, an officer or director of Saratoga or
any of its Subsidiaries (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts of any
nature whatsoever, governmental or non-governmental (including but not limited
to reasonable expenses of counsel and investigation) that are paid in settlement
of or in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such person is or was a director or officer of Saratoga or any Subsidiary of
Saratoga, whether pertaining to any matter existing or occurring at or prior to
the Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities") and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby, in each
case to the full extent that Saratoga would have been permitted under applicable
law and its Articles of Incorporation, and the Surviving Corporation is
permitted under California law, to indemnify such person (and the Surviving
Corporation shall pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent permitted by
law with no bond or security to be required upon receipt of any undertaking
required by section 317(f) of the CGCL). Without limiting the foregoing, in the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time shall be reasonably satisfactory to the Surviving
Corporation; (ii) after the Effective Time, the Surviving Corporation shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective
Time, the Surviving Corporation will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that the Surviving Corporation
shall not be liable for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably withheld or delayed.
Any Indemnified Party wishing to claim indemnification under this Section 5.7,
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify the Surviving Corporation (but the failure so to notify the
Surviving Corporation shall not relieve it from any liability which it may have
under this Section 5.7 except to the extent such failure materially prejudices
the Surviving Corporation), and shall deliver to the Surviving Corporation the
undertaking, if any, required by section 317(f) of the CGCL. The Surviving
Corporation shall be liable for the fees and expenses hereunder with respect to
only one law firm, in addition to local counsel in each applicable jurisdiction,
to represent the Indemnified Parties as a group with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
between the positions of any two or more Indemnified Parties that would preclude
or render inadvisable joint or multiple representation of such parties.
(b) Upon the Effective Time, any executive officer or director of Saratoga
or SNB who becomes an officer or director of SJNB (including any Subsidiaries
thereof) shall be included in SJNB's director and officer insurance policy.
Saratoga shall cooperate with SJNB to obtain extended coverage under Saratoga's
director and officer insurance policy to cover claims made for a period of three
years after the Effective Time regarding acts or omissions of Saratoga or SNB's
directors or officers prior to the Effective Time; provided, however, that SJNB
shall not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 150% of the premiums paid by Saratoga and SNB in
respect of 1998 for such insurance, as previously disclosed to SJNB ("Saratoga's
Current Premium"), and if such premiums for such insurance would at any time
exceed 150% of Saratoga's Current Premium, then SJNB shall cause to be
maintained policies of insurance which, in SJNB's good faith determination,
provide the maximum coverage available at an annual premium equal to 150% of
Saratoga's Current Premium.
(c) The provisions of this Section 5.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives and are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
(d) Notwithstanding the foregoing, any rights or benefits conferred by
Saratoga or SNB to their respective directors or officers under indemnification
agreements in effect as of the date hereof shall, to the extent such rights or
benefits provided thereunder are in excess of or an enhancement of the
indemnification rights provided for in this Section 5.7, be honored by SJNB and
replace or supplement the indemnification rights provided in this Section 5.7
with respect to indemnification for acts or omissions by such directors or
officers occurring prior to the Closing Date.
5.8 Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Subject to the mutual intent of the
parties that the Merger will be accounted for under the pooling of interests
method, Saratoga shall take any and all actions necessary or appropriate to
ensure that the Merger will be accounted for under the pooling of interests
method, including without limitation, causing Deloitte & Touche LLP to issue the
"poolability" letter required as a condition to close in Section 6.1(f).
5.9 Fees and Expenses. Unless otherwise agreed by the parties in writing or
as otherwise provided herein, each party hereto shall bear and pay all costs and
expenses incurred by it incident to preparing, entering into and carrying out
this Agreement and to consummating the Merger, including fees and expenses of
its own financial advisors, accountants and counsel, all printing, filing,
mailing and other incidental fees, costs and expenses related thereto associated
with the S-4 and the Proxy Statement (collectively, the "SEC Fees").
Notwithstanding the foregoing provisions of this Section 5.9 and notwithstanding
the payment of any Termination Fee, if this Agreement is terminated by either
party pursuant to Section 7.1(d) or (e) hereof because of a willful breach by
the other party of any representation, warranty, covenant or agreement as set
forth in Section 7.1(d) or (e), and provided that the terminating party shall
not have been in breach (in any material respect) of any representation and
warranty, covenant or agreement contained herein, then the breaching party shall
bear and pay all the costs and expenses incurred by the non-breaching party,
with respect to the fees and expenses of financial and other advisors,
investment bankers, accountants, counsel, printers and persons involved in the
transactions contemplated by this Agreement, including SEC Fees. Notwithstanding
the foregoing provisions of this Section 5.9, if this Agreement is terminated
pursuant to Sections 7.1(f)(i)(2) or 7.1(f)(i)(3), 7.1(f)(ii)(2) or 7.1(i)(1),
then Saratoga shall pay promptly by wire transfer of immediately available funds
to such account as SJNB shall designate the amount of all costs and expenses
incurred by SJNB incident to preparing, entering into and carrying out this
Agreement and to consummating the Merger, including without limitation, fees and
expenses incurred by SJNB for its accountants and counsel and all SEC Fees,
which amount shall not exceed $500,000 (collectively, the "Actual Expenses").
Notwithstanding the foregoing provisions of this Section 5.9, if this Agreement
is terminated pursuant to Section 7.1(i)(2) or 7.1(g)(iii), then SJNB shall pay
promptly by wire transfer of immediately available funds to such account as
Saratoga shall designate the amount of all Actual Expenses incurred by Saratoga
(excluding any and all fees and expenses of First Security Van Kasper), which
amount of Actual Expenses shall not exceed $500,000. Final settlement with
respect to the payment of such fees and expenses by the parties shall be made
within thirty days of the termination of this Agreement.
Except as otherwise expressly provided herein, whether or not the
transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense.
5.10 Cooperation. During the period from the date of this Agreement to the
Effective Time, each of Saratoga and SJNB shall, (i) confer on a regular and
frequent basis with the other, report on operational matters, policies and
banking practices and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen, could
have, a material adverse effect on Saratoga or SJNB, as the case may be, or
which would cause or constitute a material breach of any of the representations,
warranties or covenants of such party contained herein, (ii) cause each
Subsidiary of Saratoga and SJNB that is a bank to file all call reports with the
appropriate Bank Regulators and all other reports, applications and other
documents required to be filed with the applicable Governmental Entities between
the date hereof and the Effective Time and (iii) coordinate with the other the
declaration of any dividends in respect of SJNB Common Stock and Saratoga Common
Stock and the record dates and payment dates relating thereto, it being the
intention of the parties hereto that holders of SJNB Common Stock or Saratoga
Common Stock shall not receive two dividends, or fail to receive one dividend,
for any single calendar quarter with respect to their shares of SJNB Common
Stock and/or Saratoga Common Stock and any shares of SJNB Common Stock any such
holder receives in exchange therefor in the Merger.
5.11 Affiliates. Each of SJNB and Saratoga shall use its commercially
reasonable efforts to cause each director, executive officer and other person
who is an "affiliate" (for purposes of Rule 145 under the Securities Act, in the
case of affiliates of Saratoga, and for purposes of qualifying the Merger for
pooling of interests accounting treatment, in the case of affiliates of either
SJNB or Saratoga) of such party to execute and deliver, as soon as practicable
after the date of this Agreement, and in any event on or prior to the date the
Proxy Statements are mailed to the shareholders of Saratoga and SJNB, a written
agreement, substantially in the form attached hereto as Exhibit C-1 with respect
to Saratoga and Exhibit C-2 with respect to SJNB. Saratoga shall instruct
Saratoga's transfer agent regarding stop transfer instructions required in
connection with shares of Saratoga Common Stock owned by "affiliates" of
Saratoga, as described in Exhibit C-1 hereto.
5.12 Stock Exchange Listing. SJNB shall use its commercially reasonable
efforts to cause the shares of SJNB Common Stock to be issued in the Merger to
be approved for listing on the NASDAQ National Market, subject to official
notice of issuance, prior to the Effective Time.
5.13 Advice of Changes. SJNB and Saratoga shall promptly advise the other
party of any change or event which, individually or in the aggregate with other
such changes or events, has a material adverse effect on it or which it believes
would or would be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained herein.
5.14 Subsequent Interim and Annual Financial Statements; Certain Reports.
As soon as reasonably available, but in no event more than 45 days after the end
of each fiscal quarter (other than the fourth quarter of a fiscal year) or 90
days after December 31, 1999, or the end of each fiscal year ending after the
date of this Agreement, each party will deliver to the other party its Quarterly
Report on Form 10-Q or its Annual Report on Form 10-K, as the case may be, as
filed with the SEC under the Exchange Act, and each party will furnish to the
other party copies of their management's monthly interim reports (which do not
comply with the published rules and regulations of the SEC or GAAP) to their
respective Boards of Directors within two days after such reports are so
furnished to the Boards.
5.15 Dissenters' Rights. Saratoga and SJNB shall include in the notice of
their respective shareholders' meetings the summary of certain provisions of the
CGCL as required by CGCL section 1300(b).
5.16 SNB Board of Directors and Executive Officers. In the event that the
Bank Merger will not be consummated immediately following the Effective Time, at
and after the Effective Time, the Board of Directors and executive officers of
SNB shall consist of such individuals as the Board of Directors of SJNB shall
designate in their sole discretion. In such event, the condition set forth in
Section 6.2(g) shall be deemed to be replaced by the following clause: "At the
request of SJNB, which request shall be provided in writing at least five
Business Days prior to the Closing Date, the members of the Board of Directors
of SNB shall submit their resignations effective as of the Effective Time."
5.17 Transition Services. SJNB shall retain Richard L. Mount as a
consultant to SJNB for a period of six (6) months from and after the Effective
Time to provide transition services in the nature of customer retention,
business development, consultation and advice. SJNB shall pay to Mr. Mount, on
the first and fifteenth of each calendar month in such six-month period,
compensation totaling the amount of $14,000 per month (prorated for any partial
month).
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation. The respective obligations of
each party to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approvals. The Saratoga Shareholder Approval and the SJNB
Shareholder Approval shall have been obtained.
(b) Other Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with, and all expirations of waiting periods imposed
by, any Governmental Entity (all the foregoing, "Consents") which are necessary
pursuant to the Merger, other than immaterial Consents which, if not obtained,
would have no material adverse effect on the consummation of the transactions
contemplated by this Agreement and the Agreement of Merger or on either SJNB or
the Surviving Corporation, shall have been filed, have occurred or been obtained
(all such permits, approvals, filings and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals") and
all such Requisite Regulatory Approvals shall be in full force and effect.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the transactions contemplated by this Agreement
or the Transaction Agreements shall be in effect. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement or the
Transaction Agreements, by any Federal, state or foreign Governmental Entity of
competent jurisdiction which makes the consummation of the transactions
contemplated by this Agreement or the Transaction Agreements illegal.
(d) NASDAQ National Market Listing. The shares of SJNB Common Stock which
shall be issued to the shareholders of Saratoga upon consummation of the Merger
shall have been approved for listing upon official notice of issuance on the
NASDAQ National Market.
(e) S-4. The S-4 shall become effective under the Securities Act, no stop
orders suspending the effectiveness of the S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(f) Pooling. SJNB shall have received a letter from KPMG LLP, independent
public accountants to SJNB, dated the Closing Date, in form and substance
reasonably satisfactory to SJNB and Saratoga, respectively, to the effect that
the Merger will qualify for "pooling of interests" accounting treatment;
provided, however, that Deloitte & Touche LLP shall deliver to the Saratoga
Board of Directors and KPMG LLP a "poolability letter" dated the Closing Date in
a form reasonably acceptable to KPMG LLP and in accordance with Statement on
Auditing Standards No. 50; provided further, however, that if either party shall
have knowingly taken or omitted to take any action within the control of such
party which shall have prevented such party's independent public accountants
from rendering such letter, then this condition shall not be applicable to such
party.
(g) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation, order or decree enacted, entered, enforced or deemed
applicable to the Merger or the other Transaction Agreements by any Federal,
state or foreign Governmental Entity which, in connection with the grant of a
Requisite Regulatory Approval or otherwise, imposes any condition or restriction
(a "Burdensome Condition") upon SJNB or Saratoga or their respective
Subsidiaries or Affiliates which would reasonably be expected to (i) have a
material adverse effect after the Effective Time on the present or prospective
consolidated financial condition, business, operating results or prospects of
SJNB or the Surviving Corporation (including, without limitation, any
requirement to dispose of any material assets or businesses or restrict in any
significant way any material operations or activities), (ii) prevent SJNB or
Saratoga or their respective Subsidiaries from realizing all or a substantial
portion of the economic benefits of the transactions contemplated by this
Agreement, or (iii) materially impair SJNB's or Saratoga's ability to exercise
and enforce its rights under the Transaction Agreements.
(h) Dissenters' Rights. The aggregate number of shares of SJNB Common Stock
and Saratoga Common Stock held by persons who have taken all of the steps
required at or prior to the SJNB Shareholders' Meeting and the Saratoga
Shareholders' Meeting to perfect their right (if any) to be paid the value of
such shares under Chapter 13 of the CGCL shall not exceed 9% of the outstanding
shares of SJNB Common Stock and Saratoga Common Stock.
6.2 Conditions to Obligations of SJNB. The Obligation of SJNB to consummate
the transactions contemplated by this Agreement is subject to the satisfaction
of the following conditions unless waived by SJNB:
(a) Representations and Warranties. The representations and warranties of
Saratoga and SNB set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and SJNB shall have
received a certificate signed on behalf of each of Saratoga and SNB by their
respective President and Chief Executive Officer and Chief Financial Officer to
such effect.
(b) Performance of Obligations. Saratoga and SNB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and SJNB shall have received a
certificate signed on behalf of each of Saratoga and SNB by their respective
President and Chief Executive Officer and Chief Financial Officer to such
effect.
(c) Corporate Action. SJNB shall have received a copy of the resolution or
resolutions duly adopted by the Board of Directors (or a duly authorized
committee thereof) of Saratoga and of the holders of the Saratoga Common Stock
authorizing the execution, delivery and performance by Saratoga of this
Agreement and the other Transaction Agreements, certified by the Secretary or an
Assistant Secretary of Saratoga.
(d) Tax Opinion. SJNB shall have received the opinion of Pillsbury
Madison & Sutro LLP, counsel to SJNB, dated the Closing Date, to the effect that
(i) the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of section 368(a) of the Code and (ii) SJNB
and Saratoga will each be a party to that reorganization within the meaning of
section 368(b) of the Code. In rendering such opinion, such counsel may require
and rely upon representations and covenants contained in certificates of
officers of SJNB, Saratoga, SNB and others. If the opinion referred to in this
Section 6.2(d) is not delivered, such condition shall be deemed to be satisfied
if SJNB shall have received an opinion to the effect of subsections (i) and (ii)
above from Deloitte & Touche LLP or another accounting firm or law firm selected
by Saratoga and reasonably acceptable to SJNB. SJNB will cooperate in obtaining
such opinion.
(e) Material Adverse Effect. Except as disclosed to SJNB in writing prior
to the date hereof, no material adverse effect upon Saratoga shall have occurred
since December 31, 1998, and Saratoga shall not be a party to or so far as
Saratoga is aware, threatened with, and to Saratoga's knowledge there is no
reasonable basis for, any legal action or other proceeding before any court, any
arbitrator of any kind or any government agency, which in the reasonable
judgment of SJNB, could have a material adverse effect upon Saratoga, and SJNB
shall have received a certificate signed on behalf of Saratoga by its President
and Chief Executive Officer and its Chief Financial Officer to such effect.
(f) Closing Documents. SJNB shall have received from Saratoga such
certificates and other closing documents as counsel for SJNB shall reasonably
request.
(g) Bank Merger. Any required Consents of any Governmental Entities to the
consummation of the Bank Merger shall have been received and the Bank Merger
shall be able to be consummated immediately following the Effective Time.
(h) Comfort Letter (S-4). SJNB shall have received from Deloitte & Touche
LLP a letter addressed to SJNB not more than two (2) Business Days prior to the
effective date of the S-4 with respect to certain financial information
regarding Saratoga, in form and substance which is customary in transactions of
the nature contemplated by this Agreement.
(i) Comfort Letter. SJNB shall have received from Deloitte & Touche LLP a
comfort letter in form and substance customary for transactions of this type and
reasonably acceptable to SJNB with respect to Saratoga's financial statements
for the period ending no more than five (5) Business Days prior to the Closing
Date.
6.3 Conditions to Obligations of Saratoga. The obligation of Saratoga to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived by Saratoga:
(a) Representations and Warranties. The representations and warranties of
SJNB set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and Saratoga shall have
received a certificate signed on behalf of SJNB by its President and Chief
Executive Officer and its Chief Financial Officer to such effect.
(b) Performance of Obligations. SJNB shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and Saratoga shall have received a certificate
signed on behalf of SJNB by its President and Chief Executive Officer and its
Chief Financial Officer to such effect.
(c) Corporate Action. Saratoga shall have received a copy of the resolution
or resolutions duly adopted by the Board of Directors (or a duly authorized
committee thereof) of SJNB and of the holders of the SJNB Common Stock
authorizing the execution, delivery and performance by SJNB of this Agreement
and the other Transaction Agreements, certified by the Secretary or an Assistant
Secretary of SJNB.
(d) Tax Opinion. Saratoga shall have received the opinion of Deloitte &
Touche LLP, independent accountants to Saratoga (or other accounting or law firm
reasonably acceptable to SJNB), dated the Closing Date, to the effect that
(i) the Merger should be treated for Federal income tax purposes as a
reorganization within the meaning of section 368(a) of the Code, (ii) SJNB and
Saratoga should each be a party to that reorganization within the meaning of
section 368(b) of the Code and (iii) (1) except for any cash received in lieu of
any fractional share, no gain or loss should be recognized by holders of
Saratoga Common Stock who receive SJNB Common Stock in exchange for the Saratoga
Common Stock which they hold; (2) the holding period of SJNB Common Stock
exchanged for Saratoga Common Stock should include the holding period of the
Saratoga Common Stock for which it is exchanged, assuming the shares of Saratoga
Common Stock are capital assets in the hands of the holder thereof at the
Effective Time; and (3) the basis of the SJNB Common Stock received in the
exchange should be the same as the basis of the Saratoga Common Stock for which
it was exchanged, less any basis attributable to fractional shares for which
cash is received. In rendering such opinion, such independent accountants ( or
law firm) may require and rely upon representations and covenants contained in
certificates of officers of SJNB, Saratoga, SNB and others. If the opinion
referred to in this Section 6.3(d) is not delivered, such condition shall be
deemed satisfied if Saratoga shall have received an opinion to the effect of
subsections (i) and (ii) above from Pillsbury Madison & Sutro LLP or another law
or accounting firm selected by SJNB and reasonably acceptable to Saratoga.
Saratoga will cooperate in obtaining such opinion.
(e) Material Adverse Effect. Except as disclosed to Saratoga in writing
prior to the date hereof, no material adverse effect upon SJNB shall have
occurred since December 31, 1998, and SJNB shall not be a party to or so far as
SJNB is aware, threatened with, and to SJNB's knowledge there is no reasonable
basis for, any legal action or other proceeding before any court, any arbitrator
of any kind or any governmental agency, which in the reasonable judgment of
Saratoga, could have a material adverse effect upon SJNB, and Saratoga shall
have received a certificate signed on behalf of SJNB by its President and Chief
Executive Officer and its Chief Financial Officer to such effect.
(f) Closing Documents. Saratoga shall have received from SJNB such
certificates and other closing documents as counsel for Saratoga shall
reasonably request.
(g) Additions to SJNB Board of Directors. SJNB shall have amended its
Bylaws or taken any other action necessary to increase the number of authorized
directors on its Board of Directors to permit the appointment of the five
Saratoga Designees (pursuant to Section 1.3(a)(iv)) at least five Business Days
prior to the Closing Date.
(h) Fairness Opinion. Saratoga shall have received a written "bring-down"
opinion of First Security Van Kasper, dated as of the date of Saratoga's Proxy
Statement, to the effect that, as of such date, the consideration to be received
by the holders of the Saratoga Common Stock in the Merger is fair to the holders
of the Saratoga Common Stock from a financial point of view.
(i) Comfort Letter (S-4). Saratoga shall have received from KPMG LLP a
letter addressed to Saratoga not more than two (2) Business Days prior to the
effective date of the S-4 with respect to certain financial information
regarding SJNB, in form and substance which is customary in transactions of the
nature contemplated by this Agreement.
(j) Comfort Letter. Saratoga shall have received from KPMG LLP a comfort
letter in form and substance customary for transactions of this type and
reasonably acceptable to Saratoga with respect to SJNB's financial statements
for the period ending no more than five (5) Business Days prior to the Closing
Date.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after adoption of the Agreement
by the shareholders of Saratoga or SJNB:
(a) by mutual consent of SJNB and Saratoga in a written instrument;
(b) by either SJNB or Saratoga (i) upon written notice to the other
party if any Bank Regulator shall have issued an order denying approval of
the Merger and the other material aspects of the transactions contemplated
by this Agreement or if any Governmental Entity of competent jurisdiction
shall have issued a final permanent order enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement or (ii) if any Governmental Entity of competent jurisdiction
shall have issued an order in connection with the transactions contemplated
hereby imposing a Burdensome Condition on SJNB or the Surviving
Corporation, and in any such case the time for appeal or petition for
reconsideration of any such order referred to in clauses (i) or (ii) shall
have expired without such appeal or petition being granted;
(c) by either SJNB or Saratoga if the Merger shall not have been
consummated on or before March 31, 2000; provided that if the Merger shall
not have been consummated on or before such date, such termination date may
be extended by up to 60 days thereafter (i) at the election of the
non-breaching party, if the Merger shall not have been consummated due to
the volitional breach of any material representation, warranty or covenant
in this Agreement by SJNB or Saratoga, or (ii) at the election of the party
who has requested any Requisite Regulatory Approval, in the event that the
Merger shall not have been consummated due to the fact that any such
Requisite Regulatory Approvals shall not yet have been received;
(d) by SJNB in the event of a breach by Saratoga or SNB of any
representation, warranty or covenant contained in this Agreement, which
breach (i) either is not cured within 45 days after the giving of written
notice to Saratoga or SNB, or is of a nature which cannot be cured prior to
the Closing and (ii) would entitle the non-breaching party to elect not to
consummate the transactions contemplated hereby pursuant to Article VI;
provided, however, that SJNB may immediately terminate this Agreement upon
notice to Saratoga in the event that Saratoga or SNB shall breach the
covenant provided for in Section 5.4 hereof;
(e) (i) by Saratoga in the event of a breach by SJNB of any
representation, warranty or covenant contained in this Agreement, which
breach (1) either is not cured within 45 days after the giving of written
notice to SJNB or is of a nature which cannot be cured prior to the Closing
and (2) would entitle the non-breaching party to elect not to consummate
the transactions contemplated hereby pursuant to Article VI; provided,
however, that Saratoga may terminate this Agreement within ten Business
Days after notice to SJNB in the event that SJNB shall breach the covenant
provided for in Section 4.2(c) hereof and such breach shall not have been
cured within such ten Business Day period and, upon such termination, SJNB
shall pay to Saratoga the Termination Fee as liquidated damages to Saratoga
for such breach, which sum shall be paid by wire transfer of immediately
available Federal Funds, to such account as Saratoga shall designate;
(ii) by SJNB, in the event that, notwithstanding its obligations in
Section 4.2(c), a third party makes a written offer regarding a Takeover
Proposal of SJNB in which such third party indicates that they would not be
willing to consummate such a Takeover Proposal unless this Agreement is
terminated, and the Board of Directors of SJNB determines in good faith,
based upon the written advice of outside counsel, that failing to accept
such Takeover Proposal would constitute a breach of fiduciary duty by
SJNB's Board of Directors under applicable law; provided, however, that
upon such termination, SJNB shall pay to Saratoga the Termination Fee as
liquidated damages to Saratoga for such termination, which sum shall be
paid in the manner described in subsection 7.1(e)(i) above;
(f) (i) by SJNB (1) if, in accordance with Section 5.3, the Board of
Directors of Saratoga fails to recommend adoption of this Agreement by the
shareholders of Saratoga, or amends or modifies such recommendation in a
manner materially adverse to SJNB or withdraws such recommendation to the
shareholders of Saratoga, (2) if the condition set forth in Section 6.3(h)
is not satisfied, or (3) if Deloitte & Touche LLP fails to deliver the
"poolability letter" required by Section 6.1(f);
(ii) by Saratoga (1) if, in accordance with Section 5.3, the Board of
Directors of SJNB fails to recommend adoption of this Agreement by the
shareholders of SJNB, or amends or modifies such recommendation in a manner
materially adverse to Saratoga or withdraws such recommendation to the
shareholders of SJNB, or (2) if the condition set forth in Section 6.3(h)
is not satisfied;
(g) by SJNB or Saratoga, if (i) the Saratoga Shareholder Approval or
the SJNB Shareholder Approval shall not have been obtained at a duly held
meeting of shareholders of Saratoga or SJNB, as appropriate, held for such
purpose or at any adjournment, postponement or continuation thereof, or
(ii) the condition set forth in Section 6.1(h) is not satisfied, or (iii)
KPMG LLP fails to deliver the letter required by Section 6.1(f) (although
Deloitte & Touche LLP has delivered the "poolability letter" required by
Section 6.1(f));
(h) by the Board of Directors of Saratoga, if the Board of Directors
so determines by a vote of a majority of the members of its entire Board,
at any time during the two-Business Day period commencing on the first
Business Day after the Determination Date (as defined herein), if the
Average SJNB Closing Price shall be less than $29.3590 (the "Minimum
Price"); subject, however, to the following provisions of this
paragraph (h). If Saratoga elects to exercise its termination right
pursuant to the immediately preceding sentence, it shall give prompt
written notice to SJNB during such two-Business Day period by means of
facsimile transmission (as provided in Section 8.2 hereof); provided that
such notice of election to terminate may be withdrawn at any time within
the aforementioned two-Business Day period. During the five Business-Day
period commencing on the day after receipt of such notice of election to
terminate, SJNB shall have the option of adjusting the Exchange Ratio to
equal a number equal to a quotient (rounded to the nearest one
ten-thousandth), the numerator of which is the product of the Minimum Price
and 0.70 and the denominator of which is the Average SJNB Closing Price. If
SJNB makes the election contemplated by the preceding sentence, within such
five Business-Day period, it shall give prompt written notice to Saratoga
of such election and the revised Exchange Ratio, whereupon no termination
shall have occurred pursuant to this paragraph (h) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified), and any references in this Agreement to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio
as adjusted pursuant to this paragraph (h).
For purposes hereof, the following terms have the following meanings:
(i) "Average SJNB Closing Price" shall mean the average of the
closing prices of SJNB Common Stock on the NASDAQ National Market for
the 20 consecutive trading days ending on the Determination Date,
rounded to four decimal places, whether or not trades occurred on
those days (subject to adjustment as provided below and provided that
if no trades of SJNB Common Stock shall occur on a given trading day
the closing price thereof on the next preceding day when a trade shall
have occurred shall be deemed to be the closing price on such day for
the purposes hereof). In the event SJNB pays, declares or otherwise
effects a stock split, reverse stock split, reclassification or stock
dividend or stock distribution with respect to the SJNB Common Stock
between the date of this Agreement and the Effective Time, appropriate
adjustments will be made to the Average SJNB Closing Price of SJNB
Common Stock.
(ii) "Determination Date" shall mean the last day of the 20
trading-day period referred to in the definition of "Average SJNB
Closing Price" ending five Business Days prior to the Closing Date.
(iii) "Trading day" shall mean a day on which trading generally
takes place on the National Association of Securities Dealers
Automated Quotations ("NASDAQ") and on which trading in SJNB Common
Stock has not been halted or suspended; or
(i)(1) by SJNB in the event there has been a change, or any event
involving a prospective change, in the business, financial condition,
results of operations or prospects of Saratoga or any of its Subsidiaries
which has had, or would be reasonably likely to have, a material adverse
effect on Saratoga; provided, however, that termination pursuant to this
subsection (1) shall be effective 45 days after the giving of written
notice to Saratoga if the change or event described in said notice has not
been cured; and provided, further that termination under this subsection
(1) shall be effective immediately after the giving of written notice if
said change or event cannot be cured prior to the Closing; and (2) by
Saratoga in the event there has been a change, or any event involving a
prospective change, in the business, financial condition, results of
operations or prospects of SJNB or any of its Subsidiaries which has had,
or would be reasonably likely to have, a material adverse effect on SJNB;
provided, however, that termination pursuant to this subsection (2) shall
be effective 45 days after the giving of written notice to SJNB if the
change or event described in said notice has not been cured; and provided,
further that termination under this subsection (2) shall be effective
immediately after the giving of written notice if said change or event
cannot be cured prior to Closing.
7.2 Effect of Termination. Termination of this Agreement shall not
terminate or affect the Stock Option Agreement or the representations and
warranties in Article III insofar as they relate to the Stock Option Agreement
or the obligations of the parties under Section 4.2(c), 5.4, 5.9 or 8.10 or
otherwise to pay expenses as provided elsewhere herein, to maintain the
confidentiality of the other party's information pursuant to Section 5.2 or the
provisions of this Section 7.2 or of Section 8.2 or 8.6, and shall not affect
any agreement after such termination. The parties agree that any termination of
this Agreement shall not in any manner release or be construed as so releasing
the nonterminating party or parties or their respective officers or directors
from any liability or damage to the other party or parties arising out of, in
connection with or otherwise relating to, directly or indirectly, such parties'
willful breach of its covenants, agreements, representations or warranties
hereunder, except to the extent expressly provided herein.
7.3 Amendment. This Agreement may be amended by the parties hereto at any
time before or after approval of this Agreement by the shareholders of Saratoga
and SJNB, but after any such approval, no amendment shall be made which by law
requires further approval by such shareholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing Date, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (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 delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations, Warranties and Covenants. No investigation
by SJNB or Saratoga made before or after the date hereof shall affect the
representations and warranties which are contained in this Agreement; provided
that all representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant hereto or thereto shall expire on, and
be terminated and extinguished at, the Effective Time other than covenants and
agreements that by their terms are to survive or be performed, in whole or in
part, after the Effective Time; provided that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive SJNB or Saratoga (or any director or officer thereof) of any defense
in law or equity which otherwise would be available against the claims of any
person, including, without limitation, any shareholder or former shareholder of
either SJNB or Saratoga, the aforesaid representations, warranties, covenants
and agreements being material inducements to the consummation by SJNB and
Saratoga of the transactions contemplated herein.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) if to Saratoga or SNB, to:
Saratoga National Bank
12000 Saratoga Sunnyvale Road
Saratoga, California 95070
Attention: Mr. Richard L. Mount
President and Chief Executive Officer
Fax: (408) 257-3705
with a copy to:
Coudert Brothers
Attorneys at Law
303 Almaden Boulevard, Fifth Floor
San Jose, California 95110-2721
Attention: Glenn T. Dodd, Esq.
Fax: (408) 297-3191
and
(b) if to SJNB, to:
SJNB Financial Corp.
One North Market Street
San Jose, California 95113
Attention: Mr. James R. Kenny
President and Chief Executive Officer
Fax: (408) 947-0362
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Jonathan D. Joseph, Esq.
Fax: (415) 983-1200
8.3 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement, and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder except as otherwise expressly provided in Section 5.7. The parties
hereby acknowledge that, except as hereinafter agreed to in writing, no party
shall have the right to acquire or shall be deemed to have acquired shares of
common stock of the other party pursuant to the Merger until consummation
thereof. No current or former employee of Saratoga, SJNB, or any of their
respective Subsidiaries, shall be construed as a third party beneficiary under
this Agreement, and no provision in this Agreement shall create any right in any
such employee (or his or her beneficiary or dependent) for any reason,
including, without limitation, in respect of employment, continued employment,
or resumed employment with the Surviving Corporation, Saratoga or SJNB (or any
of their respective Affiliates) or in respect of any benefits that may be
provided, directly or indirectly, under any Benefit Plan maintained by the
Surviving Corporation, Saratoga or SJNB (or any of their respective Affiliates).
8.6 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
non-exclusive jurisdiction of the courts of the State of California and of the
United States of America, in each case located in the County of Santa Clara, for
any Litigation in any court or before any governmental authority arising out of
or relating to this Agreement and the transactions contemplated hereby. Each of
the parties hereto hereby irrevocably and unconditionally waives, and agrees not
to assert, by way of motion, as a defense, counterclaim or otherwise, in any
such Litigation, any claim that it is not personally subject to the jurisdiction
of the aforesaid courts for any reason other than the failure to serve process
in accordance with this Section 8.6, that it or its property is exempt or immune
from jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable law, that the Litigation in
any such court is brought in an inconvenient forum, that the venue of such
Litigation is improper, or that this Agreement, or the subject matter hereof,
may not be enforced in or by such courts and further irrevocably waives, to the
fullest extent permitted by applicable law, the benefit of any defense that
would hinder, fetter or delay the levy, execution or collection of any amount to
which the party is entitled pursuant to the final judgment of any court having
jurisdiction. Each of the parties irrevocably and unconditionally waives, to the
fullest extent permitted by applicable law, any and all rights to trial by jury
in connection with any Litigation arising out of or relating to this Agreement
or the transactions contemplated hereby.
8.7 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability and, unless the
effect of such invalidity or unenforceability would prevent the parties from
realizing the major portion of the economic benefits of the Merger that they
currently anticipate obtaining therefrom, shall not render invalid or
unenforceable the remaining terms and provisions of this Agreement or affect the
validity or enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
8.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, and any attempt to make any such assignment without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.
8.9 Publicity. SJNB, SNB, and Saratoga shall consult with each other before
issuing any press release with respect to the Merger or this Agreement and shall
not issue any such press release or make any such public statement without the
prior consent of the other parties, which shall not be unreasonably withheld;
provided, however, that a party may, without the prior consent of the other
parties (but after prior consultation, to the extent practicable in the
circumstances) issue such press release or make such public statement as may
upon the advice of outside counsel be required by law or the rules and
regulations of the National Association of Securities Dealers. Without limiting
the reach of the preceding sentence, SJNB and Saratoga shall cooperate to
develop all public announcement materials and make appropriate management
available at presentations related to the transactions contemplated by this
Agreement as reasonably requested by the other party. In addition, Saratoga and
its Subsidiaries shall (a) consult with SJNB regarding communications with
customers, shareholders, prospective investors and employees related to the
transactions contemplated hereby, (b) provide SJNB with shareholders lists of
Saratoga and (c) allow and facilitate SJNB contact with shareholders of Saratoga
and other prospective investors.
8.10 Attorneys' Fees. In the event of any dispute between the parties
arising out of or relating to this Agreement, the prevailing party in any
litigation (whether at law or in equity), arbitration or other proceeding with
respect to such dispute, including any appeal thereof (collectively, an
"Action"), shall be entitled to recover such party's reasonable attorneys' fees
and all other reasonable costs and expenses incurred in connection with such
Action from the non-prevailing party.
IN WITNESS WHEREOF, SJNB, Saratoga and SNB have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of date
first above written.
SJNB FINANCIAL CORP.
By: /s/ James R. Kenny
-------------------------------------------
Name: James R. Kenny
Title: President and Chief Executive Officer
By: /s/ Jennifer Dowling
-------------------------------------------
Name: Jennifer Dowling
Title: Assistant Corporate Secretary
SARATOGA BANCORP
By: /s/ Richard L. Mount
-------------------------------------------
Name: Richard L. Mount
Title: President and Chief Executive Officer
By: /s/ V. Ronald Mancuso
-------------------------------------------
Name: V. Ronald Mancuso
Title: Secretary
SARATOGA NATIONAL BANK
By: /s/ Richard L. Mount
-------------------------------------------
Name: Richard L. Mount
Title: President and Chief Executive Officer
By: /s/ V. Ronald Mancuso
-------------------------------------------
Name: V. Ronald Mancuso
Title: Secretary
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated August 27, 1999 (the "Agreement"), between
SJNB Financial Corp., a California corporation ("Buyer"), and Saratoga Bancorp,
a California corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer, Seller and Saratoga National Bank (Seller's subsidiary)
have entered into an Agreement and Plan of Merger of even date herewith (the
"Merger Agreement"), which agreement has been executed by the parties hereto
immediately prior to this Agreement; and
WHEREAS, as a condition to Buyer's entering into the Merger Agreement and
in consideration therefor, Seller has agreed to grant Buyer the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Seller hereby grants to Buyer an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 378,561 fully
paid and nonassessable shares of Seller's Common Stock, no par value ("Common
Stock"), at a price of $19.21 per share; provided, however, that in the event
Seller issues or agrees to issue any shares of Common Stock (other than pursuant
to warrants and options outstanding at the date hereof or as permitted under the
Merger Agreement) at a price less than $19.21 per share (as adjusted pursuant to
subsection (b) of Section 5), such price shall be equal to such lesser price
(such price, as adjusted if applicable, the "Option Price"); provided further
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the Seller's issued and outstanding shares of Common Stock. The
number of shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date hereof (other than pursuant to this
Agreement), the number of shares of Common Stock subject to the Option shall be
increased so that, after such issuance, it equals 19.9% of the number of shares
of Common Stock then issued and outstanding without giving effect to any shares
subject to or issued pursuant to the Option. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Seller
or Buyer to breach any provision of the Merger Agreement.
2. (a) Provided that Buyer shall not be in material breach of this
Agreement or of its covenants and agreements contained in the Merger Agreement
such that Seller shall be entitled to terminate the Merger Agreement pursuant to
Section 7.1(e)(i) thereof, and no preliminary or permanent injunction or other
order against exercise of the Option or delivery of the shares covered by the
Option issued by a court of competent jurisdiction is currently in effect, the
Holder (as hereinafter defined) may exercise the Option, in whole or in part,
and from time to time, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent written notice of
such exercise (as provided in subsection (e) of this Section 2) within 30 days
following such Subsequent Triggering Event. Each of the following shall be an
Exercise Termination Event: (i) the Effective Time of the Merger;
(ii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Buyer pursuant to Section 7.1(d) of the
Merger Agreement (unless the breach by Seller giving rise to such right of
termination is non-volitional); (iii) the passage of 12 months after termination
of the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event except a termination by Buyer pursuant to Section 7.1(d)
thereof (unless the breach by Seller giving rise to such right of termination is
non-volitional) (provided that if an Initial Triggering Event continues or
occurs beyond such termination and prior to the passage of such 12-month period,
the Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination); or (iv) the third anniversary of the date hereof. The "Last
Triggering Event" shall mean the last Initial Triggering Event to occur. The
term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Seller or any of its Subsidiaries (each a "Seller Subsidiary") or
any Seller Affiliate (as hereinafter defined), without having received
Buyer's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined) with any
person (the term "person" for purposes of this Agreement having the meaning
assigned thereto in sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations
thereunder) other than Buyer or any of its Subsidiaries (each a "Buyer
Subsidiary") or the Board of Directors of Seller shall have recommended
that the shareholders of Seller approve or accept any Acquisition
Transaction other than as contemplated by the Merger Agreement. For
purposes of this Agreement, "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Seller or
any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission ("SEC") of Seller,
(y) a purchase, lease or other acquisition representing 15% or more of the
consolidated assets of Seller and its Subsidiaries, or (z) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Seller or any Significant Subsidiary of Seller; provided that the
term "Acquisition Event" shall not include any transaction involving only
Seller and/or any Seller Subsidiary.
(ii) Seller or any Seller Subsidiary or Seller Affiliate, without
having received Buyer's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to authorize,
recommend or propose, to engage in an Acquisition Transaction with any
person other than Buyer or a Buyer Subsidiary, or the Board of Directors of
Seller shall have publicly withdrawn or modified, or publicly announced its
intent to withdraw or modify, in any manner adverse to Buyer, its
recommendation that the shareholders of Seller approve the transactions
contemplated by the Merger Agreement;
(iii) Any person other than Buyer, any Buyer Subsidiary or any Seller
Subsidiary acting in a fiduciary capacity shall have acquired beneficial
ownership or the right to acquire Beneficial Ownership (within the meaning
of section 13(d) of the Exchange Act and the rules and regulations
thereunder) of 10% or more of the outstanding shares of Common Stock;
(iv) Any person other than Buyer or any Buyer Subsidiary shall have
made a bona fide proposal to Seller or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Seller or its
shareholders to engage in an Acquisition Transaction, Seller shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Buyer to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Buyer or any Buyer Subsidiary, other than
in connection with a transaction to which Buyer has given its prior written
consent, shall have filed an application or notice with the Federal Reserve
Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
For purposes of this Agreement, the term "Seller Affiliate" shall mean
any Person who or which, together with all "affiliates" and "associates"
(as such terms are defined in Rule 12b-2 of the rules and regulations under
the Exchange Act) of such Person, shall be the "beneficial owner" (as
defined in section 13(d) of the Exchange Act and the rules and regulations
thereunder) ("Beneficial Owner") of 5% or more of the shares of Common
Stock then outstanding, but shall not include Seller, any Seller
Subsidiary, any employee benefit plan of the Seller or any Seller
Subsidiary, or any entity holding shares of Common Stock for or pursuant to
the terms of any such plan.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Buyer or any Buyer
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) shall be 20%.
(d) Seller shall notify Buyer promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering
Event"), it being understood that the giving of such notice by Seller shall not
be a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Seller a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place (subject to Seller's
reasonable approval) and date not earlier than three business days nor later
than 30 business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided, that if the closing of the purchase and sale pursuant
to the Option (the "Closing") cannot be consummated by reason of any applicable
judgment, decree, order, law or regulation, the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
such restriction on consummation has expired or been terminated; and provided
further, without limiting the foregoing, that if prior notification to or
approval of the Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto. Notwithstanding this
subsection (e), in no event shall any Closing Date be more than 18 months after
the related Notice Date, and if the Closing Date shall not have occurred within
18 months after the related Notice Date due to the failure to obtain any such
required approval, the exercise of the Option effected on the Notice Date shall
be deemed to have expired. In the event (i) Buyer receives official notice that
an approval of the Federal Reserve Board or any other regulatory authority
required for the purchase of Option Shares (as hereinafter defined) would not be
issued or granted, (ii) a Closing Date shall not have occurred within 18 months
after the related Notice Date due to the failure to obtain any such required
approval or (iii) Holder (or Substitute Option Holder (as hereinafter defined))
shall have the right pursuant to the last sentence of Section 7 (or Section 9)
to exercise the Option (or Substitute Option (as hereinafter defined)), Buyer
shall nevertheless be entitled to exercise its right as set forth in Section 7
and Buyer or Holder (or Substitute Option Holder) shall be entitled to exercise
the Option (or Substitute Option) in connection with the resale of Seller Common
Stock or other securities pursuant to a registration statement as provided in
Section 6.
(f) At the Closing referred to in subsection (e) of this Section 2, the
Holder shall present and surrender this Agreement and pay to Seller the
aggregate purchase price for the shares of Common Stock purchased pursuant to
the exercise of the Option in immediately available funds by wire transfer to a
bank account designated by Seller, provided that failure or refusal of Seller to
designate such a bank account shall not preclude the Holder from exercising the
Option.
(g) At such Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in subsection (f) of
this Section 2, Seller shall deliver to the Holder a certificate or certificates
representing the number of shares of Common Stock purchased by the Holder and,
if the Option should be exercised in part only, a new Option evidencing the
rights of the Holder thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Seller a letter reasonably
satisfactory to Seller by which Holder makes the representations and covenants
customary in the issuance of privately placed securities, including, without
limitation, agreements that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the provisions of this
Agreement.
(h) Certificates for Common Stock delivered at a Closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Seller and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Seller and will be provided to the holder hereof without charge upon
receipt by Seller of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Seller a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Seller, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Seller of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds and
surrender of this Agreement to Seller, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Seller shall then be closed or
that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder or the Seller shall have failed or refused to
designate the bank account described in subsection (f) of this Section 2. Seller
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 2 in the name of
the Holder or its assignee, transferee or designee.
3. Seller agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued shares of Common Stock
(and other securities issuable pursuant to Section 5(a)) so that the Option may
be exercised without additional authorization of Common Stock (or such other
securities) after giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock (or such other securities);
(ii) that it will not, by charter amendment 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
Seller; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended ("BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and the Seller duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Seller, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Seller 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, Seller will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Seller, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof shall
be appropriately adjusted so that Buyer shall receive upon exercise of the
Option and payment of the aggregate Option Price hereunder the number and
class of shares or other securities or property that Buyer would have
received in respect of Common Stock if the Option had been exercised in
full immediately prior to such event, or the record date therefor, as
applicable.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event (or as otherwise provided in the last sentence
of Section 2(e)), Seller shall, at the request of Buyer, which request shall be
delivered within 30 days after such Subsequent Triggering Event (or such trigger
date as is provided in the last sentence of Section 2(e)) (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the Securities Act
covering this Option and any shares issued and issuable pursuant to this Option
and shall use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Buyer. Seller will use its best efforts to cause such registration
statement first to become effective and then to remain effective for such period
not in excess of 180 days from the date such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Buyer, for a period of 18 months following
such first request, shall have the right to demand a second such registration if
reasonably necessary to effect such sales or dispositions. The foregoing
notwithstanding, if, at the time of any request by Buyer for registration of the
Option or the Option Shares as provided above, Seller is in registration with
respect to an underwritten public offering of shares of Common Stock, and if, in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering, the
inclusion of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Seller, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and Seller in the aggregate; and provided
further, however, that if such reduction occurs, then the Seller shall file a
registration statement for the balance as promptly as practical and no reduction
shall thereafter occur (and such registration shall not be charged against the
Holder). Each such Holder shall provide all information reasonably requested by
Seller for inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registration, Seller shall
become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for the Seller. Upon receiving any
request under this Section 6 from any Holder, Seller agrees to send a copy
thereof to any other person known to Seller to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of the Holder,
delivered within 30 days after such occurrence (or such later period as provided
in Section 10 or the last sentence of Section 2(e)), Seller (or any successor
thereto) shall repurchase the Option from the Holder at a price (the "Option
Repurchase Price") equal to the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which this Option may then be exercised and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered within 30 days after
such occurrence (or such later period as provided in Section 10), Seller shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated. The
term "market/offer price" shall mean the highest of (i) the highest price per
share of Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Seller, (iii) the highest closing price for
shares of Common Stock quoted in the New York Stock Exchange (or if Common Stock
is not quoted in the New York Stock Exchange, the highest bid price per share as
quoted on the National Association of Securities Dealers Automated Quotation
Systems, or, if the shares of Common Stock are not quoted thereon, on the
principal trading market on which such shares are traded as reported by a
recognized source) within the six-month period immediately preceding the date
the Holder gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of assets representing 15% or more of the
consolidated assets of Seller and its Subsidiaries, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Seller as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, divided by the number
of shares of Common Stock of Seller outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be.
(b) The Holder or the Owner, as the case may be, may exercise its right to
require Seller to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Seller, at its principal office,
this Agreement or certificates for Option Shares, as applicable, accompanied by
a written notice or notices stating that the Holder or the Owner, as the case
may be, elects to require Seller to repurchase this Option and/or the Option
Shares in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within five business days after the surrender of
the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Seller shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Seller is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Seller 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, Seller shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Seller is no longer so prohibited; provided, however, that if
Seller at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Seller hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Seller shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Seller is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable immediately prior to the time of delivery of
the notice of repurchase less the number of shares of Common Stock covered by
the portion of the Option Shares repurchased, or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Seller
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
8. (a) In the event that prior to an Exercise Termination Event, Seller
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Buyer 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 Buyer or one of its Subsidiaries, to merge into Seller and
Seller shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock 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 Buyer or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Seller (if other than
Seller), (ii) Seller in a merger in which Seller is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Seller's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the date
preceding such consolidation, merger or sale; provided that if Seller is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Seller or by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to the exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Seller")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Seller shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Seller
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Seller shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Seller shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Seller to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Seller,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Seller to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provision of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Seller shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Seller is not then
prohibited under applicable law and regulation, or as a consequence of
administrative policy, from so delivering.
(c) To the extent that the Substitute Option Seller is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Seller shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price, respectively, which
it is no longer prohibited from delivering, within five business days after the
date on which the Substitute Option Seller is no longer so prohibited; provided,
however, that if the Substitute Option Seller is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Seller shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Seller shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Seller is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Seller described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day period for exercise of certain rights under Sections 2, 6,
7, 9 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under section 16(b) of the Exchange Act by reason of such exercise.
11. Seller hereby represents and warrants to Buyer as follows:
(a) Seller has full corporate power and authority to execute and deliver
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 and validly authorized by the Board of Directors of Seller and no
other corporate proceedings on the part of Seller are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Seller. This Agreement is
the valid and legally binding obligation of Seller, enforceable against Seller
in accordance with its terms.
(b) Seller has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto and payment of the aggregate Option Price therefor, will be duly
authorized, validly issued, fully paid, nonassessable, and will be delivered
free and clear of all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
(c) Except as disclosed pursuant to the Merger Agreement, 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 of, or
default under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or the
creation of a lien, pledge, security interest, charge or other encumbrance on
assets (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") pursuant to any
provisions of the Articles of Incorporation or by-laws of Seller or any Seller
Subsidiary 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 Seller or any Seller Subsidiary or
their respective properties or assets which Violation would have a Material
Adverse Effect on Seller.
12. Buyer hereby represents and warrants to Seller as follows:
(a) Buyer has full corporate power and authority to execute and deliver
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 and validly authorized by the Board of Directors of Buyer and no other
corporate proceedings on the part of Buyer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Buyer. This Agreement is the
valid and legally binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Buyer 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.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Buyer, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder within 30 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 15 days following the date
on which the Federal Reserve Board approves an application by Buyer under the
BHCA to acquire the shares of Common Stock subject to the Option, Buyer may not
assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Seller, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Buyer's behalf, or (iv) any
other manner approved by the Federal Reserve Board. Any such assignment shall be
made in compliance with and subject to applicable Federal and state laws, rules
and regulations.
14. Immediately following an Initial Triggering Event, each of Buyer and
Seller will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation, making application to list the shares of Common Stock
issuable hereunder on the Nasdaq upon official notice of issuance and applying
to the Federal Reserve Board under the BHCA for approval to acquire the shares
issuable hereunder, but Buyer shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
15. Notwithstanding anything to the contrary herein, in the event that the
Holder or Owner or any Related Person thereof is a person making, without the
prior written consent of Seller, an offer or proposal to engage in an
Acquisition Transaction (other than the transaction contemplated by the Merger
Agreement), then (i) in the case of a Holder or any Related Person thereof, the
Option held by it shall immediately terminate and be of no further force or
effect, and (ii) in the case of an Owner or any Related Person thereof, the
Option Shares held by it shall be immediately repurchasable by Seller at the
Option Price. A Related Person of a Holder or Owner means any "affiliate" (as
defined in Rule 12b-2 of the rules and regulations under the Exchange Act) of
the Holder or Owner and any person that is the beneficial owner of 20% or more
of the voting power of the Holder or Owner, as the case may be.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a Federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in 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 Holder or Substitute Option Holder is not permitted to acquire, or
Seller or Substitute Option Seller is not permitted to repurchase, pursuant to
Section 7 or Section 9, as the case may be, the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Seller to allow the Holder to
acquire or to require Seller to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein or in the Merger
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.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
23. In the event of any exercise of the Option by Buyer, Seller and Buyer
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.
24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
SARATOGA BANCORP
By: /s/ Richard L. Mount
----------------------------------
Name: Richard L. Mount
Attest: /s/ V. Ronald Mancuso Title: President and Chief Executive
------------------------- Officer
Name: V. Ronald Mancuso
Title: Secretary
SJNB FINANCIAL CORP.
By: /s/ James R. Kenny
---------------------------------
Name: James R. Kenny
Attest: /s/ Jennifer Dowling Title: President and Chief Executive
------------------------- Officer
Name: Jennifer Dowling
Title: Assistant Corporate Secretary
